A new study reveals whistleblowing arrangements in UK and European companies

Written by International Compliance Association on Monday June 24, 2019

Fresh legislative initiatives and large scandals are thrusting whistleblowing on to the corporate agenda. However, how companies approach internal whistleblowing arrangements varies significantly across Europe. This is according to the Whistleblowing Report 2019 published by the University of Applied Sciences HTW Chur in Switzerland and EQS Group which draws upon a survey of almost 1,400 companies in the UK, France, Germany and Switzerland. This article presents the main findings and best practices. 

The UK is the most developed market for whistleblowing practices

The growing importance of ethics and integrity in business now requires organisations to identify misconduct at an early stage and proactively manage risk. Effective whistleblowing policies and procedures play a critical role in unearthing potential legal or ethical violations.

A critical success factor of these arrangements is the availability of whistleblowing channels. Interestingly, 65% of companies in the UK and Switzerland have at least one whistleblowing channel. The results across the other jurisdictions did not differ enormously with 56% in Germany and 53% in France. This however doesn’t show the whole picture as whistleblowing channels vary in their reliability and quality.

Source: The Whistleblowing Report 2019, University of Applied Sciences HTW Chur, EQS Group 

While across the reporting channels email had the highest level of implementation across the jurisdictions, it is also among the least secure and doesn’t offer anonymity (more on anonymity later). The maturity of a country with regard to whistleblowing practices can generally be demonstrated by the number of companies having implemented specialised reporting channels (secure web-based reporting and hotlines).

The UK comes out on top with 39% of companies having a web-based form (Switzerland was in second place with 31%) and 46% having implemented a telephone hotline (France was in second place with 30%). The results also demonstrate that UK companies adopted whistleblowing channels before their counterparts in mainland Europe.

Source: The Whistleblowing Report 2019, University of Applied Sciences HTW Chur, EQS Group 

This being said, over one third of UK companies still don’t have any whistleblowing channels in place at all.

Why do companies implement whistleblowing systems?

Companies are often driven by regulatory requirements. However, our research suggests a variety of reasons drive companies to implement whistleblowing systems across the surveyed jurisdictions. For example, in the UK the two key drivers were to strengthen the company’s ethical reputation and to satisfy their obligations towards employees. This compares to France where companies seek to avoid financial loss and believe in the effectiveness of whistleblowing systems.

This contrast is indicative of the maturity of ethics and compliance programs. Some companies may seek to promote a ‘speak up’ culture centered around employee wellbeing, while others take a narrow view of whistleblowing as a means to limit financial loss via misconduct.

Whistleblowing systems identify financial loss

40% of UK companies were exposed to misconduct in 2018. Of the companies that suffered financial loss as a result, all of them were able to identify at least part of the loss via their whistleblowing set-up.

In the UK, over one quarter of companies were able to uncover more than 60% of financial loss due to their whistleblowing system. This supports benchmarks by an ACFE report that suggests 46% of fraud is detected by whistleblowing systems. 

Source: The Whistleblowing Report 2019, University of Applied Sciences HTW Chur, EQS Group 

How do companies encourage reporting?

Increasingly, evidence suggests higher use of whistleblowing arrangements is a sign of a healthy company with a strong ‘speak up’ culture. Effective and utilised internal whistleblowing channels were recently linked to less lawsuits and settlement payments₁.

Our research discovered companies receive on average 52 reports per year. This varied enormously between SMEs who received 15 and companies with over 250 employees who received 65. However, numbers on their own don’t tell the whole story. Receiving no reports or a low number of reports can be an indication that either there are few or no cases of misconduct or can be a symptom of distrust or lack of awareness. The reverse would apply for a high number of reports.

So how do companies encourage employees and other stakeholders to raise concerns? The report produced three main findings. Firstly, providing specialised reporting channels such as web-based whistleblowing systems, hotline/call centres, mobile apps drive a higher number of reports as stakeholders have more confidence in these channels.

Secondly, communication is essential. More whistleblowing reports are received if the channels are communicated often and widely. The more frequently whistleblowing channels are communicated to stakeholders, the more reports are received. Keeping the whistleblowing channels front of mind is key.

Thirdly, the more stakeholder groups have access to the system, the more reports come through. While employees remain the most important stakeholder group, across the jurisdictions more than half of the companies also give other internal stakeholders – such as shareholders and owners – and external stakeholders – such as customers and suppliers - the opportunity to report illegal and unethical conduct.

Should anonymous reporting be permitted?

This is a hotly contested topic. In the UK, 56% of companies allow anonymous reporting. This compares to Switzerland with 66%, 63% in Germany and 41% in France. While some are of the opinion that providing an anonymous channel ensures that all employees feel comfortable reporting, others feel that anonymous channels undermine the internal speak up culture, make investigations more complicated and are open to abuse.

The study provides scientifically substantiated and representative findings on this matter. Of the companies that provide anonymous reporting channels, 58% of the initial reports are submitted anonymously. However, more than one third will reveal their identity during the course of the investigation. This suggests anonymous channels facilitate the building of trust until reporters feel more comfortable revealing their identity. It’s worth noting that modern whistleblowing systems allow for two-way anonymous communication between the case manager if required.

Concerns about the system being open to abuse appear unfounded. The introduction of an anonymous channel does not have any influence on the number of ‘abusive’ reports submitted. Across the board, the numbers remain low with 7% of reports being categorised as abusive in the UK, compared to 3% in Switzerland, 11% in France and 12% in Germany.

To access the full report, visit this page.

References:

1. 2018 Global Study on Occupational Fraud and Abuse, Accessed on 24.06.2019

2. Whistleblowers Are a Sign of Healthy Companies, Harvard Business Review, Accessed on 24.06.2019

Author: Viviane Joynes, Managing Director of EQS Group Ltd. EQS Group is a leading international provider of regulatory technology (RegTech) in the fields of corporate compliance and investor relations. Their solutions included EQS Integrity Line, a whistleblowing case management and reporting solution.

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