By Stephen Hipkin
Allegations of unethical business behaviour are constantly in the Australian media; Target, CommInsure and 7-Eleven are high profile and recent examples. However many more instances go unreported. Consider the following:
- A financial controller, who was able to divert payments to their own bank account by setting up ghost employees in the payroll system….undetected for seven years.
- A consultant employed on a six month contract submitted invoices (for unidentified services) and received payment…. in excess of $10m over a two year period.
- The property manager in a financial institution, who was able to jettison an incumbent cleaning contractor and replace them with a “related party” provider…$2m benefit.
- The IT manager, who by-passed corporate procurement procedures, in order to negotiate “non-arm’s length” contracts with their own preferred suppliers …value in excess of $500k.
Whilst not having the same profile, they are real, and could happen in any organisation. They also had a significant financial, operational and reputational impact on the organisations in question.
Although all four cases were uncovered by a company employee, they highlight two operational issues;
- Why did it take so long to identify a problem?, and
- Would the incidents have been identified sooner, had a more effective reporting facility been in place?
Over the years I have been responsible for the management of whistleblower services for in excess of a dozen Australian organisations. During that time there have been a number of consistent factors relevant to the effectiveness of the service;
- Employees and members of the public have a natural reluctance to be considered a “whistleblower”. Rightly or wrongly, they still feel that there is a stigma attached.
- Organisations will usually set up a whistleblower service for one of two reasons; they wish to uncover ethical, fraud and corruption risks, or they have a statutory/corporate obligation to do so.
- The level of reporting is proportional to the awareness associated with the service. If training is not provided and the facility is not regularly and extensively publicised, its effectiveness will be limited.
- All reports should be treated seriously (the consultant call was initially thought to be a $50k loss).
- People are more likely to “blow the whistle” to a service operated independently from the engaging organisation.
- Whistleblowers are more likely to use anonymous “on-line reporting portals” than the more traditional Freephone, PO Box and email alternatives.
Summarising; a whistleblower protection program is an essential tool in the identification and management of corrupt, illegal or other undesirable conduct within any organisation. It is also a necessary component of a robust corporate governance framework.
Benefits of an effective whistleblower program
- Encourages the reporting of matters that may cause financial or non-financial loss to an organisation, or damage the organisation’s reputation.
- More effective compliance with relevant laws.
- More efficient fiscal management of the organisation, for example; highlighting wasteful processes, improper tendering.
- Improved corporate morale.
- An enhanced perception and the reality that the organisation is taking its governance obligations seriously.
- By outsourcing whistleblower management, independence is emphasised, with day-to-day administration and “whistleblower interaction” carried out by forensic specialists.
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