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What is Whistleblowing And Why is it Important?
Whistleblowing is the process by which the public and competent authorities are made aware of an important, existing problem. Whistleblowers or whistleblowers come forward to report misconduct, misuse of resources, illegal activity, or unethical practices that could harm the public interest.
Whistleblowers act on a large scale as watchdogs, reporting misconduct, preventing fraud and corruption, protecting human rights and ensuring transparent government. Even though most companies comply with established standards, there are still a few outliers whose behavior and the associated failure cause serious and lasting damage. The last prominent example, which initially began with an anonymous tip and prevented possible abuse and state interference, is Austria, where high-ranking government members were forced to resign as a result of the revealed missteps.
Whistleblowing is also an integral part of democracy and an important mechanism for uncovering grievances that would otherwise remain hidden. As such, it plays an essential role in protecting civil rights and ensuring the efficient functioning of society.
What Role Does Whistleblowing Play For Companies?
Whistleblowing plays a crucial role in the corporate landscape, as it helps companies to uncover cases of fraud, corruption, or other forms of unethical conduct in good time or at all. In large companies in particular, the risk of misuse or unethical conduct is high, as legal and compliance resources are limited, the company may lack the knowledge to address grievances effectively, or a strengthened culture of transparency, integrity and responsibility must be created.
Nevertheless, we would also like to admit at this point that, as already mentioned at the beginning, most companies do not aim to exploit and betray their employees or society. On the contrary, the raison d'etre of a company, particularly in Germany and Europe, is to maximize corporate value for all parties involved.
The most important aspect for companies to create an effective whistleblowing system is creating a culture of transparency and integrity. Employees should feel that their concerns are being taken seriously and that it is okay to report grievances without fear of retaliation. This can be achieved, for example, by establishing independent contact points such as compliance or ethics officers or a special hotline for employees.
Whistleblowers, as observers (or as silent observers) as an extension of the compliance department, can help uncover potential abuses or financial irregularities that would otherwise remain hidden. Whistleblowers can come from outside or even from within the company's workforce to uncover grievances.
What Benefits Do Companies Get From Institutionalized Whistleblowing?
The introduction of a structured system for reporting grievances offers companies numerous advantages. First and foremost, whistleblowing represents an unofficial supervisory authority that ensures that legal requirements, codes of conduct and processes are complied with. In the second instance, whistleblowing is an undercover journalist who uncovers unfair business practices before they cause public scandal. Other benefits for companies include:
An open corporate culture
It is no secret that an open corporate culture can be of great benefit to companies. Whistleblowing in particular plays an important role in such a culture. Whistleblowing gives employees peace of mind that they can raise misconduct or potential issues without fear of retaliation or convictions. Even though it can be difficult for companies to create such an environment, it can ultimately help protect the company from a potential scandal or fraud. Creating a safe space for employees to express their opinions is likely to result in better employee morale and productivity, and create a sense of trust between employees and management.
Increased trust in the company and its products and services
Whistleblowing plays an important role in creating more trust in the company and its products and services. Whistleblowing involves an employee reporting unethical or illegal workplace activity that he/she is aware of, such as fraud or unsafe working practices. This ensures that such activities are identified and dealt with early on, resulting in greater security for customers and greater trust in the company's reputation.
Better work culture/better working environment
An institutionalized system also helps employees identify and report any type of misconduct or inappropriate conduct, which increases the efficiency of investigations and leads to greater trust in a company's work culture.
Avoiding major outraged
Avoiding major scandals is a key element of sustainability and integrity in any organization. Whistleblowing, i.e. reporting unethical conduct by an individual within a company, can help organizations identify potential problems before they become a bigger problem. Companies should therefore ensure early on that their employees feel supported and safe when they report a problem, as this promotes an environment in which ethical missteps are likely to be quickly identified.
Strengthening compliance
As already stated, compliance is an essential function of a company and, if correctly interpreted, can become a mainstay of the company. Correct interpretation means the value-driving implementation of business processes and not the punishing and nagging hand, as compliance often shows in many companies.
When implemented correctly, whistleblowing can become a central part of some compliance programs, as it allows individuals to directly report violations they observe or experience. Whistleblowing can also provide organizations with important information that helps them find solutions to complex problems. In retrospect, integrating whistleblowing into regulatory compliance strengthens both systems and can provide a better guarantee of maintaining a secure environment for all employees in a company.
What Are Typical Cases Reported By Whistleblowers in Companies?
Triggered by some of the biggest corporate scandals in recent history, whistleblowing has become an important concept for companies that want to detect and prevent misconduct. From illegal financial practices by large banks during the 2007-2008 global crisis to falsified emissions figures by car manufacturers — these events have cost companies billions and shown how much could be preserved with proactively established whistleblowing systems.
Other typical cases that whistleblowers in companies regularly uncover:
- Corruption/compliance violations
- insider trading
- Misuse of data
- violations of human rights
- Discrimination in the workplace
What is The Legal Background?
In mid-December 2021, the deadline to implement the EU Whistleblowing Directive expired. On September 29, 2022, at first reading, the Bundestag discussed the draft law on whistleblower protection tabled as printed matter 20/3442 and finally passed it on December 16, 2022. The Whistleblower Protection Act is to come into force three months after its promulgation in the Federal Law Gazette, so that it is expected to come into force in the second quarter of 2023 at the latest. Following the entry into force of the National Implementation Act (i.e. the Whistleblower Protection Act), private law entities such as the public sector with more than 50 employees will be affected, with a transition period until December 2023 for private sector employers between 50 and 249 employees; this period expressly does not apply to public sector employers.
How Can Software Help to Implement The Whistleblowing Policy?
Whistleblowing can help protect employees, but implementing a whistleblowing policy can still be a challenge. Thankfully, there are software solutions that make this process easier.
The use of special software for clearly defined processes is often the more cost-effective alternative to existing solutions. General solutions usually involve labor-intensive process steps, which in total regularly cost employees time and nerves. In addition, manual processes are a source of human errors, which in turn cost a lot of money and time to process.
With professional whistleblowing software, employees can easily report concerns and violations, which are then quickly and securely forwarded to the relevant authorities. Managers and directors have access to the data they need to investigate reported issues, track progress toward resolution, and take preventative action where appropriate. As mentioned above, whistleblowing software thus helps companies comply with regulations by making it easier for employees to report misconduct, ensuring confidentiality and allowing administrators to monitor incidents until they are resolved.
By streamlining the whistleblowing process with robust software solutions, companies can implement effective policies that promote employee trust and support healthy work practices in their workplaces.
