Whistle Blowing: An Investigative Tool
Col. Avijit Nandi (Retd.), Head-Integrated Risk Management & Investigation/ Fraud, MitKat Introduction Whistleblowing is not a new phenomenon as many thinks. The concept and its use have been there for ages. Two quotes below from Kautilya, the famous scholar and one of India’s most popular presidents Dr. A. P. J. Abdul Kalam echo the sentiment. In fact, we turn whistle-blowers in our school, colleges, and even in our families. The only difference is the motive in each case. “Where do the evils like corruption arise from? It comes from the neverending greed. The fight for a corruption-free ethical society will have to be fought against this greed and replaced with ‘what can I give’ spirit” – Dr. A. P. J. Abdul Kalam Here we will broadly discuss ‘Whistle Blowing’ in the workplace. Every organisation encourages honest employees. Encouraging whistle-blowing in an organisation promotes transparent, clear, and effective communication means. An ethical person who thinks of the betterment of the society and organisation he serves will resort to whistle-blowing. Whistle-blowing in recent years has gained huge prominence since in the global competitive market, a company’s effort to be ahead in the race cut corners illegally, which gets reported. There have been instances of huge and big whistle-blowing by the employees against the companies. There are seven dimensions of organisation culture that can influence the employees to be a whistleblower. “Any witness who supplies data about extortion and on the off chance that he/ she prevails with regards to demonstrating it will get the reward of onesixth of the sum being referred to; or if the source is an administration worker, he/ she might get one-twelfth of the sum for a similar demonstration” – Kautilya Vigilance. Engagement. Credibility. Accountability. Empowerment. Courage. Option. Who is a Whistleblower? A whistleblower is a person, often an employee but also can be a supplier, vendor, or any third party, who reveals information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe, or fraudulent. Study shows there are four type of factors that can influence a whistleblower’s intention to conduct whistleblowing, namely – pressure/ incentives, opportunity, rationalization, and capability. Types of Whistleblowers The need for effective whistle-blowing systems The value of whistle-blowing cannot be overstated. Studies have shown ‘the single most important way in which wrongdoing was brought to light in public sector organizations’ was employee whistle blowing. There is accordingly no doubt that more needs to be done by legislators as well as public and private entities to encourage whistle-blowing and related reports of corruption – to handle reports of alleged corruption, wrongdoing and undue risks in a sound manner; and to provide appropriate levels of protection for whistle-blowers. Whistle-blowing systems can be more successful if they provide a combination of reporting channels (e.g., directly to specific trusted persons, via a telephone hotline, or through an online channel, or an app); if the authorities make a point of communicating with whistle-blowers throughout the investigation process to maintain trust (a failure to be responsive may give rise to a perception that the wrongdoing is being covered up or that the investigation is not serious); and if information from reports is connected with information from other sources (such as surveys and audits). For that reason, supporting whistleblowing inside the organszation may be highly beneficial for companies. If misconduct is reported, the perpetrators can be stopped, and more importantly, the damage their actions have caused can be mitigated or even prevented. It is often hard for employees to decide to report misconduct. We will explore in detail different reasons employees fail to report transgressions. This does not mean that companies should be discouraged, as there are ways for them to encourage whistleblowing. It starts with implementing an anonymous whistleblowing system and making it a big part of the company’s culture. We will analyse different options, their advantages and disadvantages, and how to begin implementing them. Encouraging people to speak up and expose wrongdoing is a major factor in fighting fraud, corruption and unethical behaviour. The mere presence of a whistleblowing system may be enough to put people off committing any illegitimate activity, thus significantly reducing the risk of fraud. Take a look at six crucial benefits that whistleblowing can bring to any organisation: Helps combat fraud. Avoids reputational damage. Prevents issues escalating. Reduces losses. Raises awareness. Creates an open culture. Barriers to whistle-blowing According to research, whistleblowing is beneficial for companies. For example, companies that receive a higher number of whistleblowing reports tend to have a plethora of positive outcomes such as a 46% decrease in negative news coverage or a 2.8% increase in return on assets to mention a few. However, this study found that 56% of employees chose not to report misconduct. Other studies show even more alarming numbers. One EU study found out that 81% of Europeans did not report the corruption even when they were aware of whistleblowing is beneficial for companies, but employees tend not to report misconduct. To be able to provide the solution, we first need to understand the problem. Why don’t people report misconduct more often? Barriers on the employer’s side One of the most prominent obstacles to the introduction of whistleblowing in companies is the negative perception by managers. Whistleblowing is perceived less as an improvement tool and more as telling on someone. Culture plays a role in this perception. For example, in the US, employees are three times more likely to report than in Europe. Also, the United Kingdom has the highest reporting rates in Europe. Additionally, managers often believe that there is no need for a reporting system as they have an open company culture that nurtures whistleblowing. However, the data paints a different picture. A survey by the consulting company EY found that 56% of those who witnessed misconduct in the company did not report it. However, 73% of these people reported that they would consider reporting to an external party, such as a lawyer. Barriers on the employees’ side…