Benefits of Whistleblowing
Focus on fraud detection and increase your bottom line
The 2014 Report to the Nation on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE) found typical organisations lose 5% of its annual revenue to fraud.
The median duration — the amount of time from when the fraud commenced until it was detected — for the fraud cases reported was 18 months. The ACFE concluded tip offs from employees being consistently and by far the most common detection method.
Over 40% of all cases were detected by an employee tip — more than twice the rate of any other detection method. Organizations with external hotlines are much more likely to catch fraud by a tip and experience frauds that are 41% less costly and detected 50% more quickly.
Fraud is based on trickery and deceit. The statistics demonstrate that it is particularly difficult to detect fraud when it is committed by employees at work.
It is particularly difficult to detect fraud in Australia because of an institutionalised culture that sees whistleblowing as “dobbing”. From the highest levels of leadership in this country, the concept of “mateship” is a defining characteristic of our culture.
Our resistance to reporting the questionable behaviour of those in our networks has resulted in a poor appreciation of what whistleblowing really means, how it can help organisations to detect fraud, and how people can securely and anonymously report fraud.
In many cases of fraud, blatant warning signs or red flags go unnoticed by managers and employees. This is frustratingly illuminated too often in post fraud investigations. Thus, training employees to identify early warning signs or indicators of possible fraud is vital to enhancing your ability to detect fraud.
Predominantly, it´s your employees and external third parties who witness the initial fraud so it´s in the best interests of leaders to encourage whistleblowing and provide a trusted mechanism by which detected fraud can be reported.
People need to be encouraged to report information even if they may perceive it to be small or inconsequential as it may, particularly in cases of fraud, add to the bigger picture or to the jigsaw puzzle often needed to unravel and detect fraud.
The risk is at many levels in the organisation. The further up the hierarchy, the longer it takes to detect fraud. The “period to detect” fraudulent activities of directors and senior managers is often twice that of their subordinates.
The power of these leaders often results in a reluctance of employees to report wrongdoing by their superiors. To trust existing internal controls and reporting systems without developing an external element to a whistleblower program overlooks the fact that despite one´s best efforts some people have unfortunately an inherent distrust of their employer.
People want the security and protection offered by an independent service, not burdened by any potential conflicts of interest, where they can safely and anonymously blow the whistle on corrupt activity or perceived weaknesses in the systems. This will assist organisations to detect fraud sooner and as a result, minimise the risk of lost revenue and potential damage to the company.