How can offering employees an anonymous reporting program serve as a profit center for any business? The reporting tool is used to report witnessed or suspected misconduct or fraud, and these tips often require spending non-revenue generating time and resources to investigate. So, how can a reporting tool actually help?
The statistics are clear – the potential losses to your organization if you fail to detect fraud or misconduct can be staggering. For example, fraud investigations experts report that 5% of revenues are lost to fraud and, for small businesses, the average loss is a potentially devastating $807,443. Fraud and embezzlement schemes can go on for many years before they are detected, especially for small and mid-sized businesses that do not have dedicated fraud-prevention resources and adequate internal controls. But, as you can see from recent headlines, large companies are also not immune to the tremendous impact of fraud. Valued employees at companies of all sizes may abuse their employer’s trust for personal financial gain. No matter how experienced, tight knit, or vigilant your organization, you are not immune.
What could your business do with 5% of revenues?
The U.S. Equal Employment Opportunity Commission (EEOC) administers and enforces civil rights laws prohibiting workplace discrimination. In 2017, the EEOC received 540,000 calls to their tip line. Last year the EEOC recovered approximately $484 million on behalf of victims of discrimination and harassment through litigation penalty awards and settlements. This amount does not reflect the additional costs to a company related to reputational harm, legal fees, decreased productivity, and employee turnover that necessarily stem from these claims. A company may also be required to implement costly remediation steps such as designing and socializing new policies and practices, providing training, and YES, implementing a 24-hour anonymous hotline for reporting complaints.
Here is how your company can mitigate the negative effects of these claims.
Studies have shown consistently that providing an anonymous reporting channel for employees serves as a fraud and misconduct deterrent because they encourage and facilitate reporting of wrongdoing, and address the very real fear of retaliation. By letting your employees be your eyes and ears and fostering a “Speak Up” culture, you can take corrective action before significant losses, or reputational damage, are incurred.
Early reporting of misconduct, fraud and theft can mitigate losses and brand damage, and serve as “lessons learned” to help prevent future, similar incidents.
The National Business Ethics Survey™ shows that members of management are responsible for six in 10 instances of misconduct, and that one in five workers claimed they suffered retaliation for reporting the misconduct. How many employees are lost, and how much spent on recruiting and training new employees, due to management misconduct that remains unreported?
Competitive compensation and benefits are no longer enough to attract and retain talented employees. In the recent Deloitte Millennial Survey, only 48 percent of the 10,455 millennials surveyed believed that businesses behave ethically, and 56 percent swear they will never work for specific companies because of their perception of the organizations’ values.
Demonstrate your commitment to providing a workplace with the highest ethical standards by offering a platform to report witnessed or suspected wrongdoing. This instills confidence in current AND future employees, and will help you resolve issues internally before they spiral into larger, costly, or public problems.