Efficiency in whistleblowing?
To justify the efficiency of one specific hotline for a particular company, it is vital to know the result you expect to get from the whistleblowing services. Do you have a hotline to improve the relationships within the company, gain trust from the employees? Or you have it to be the first to know about the misconduct and financial manipulations? Or all at once?
The social impact of whistleblowing hotlines is challenging to evaluate, but it's worth talking about. Yet, we'd like to highlight the other side of whistleblowing in terms of profit. Can whistleblowers become a protective shield for the company and save it from court proceedings?
Figures and numbers tell us yes - we are going to uncover the most vocal facts from statistics in favor of whistleblowing services.
ROI - what's that for your company?
You can think of a whistleblowing platform not as only the tool for compliance with legislative requirements, but as an investment. And just as any investment, it should give you some returns. And here comes the ROI. What is the ROI of whistleblowing?
ROI, or return on investment, is the correlation between the cost of your investment and the final gain from it. Returns on investment in whistleblowing hotlines aren't straightforward, since they contribute both to the company's corporate culture and financial state. Similarly, a whistleblowing hotline will not generate any revenue, but will save you from possible losses. That's why the final gain, in this case, will be the amount of saved money from detected fraud.
The correlation between the costs of whistleblowing services in your company and the sum of prevented fraud cases over a fixed period will be the ROI for your company. Still don't quite follow?
The good news is that we've developed a Calculator for you to estimate the losses and a possible return on your investment in whistleblowing hotlines. You can check the present risks in your company and analyze mistakes as well - all for free.
Some numbers - what's the profit from whistleblowing?
Let's be honest - whistleblowing, compliance, corporate culture is a thing, and it's only a matter of time for more companies to realize it. But it's impossible to overlook the numbers regarding internal and external audit spending to detect fraud. Companies with revenue less than $50 million paid nearly $350k to national audit companies, $91k to regional companies, and up to $970k to the Big Four companies.
That's impressive considering that only 15% of occupational fraud is revealed by internal audits and 4% by external auditors. And to contrast these numbers, 43% of occupational fraud cases are exposed by tips, half of which comes from employees (ACFE, 2020 Report to the Nations).
Would you rather pay above $300k for an audit to reveal 20% of fraud, or invest $14k a year in a whistleblowing hotline and get tips from your employees directly? The question is worth considering. The annual revenue of the biggest companies on the whistleblowing market is over $500 million - another sign of rapid growth of demand for whistleblowing services.
Who earns on whistleblowing and how much?
Private companies aren't the only ones who realized the importance of tips and hotlines and turned them into a profit. Yearly we post the updates on FCPA cases and charges for the companies who violated the US legislation - that's the major source of the most considerable fines in the world.
Either from whistleblowers or by financial monitoring, SEC yearly gets the information about tax avoidance and money laundering - the result is the highest in the world charges against the companies with high revenues (Airbus, Goldman Sachs, Ericsson, Samsung, Microsoft and more).
The total charges of 2020 under FCPA amounted to almost $10 billion (including non-US jurisdictions) - an unbelievable and unprecedented year for tax agencies and the world of whistleblowing. That's a profit for the government, since all the fines paid by the companies under FCPA go to the state budget.
A program organized by SEC in the US also gives the opportunity to earn money for the whistleblowers - if the amount of losses caused by the company exceeds $1m, the whistleblower is eligible to get 10-30% of the total fine as a reward. So while it cannot be called a profit since whistleblowing isn't a business, whistleblowers in the US (and also in South Korea) might benefit financially from their disclosure.
All of this argues in favor of compliance and whistleblowing hotlines- if it's not yet implemented in your companies, it might be the right time to join Ethicontrol.