Ethics Reporting: Internal or Outsourced Program

Posted by Amanda Nieweler

on December 16, 2015

Ethics reporting systemShould you consider an internal, or external ethics reporting system?

If you are considering implementing a whistleblower hotline, there’s much to take into account regarding features and benefits of an outsourced program compared to an internal system.

Things to think about are budget, resources, and implementation plan, training and report review, response and analytics. What policies and codes need to be developed to support the system? What types of reporting do you need? How do you measure success? And of course, how important is an anti-retaliation policy? 

Statistics indicate that 40% of people believe their businesses have a weak ethical culture. Implementing a whistleblower system, along with a strong Code of Conduct can assist an organization in a number of ways. A whistleblower system protects both the company and the employee. The implementation and support of a strong corporate governance program can eliminate waste, loss and theft through identifying sources of corruption and dishonesty. The system also improves employee morale and engagement through management’s commitment to providing alternative methods of reporting and dialoguing with the organization. It also limits the liability for directors and managers.

A strong corporate governance program can mitigate risk for both an organization’s reputation as well as for financial sustainability. The introduction of such a program is also an important factor when treading into international business operations. The global reach of the Foreign Corruption Practices Act, and the UK Bribery Act mean that an organization and its executives can be liable for business practices occurring on another continent without their knowledge. Management truly needs to understand the ramifications of lack of ethics training, and they also need to understand policies to support the Code of Conduct and the avenues of communication that are available to their employee base.

Internal vs. Outsourced – What Do You Do?

Any system is better than none!

Tips are the best method for detecting fraud:
According to the ACFE, 40% of reported fraud is uncovered through an employee tip. In fact, the impact of tips is probably underestimated by the fact that so many organizations fail to implement adequate reporting systems. The lesson remains, the better you are at collecting and responding to fraud, the better you will be at detecting it and limiting losses.

Confidentiality:
In-house systems don’t always offer the same level of confidentiality as an external system. This can be a detriment as an employee may not wish to report an incident if they don’t feel they can remain anonymous. With an external system, the employee’s report sits outside the organization safely.

Voicemail vs. Live Agent:
Some instances of internal systems might feature a voicemail if an employee wishes to report an incident at a certain time. There’s no anonymity or confident in who could be listening to the message. External systems have live, 24/7/365 agents who are trained to provide a strong level of service.

Translation Services:
Internal systems covering large organizations with varying locations around the world can’t service all employees who could potentially be needing to speak to someone in certain languages. External systems have translation and interpretation services servicing a huge assortment of languages so employees can speak in their native tongue.

Cost:
This is a big one. Although easy to set up on an ad-hoc basis with a voicemail system (although not recommended), internal systems wishing to be a bit more robust have to budget for staffing the system, maintaining the system, marketing the system, etc. The cost for this is certainly more than the cost for an external system, typically with a yearly subscription, and all the maintenance is done by the provider.

Figuring out whether an internal or an outsourced system is right for you takes a lot of thought. Download a more comprehensive eBook that covers this topic. An ethics reporting system protects both the company and the employee, and having something in place where employees can come forward to report wrongdoing is better than having nothing at all. Being able to speak up in confidence under the protection of a hotline and policy ensures a culture of integrity, empowerment, improved employee morale, and the management’s commitment to transparency.

eBook: Whistleblower Hotlines: Internal vs. External