Setting up a corporate ethics and compliance hotline the right way for best results
Many clients ask us why the ethics hotline they have put in place on their own proves ineffective or generates mostly irrelevant “junk” messages that provide no useful insight into the real compliance or fraud risks the company may be facing.
So, we’ve decided to use their “hotline hang-ups” as a “teachable moment” by sharing our extensive experience in establishing and running numerous hotline programs. Below, we will outline the five essential components of a well-designed and operated corporate ethics hotline.
But, first, let’s start with the basics.
What is an ethics and compliance hotline?
An ethics and compliance hotline is an effective channel for facilitating confidential reporting on instances of fraud or inappropriate or illicit behavior by employees or business partners, and other cases of misconduct involving a company and its various stakeholders (management, employees, counterparties, the community).
Five essential components of a well-designed and operated ethics hotline:
1. Spreading awareness of the hotline
Awareness is one of the most important elements of an effective hotline program. All employees, business partners, and other interested parties should be made aware that the hotline exists and why. To ensure such across-the-board awareness, we recommend creating a dedicated hotline page on the company's website. It’s also critical to regularly inform employees about the hotline and how it works should they need to use it, including basic information on the fundamental goals of the hotline program and the communication options available to them, as well as how their anonymity
and confidentiality will be safeguarded. Our experience shows that holding periodic training sessions and sending out regular informational emails are effective means of spreading hotline awareness. Additionally, we suggest placing informative posters in employees' recreation areas, such as lunchrooms or staff lounges.
2. Providing various options for communicating information
When establishing a hotline, we recommend adopting a model that offers users several alternative methods of sharing information, for example by a special telephone number, via a dedicated email address, or through an online form on the website’s hotline page. Moreover, whether they are managers, employees, business partners, or others, users must be given the choice of leaving a message anonymously, or providing his or her name and contact details. Making such multiple options available gives users the ability to choose for themselves which approach is most convenient and acceptable for them personally, thus enhancing their “comfort zone” when using the hotline.
3. Ensuring confidentiality, anonymity and protection from retaliation
A critical aspect of running an effective hotline is ensuring the absolute confidentiality of information reported and the anonymity of those users who request it. Individuals contacting the hotline must be assured that they will not be subject to company sanctions and will be protected from potential retaliation by wrongdoers should they come forward, regardless of the nature of their message. We recommend that you regularly remind employees that persons reporting information via the hotline will face no negative repercussions for speaking out. As well, it is critical to reiterate the message that the company guarantees the confidentiality of information reported and the anonymity of hotline users. Finally, we also recommend that you amend your corporate policies to include relevant clauses that clearly spell this out.
4. Establishing clear-cut message handling and investigative procedures
Before launching a hotline, you must establish clear-cut, transparent procedures and protocols for interacting with hotline users and processing the information they report and other incoming messages or requests. Each and every allegation of wrongdoing reported by a whistleblower via the hotline must be duly registered in a log, subject to an initial review and assessment, and then forwarded to the appropriate corporate department or function that will investigate it in a thorough and unbiased manner. It is also critical to include a mechanism for providing feedback on the status of an investigation to the hotline user who initially brought the issue to the company’s attention.
5. Working with reliable, independent hotline services providers
According to Deloitte’s 2019 “Compliance Trends in Russia and the CIS” survey, nearly one-third (28%) of participating companies indicated that they use an external provider to run and service their corporate hotline program. This comes as no surprise as, in our experience, many employees often remain skeptical and mistrustful of an in-house hotline long after their employer sets one up because they are uncertain whether anything they may report will actually be kept in confidence and their anonymity will be respected. But, engaging a reputable third-party provider can help ease such skepticism and bolster the level of employee confidence and trust in the integrity of a company’s hotline program. In addition, the provider's expertise in running a hotline and handling information received, from highly sensitive whistleblower allegations to mundane employee complaints, can be of invaluable assistance to corporate Compliance staff, helping them save precious time in properly “separating the wheat from the chaff” when sorting and prioritizing incoming hotline messages.
Taken together, these recommendations will help your company to properly design and set up an effective, smooth-running ethics hotline program.
The hotline, in turn, will be an invaluable management tool for identifying on a timely basis any instances of fraud or unethical behavior by employees, counterparties, or other stakeholders, as well as an early warning system alerting you to “red flags” indicating the potential risk of fraud or misconduct in company operations and business processes.
In this way, your company can respond promptly and proactively by rooting out such cases of fraud or mitigating suspected risks, thus preventing financial losses and costly reputational impairment.