A Whistleblowing System to Create Good Corporate Governance
The dynamic business world requires companies to be flexible and able to respond quickly to changes in the market. Especially when the world is facing the Covid-19 pandemic as it is today. Given this dynamic condition, companies are required to consistently implement Good Corporate Governance (GCG).
According to the Business Dictionary, Corporate Governance is the framework of rules and practices by which a board of directors ensures the accountability, fairness and transparency of a company’s relationship with all its stakeholders (financiers, customers, management, employees, government, and the community).
The implementation and sustainability of Good Corporate Governance is imperative to ensure that the company runs effectively and efficiently so that its health is guaranteed. A company is said to have good governance if it adheres to the following three principles: accountability, fairness, and transparency.
However, the path to implementing better corporate governance is not always smooth. Constraints such as lack of integrity of individual employees or parties outside the company may lead to potential fraud and would impact on the health of the company. Unfortunately, ongoing fraud cases often remain undetected because the company’s management would remain unaware of these practices. However, lower level employees often find out and even witness firsthand the ongoing fraud scheme.
A whistleblowing system to create GCG
The results of the study entitled Whistleblowing as a Tool for Good Corporate Governance-An Indian Perspective, suggested that there are five important mechanisms to be implemented to create a better and effective governance in institutions or organizations, one of which is the whistleblowing system.
By implementing a whistleblowing system, a company would be basically adhering to the transparency principle. Through a whistleblowing system, employees can rise concerns related to signs of fraud that they have witnessed or experienced with guaranteed anonymity. The whistleblowing system is by far the most effective tool for detecting fraud. According to ACFE’s 2018 Report to The Nations, tips were by far the most common means of fraud detection by amounting to 40% of their studied cases.
Should a whistleblowing system be managed internally or by a third party?
Companies can implement a whistleblowing system that is managed internally or independently through third parties. Whistleblowing systems that are managed internally may not cost much because they utilize internal resources, but there is risk that the system may not work very well. For example the report may not be forwarded because the person receiving the report is the reported individual.
However, this risk can be minimized if the company uses a third-party whistleblowing system because third parties do not have any interest in the company. In addition, third parties also have integrity in protecting data, therefore they can be better trusted by the companies.
Integrity Indonesia as a company that has more than seventeen years working in the field of compliance has extensive experience in providing whistleblowing services for clients from various business backgrounds. Through the Canary Whistleblowing System, Integrity presents a combination of several reporting channels that are centralized on the website application thereby increasing our client’s accessibility to reports, while still ensuring the anonymity of the reporter. If your company is ready to take whistleblowing systems seriously, contact us today!