We answer the most important questions about whistleblowing systems.
What Are the Advantages of Whistleblower Systems in General?
An internal whistleblowing system is an early-warning system for identifying and combating maladministration and forms the basis for successful risk management. Informants can pass on information within a fully internal system, keeping the information from leaking to external sources and thus avoiding reputation damage to the company.
Employee feedback is the best way to detect compliance violations. Experience shows that companies and organizations lose around 7% of their annual revenue through fraudulent activities. Evidence of such activity which is passed on anonymously and securely can help to detect a significant proportion of these cases, thereby minimizing financial damage to companies caused by compliance issues. This is confirmed by the study “Whistleblowing Report 2019” conducted jointly with HTW Chur: more than half of feedback received via internal whistleblowing systems uncovered compliance-relevant abuses and misconduct.
Does This System Just Produce Costs or Also Results?
Evaluations in Switzerland have shown that a company loses an average around 7% of its revenue due to economic crimes such as fraud, embezzlement or corruption. A company with €100 million in revenue would lose €7 million annually.
If only 10% of these offenses are detected and avoided due to an anonymous digital whistleblowing system, that company would save €700,000 a year. An internal reporting system costs a fraction of this amount per year. Thus, implementing and maintaining a whistleblower system more than pays off.
Should We Allow Anonymous Feedback?
Absolutely. The Whistleblowing Report 2019 shows that more than half of the initial reports received by companies that enable anonymous reporting are also received in anonymous form. Legal protection for whistleblowers is being gradually improved, and many companies are also assuring that whistleblowers will not face any negative consequences. Nevertheless, whistleblowers find themselves in a situation of greatest uncertainty before their first report: What will my report trigger? Who will read the report, who will be involved in an internal investigation? Do I really not have to fear any negative consequences? The inhibition threshold for whistleblowers is correspondingly high – and the more they appreciate the possibility of being able to report anonymously.
The disadvantage of anonymous feedback is that usually no communication between the whistleblower and the company is possible, making comprehensive clarification of any incident more difficult – especially if there is a lack of important information that can only be obtained through the notifying person. On the other hand, sufficient protection in the form of anonymity is particularly important to many whistleblowers. Therefore, they should be given the option of anonymous messaging, as there are ultimately solutions which make anonymous dialogue possible.
When choosing a whistleblowing system, companies should ensure that communications between a whistleblower and a company can also be conducted anonymously in order to address a larger circle of potential whistleblowers.