Detect fraud sooner by improving your whistleblower hotline

A whistleblower or tip hotline, a foundational control for all businesses, can be an important tool for detecting fraudulent or suspicious behavior — and a requirement for publicly traded companies. Hotlines, however, are only as useful as the intelligence they gather from participants, and many hotlines fail to provide valuable information because they aren’t established in a way that invites participation.

To increase the effectiveness and value of their hotlines, organizations must take steps to encourage people to utilize the tool and decrease barriers to participation.

Benefits of an effective hotline

Hotlines have been a part of fraud-detection programs for over 30 years, and, when well-utilized, they’re a valuable tool for uncovering illegal or unethical activities, which can, in turn help companies avoid financial losses. As much as 37% of fraud cases in the United States are detected by a tip, according to the 2018 Report to the Nations Global Study on Fraud and Abuse put out by the Association of Certified Fraud Examiners.

The basic requirements

To encourage participation, organizations must do their part to communicate that individuals won’t face repercussions for reporting. Some basic requirements of an effective hotline include the following:

• Messaging that the company values ethics and its intent is to remain ethical
• Clear directions on how to report suspicious activity
• Anonymous reporting
• Specifics about what constitutes suspicious behavior and what can or should be reported
• Respect for communication preferences such as phone or text, email, mail, in-person meeting, language, and cultural or linguistic differences
• Ongoing education and updated messaging
• A monitoring process — often administered by a third party — that helps ensure items reported are properly investigated and resolved as necessary

Communicating that all employees have a duty to report ethical concerns is important. A program that is safe, anonymous, and operated by a third party encourages participation; the benefit of the hotline is that it is anonymous, user-friendly, and available anytime.

Branding the hotline as a resource

To incentivize participation, it can help to approach the hotline as a helpline. This means crafting it in a positive light as an avenue to ask questions, solicit guidance, report quality or safety concerns, suggest process improvements or cost reduction recommendations, and provide leadership with valuable insights.

In terms of value creation, it’s beneficial for hotline oversight committees, internal audit teams, or other gatekeepers to ask, “What else can this do for us if we invest in it and use it?” It’s a waste of time, effort and resources to create, maintain or update processes that do not add value. They also may suffer from a lack of employee buy-in.

Contributors benefit the most when they understand that the hotline helps keep risk at acceptable levels so that key stakeholders can respond quickly and appropriately to future threats and emerging risks.

Invite contributors

Making the helpline available to additional contributors — beyond employees and management — can be an effective way to elicit feedback and widen the scope of those available to report unethical or fraudulent activity.

Inviting vendors and customers to use your hotline to provide feedback on cost-saving measures, successful initiatives, or suspected fraud and abuse sends the message that you value their insights as part of the ongoing success of your organization. This expanded community has been shown to be effective at reporting suspected fraud activity and for providing insights that bring value to a business.

Reassess hotlines during transitions

Times of organizational transition, such as mergers, acquisitions, and downsizing present a good opportunity to review the purpose and accessibility of a hotline. In these times of uncertainty, people’s fear of job-loss or displacement often runs high, which can lead to unethical behavior. Additionally, transitional phases are ideal times to gather feedback that could pave the way to integrational or operational improvements.

Increase awareness

Many organizations, after establishing a hotline, fail to actively promote it and instead simply wait for tips or suggestions to come in. As a result, the hotline is often overlooked by potential participants. To prevent this, organizations can remind employees of the helpline’s purpose and significance by providing the following:

• Informational training, handouts, and emails for all new hires
• Annual or as-needed training and awareness updates
• Posters with contact information
• Periodic reminders of the hotline purpose, success stories, and other impacts to the company that underscore the value of the hotline to the organization
• A hotline section in the company’s code of conduct or handbook

Communicate hotline wins

It’s important for potential participants to see the value the hotline — and therefore their participation — provides an organization. This means it’s critical to think through the monitoring process — such as who reviews reports and who is responsible for following up on them. Failure to think through and implement an effective resolution phase not only diminishes the effectiveness of the hotline but also discourages participation by signaling that there’s little follow through on or support for tips received.

Relatedly, sharing the results of the helpline in identifying fraud, improving outcomes, generating revenue and the impact on the business is important. Many organizations incentivize operational improvement suggestions that are implemented. This type of reward and transparent reporting underscores the value placed on contributions, encourages faith in ongoing helpline use, and improves overall employee engagement.