Unveiling Transparency: How Compliance Hotlines Strengthen Corporate Accountability

September 12, 2023

Close to $3 million. That’s the amount of money organizations lose to instances of fraud annually, according to the Association of Certified Fraud Examiners. What’s more, EY’s Global Fraud Survey reveals about 42% of executives are willing to justify unethical actions for the sake of meeting their financial goals. 

Unfortunately, wrongdoings are deeply rooted in our corporate world today. The widespread presence of corporate malfeasance is shocking at the least, given how organizations shell out oceans of money to meet their compliance goals – right from crafting solid company policies to detecting instances of misconduct. 

The cost of non-compliance can cripple even the most powerful organization and your company is no exception. But how can you mitigate wrongdoings when you don’t know if they occur in the first place? This is where the need for a compliance hotline or any reporting channel comes into play. 

Why Are Compliance Hotlines So Important? 

A compliance hotline forms an integral part of a whistleblower system. It encourages employees or non-employees to report any kind of unethical or illegal activity that takes place in a company. 

An anonymous hotline protects employees from retaliation. When everyone in the workplace knows they can safely report their issues, organizations naturally begin to build a speak-up culture. 

A lack of an anonymous hotline (or dismissal of reports that a company receives from it) can cause instances where an employee:

  • Leaks wrongdoing to the press
  • Reports suspected illegal activity to a federal or state enforcement agency
  • Sues the company if they become a victim of discrimination, sexual harassment, slander, injury, and more
  • Simply leaves their organisation for a better one

How Do they Contribute to a Culture of Compliance? 

The logic of an anonymous hotline is simple. An employee who knows their identity will remain undisclosed will feel safe when reporting wrongdoing they’ve either witnessed or experienced. 

Once a company receives this report, it can take the necessary steps to investigate and resolve the situation in a way that the same incident doesn’t resurface in the future. As more and more employees realize the power of a compliance hotline, issues begin to get identified and resolved efficiently and at a faster pace – ultimately creating a solid culture of compliance. 

What’s more, when employees know their concerns are taken seriously, they are more likely to report misconduct in the future. Over time, as more and more issues get revealed, the volume of wrongdoings plummets, making way for a compliant and productive workplace. 

What Can Employees Report Via a Hotline? 

Compliance hotlines create a safe space for employees to report a wide range of issues including:

  • Fraud 
  • Instances of discrimination 
  • Environmental damage
  • Sexual harassment 
  • Slander and safety issues 
  • Violations of policies or regulations 
  • Any type of behavior that is illegal or unethical

Key Benefits of Having a Compliance Hotline in Place 

The importance of having a compliance hotline is rooted in its benefits. Here’s why it’s time you incorporate an anonymous hotline into your organization’s compliance efforts:

Enhances Corporate Accountability 

An anonymous hotline allows every employee to report their concern. When a company receives a report of wrongdoing and immediately begins to investigate the matter, it shows that it takes accountability for issues that occur in the workplace. 

Through a hotline, your employees also realize your commitment to transparency. When combined, transparency and accountability help an organization identify and address misconduct proactively and create an ethics-first culture. 

Strengthens the Compliance Program

The success of your company’s compliance program is rooted in how well and how quickly issues get identified and resolved. The only way to ensure no wrongdoings go undetected involves establishing a solid anonymous hotline.

A compliance hotline uncovers wrongdoings that would otherwise never surface via audits. Studies reveal that companies with internal anonymous hotlines receive over 50% of tips-off related to fraud detection in comparison to companies that receive only one-third due to the lack of an anonymous hotline. The same study reveals that “the rate of discovering fraud by “accident” more than doubles when a company fails to offer a hotline.”

Builds Trust with Your Workforce

Having a hotline in place shows your employees that you don’t just talk the talk but walk the walk as well. Hotlines also create a safe space for employees to express their concerns. When they see the management acting on their issues, they naturally cultivate trust towards their workplace and their management. When your workers feel safe, valued, and heard – their productivity increases and your business performs better.

Offers Anonymity 

Harvard Business Review notes that “retaliation is astonishingly common: 68% of sexual harassment allegations and 42% of LGBTQ+ discrimination allegations made to the EEOC also includes charges of employer retaliation.” Fear of retaliation is one of the top reasons why employees choose not to report wrongdoings. A compliance hotline erases this fear by allowing employees to report issues anonymously. 

Helps Detect Issues Before They Translate into Full-Blown Disasters

Without an anonymous hotline, certain wrongdoings simply hide away in the company’s corners, only to re-emerge as full-blown scandals in the future. Moreover, when your employees don’t have the option to report misconduct anonymously, they end up taking their complaints to social media, federal agencies, or the court. This can not only cost the company millions in legal fees but also cause long-term damage to its reputation.

A Convenient Way to Address Workplace Issues

A great compliance hotline system is available for employees 24 hours a day, seven hours a week. This allows both in-office employees and remote workers to report a concern during nonwork hours as well. Sometimes, employees also choose to think about a situation in-depth before they finally decide to report it. Many choose not to report an issue until they’re in the comfort of their home. 

A Final Word 

Your company’s compliance hotline is the weapon that can stop wrongdoings in their tracks. But setting up a solid report system is only half the battle won. The other half depends on what you do after you receive reports of misconduct. For this, it’s critical to enforce comprehensive systems to investigate, monitor, and resolve wrongdoings the moment they knock on your company’s doors.