The whistle-blowing quandary: India Inc.’s journey from oblivious to obvious
Forensic & Integrity Services
Enhanced governance standards are driving organizations to focus on monitoring and controlling risks related to fraud and misconduct while conducting their business operations. An efficient whistle-blowing mechanism is a key tool to detect and mitigate such risks.
Key survey results
- 22% of the respondents had implemented a structured mechanism.
- 32% of the respondents had outsourced their mechanisms to third-party service providers.
- 13% of the respondents indicated that their whistleblowing frameworks were fully compliant with the Companies Act, 2013.
- Around 56% of the survey respondents indicated that less than 25% of complaints reported the need for further investigations.
The whistle-blowing landscape in India is relatively nascent, with laws driving enforceability for certain classes of companies coming into play fairly recently. Organizations need to proactively implement the mechanism not as a mere compliance-related factor but as a sound governance framework.
One of the key takeaways from the survey is the need for organizations to set the right ‘tone at the top’ when advocating a vigil mechanism. Management’s support in compliance and monitoring is another essential factor in establishing the success of this mechanism. A well-thought of and structured response mechanism is critical for the success of whistle-blowing. This should not only help in investigating cases, but also lay down the protocol and responsibility of the management to critically examine the control gaps that provide an opportunity to employees to commit or attempt to commit fraud and plug them.
Companies also need to adopt global leading practices to lay the foundation of the mechanism. A reporting platform should enable complaints to flow in easily.
Key steps to increase the effectiveness of the reporting mechanism
- Hotline with 24/7 availability and multiple language options
- Multiple reporting channels
- Outsourcing of reporting platform
- Confidentiality of complaints and reporters’ anonymity
- Protection of the whistle-blower
- Employee training and awareness drives
- Fraud response plan
The combination of an effective response mechanism and proactive action taken by an organization strengthens its controls and, at the same time, helps it establish a strong deterrence mechanism, if this is communicated appropriately.