This is the fourth in a series of five extracts from EY’s EMEIA Fraud Survey 2017 – Human instinct or machine logic: which do you trust most to fight fraud and corruption? Visit ey.com/fraudsurveys/EMEIA to access the full version.
Whistleblowing regulation and legislation are becoming increasingly prevalent across the globe, driven in part by the demand for greater transparency. France’s “Sapin II” Bill and the Netherlands’ “House for Whistleblowers Act” are good examples, both of which include protection measures for individuals. The trend toward encouraging individuals to blow the whistle is further fueled by the multi-million dollar awards made to whistleblowers by the U.S. Securities and Exchange Commission.
How well do you know your employees?
EY’s EMEIA Fraud Survey 2017 has identified three important findings relating to whistleblowing. Firstly, there are rising levels of concern about unethical behavior among employees. Second, awareness of whistleblowing hotlines is low and pressure on employees not to report concerns is substantial. Third, a significant number of respondents indicate they would report concerns externally irrespective of the response to any internal report they had made.
Suspicions of misconduct are high with more than half of respondents indicating they have had concerns about unethical conduct. And almost half of respondents have even considered resigning due to concerns over unethical conduct at their company. This not only poses a threat to talent retention, but also indicates that the workforce may hold important information which companies could use to identify and detect misconduct.
Do employees feel comfortable escalating their concerns? What prevents employees from reporting internally?
What prevents employees from reporting internally?
Of even more concern is that 48% of those who have had concerns about unethical conduct have faced pressure to withhold information. Additionally, fear for personal safety and concerns about their future career progression top the list of reasons that would prevent them reporting concerns. However, even when employees want to report, they may not know how. Our survey has found that only 21% of people are aware of a whistleblowing hotline within their company. And even when regulations require it, for instance by the Financial Conduct Authority in the UK, whistleblowing appears to not be effectively embedded. While our survey showed that awareness in the financial services sector is higher than all other sectors, it is still deeply concerning that only 1 in 3 financial services respondents indicate an awareness of whistleblowing hotlines. Either financial services firms are not fulfilling their obligations to regulators, or communication about these tools is extremely ineffective. In either case, even if employees wanted to report concerns on misconduct internally, it appears that they do not know how.
Even when they want to report - do they know how?
While awareness of internal reporting mechanisms is low, 73% of respondents would consider providing information about potential fraud, bribery and corruption in their business to an external third-party. The majority of our respondents would only do so if no action was taken after reporting internally, however, 15% of our respondents would report regardless of their company’s response. Further, a significant majority of those who would report information externally said they would go directly to a law enforcement agency or regulator.
The survey has highlighted results which, in combination, could be seen as toxic. If companies are not aware of, or are not seen to respond effectively to their employees’ concerns, the workforce is likely to lose confidence in internal reporting processes. If employees choose to bypass internal reporting mechanisms and only report concerns to external parties, it may make the situation more complicated for companies to manage. In light of this, businesses need to consider how best to establish their whistleblowing hotlines and other arrangements to ensure they capture any vital intelligence about misconduct known by their employees. This will enable organizations to react quickly, to address incidents and issues, and to prepare for any potential response from regulators or reports in the media.
Visit ey.com/fraudsurveys/EMEIA to discover the full version of EY’s EMEIA Fraud Survey 2017 – Human instinct or machine logic: Which do you trust most in the fight against fraud and corruption? The new Interactive Results Comparison Tool also helps you to explore how results compare across different countries and industry sectors.