INTRODUCING A WHISTLERBLOWER HOTLINE? Policies, External & internal Considerations

Reputational Risk “It takes many good deeds to build a reputation and only one bad one to lose it. “ Benjamin Franklin

Quick Facts

¤  40% of people said their businesses have a weak ethical culture

¤  62% were confident in their firm’s senior leadership

¤  But 43% said managers don’t display ethical behavior

More Quick Facts ¨  65% of those who

witnessed misconduct reported the issue

¨  13% of employees felt pressure to compromise their ethics in order to do their jobs

¨  But 22% of whistleblowers said their companies struck back at them for spilling the beans

¨  Source: KPMG Survey 2013

Good Corporate Governance ¨  Protects both the

company & employee

¨  Deters & eliminates waste, loss, theft

¨  Increases employee morale & engagement

¨  Limits liability for directors and managers

Ethics & Compliance Programs

¨  Protect Reputational & Financial Integrity

¨  Shelter organization & management from costly litigation & penalties

¨  Increasing global regulatory reach – FCPA, UK Bribery Act, Dodd-Frank

¨  Improve corporate culture & increase shareholder value

Effective Policy Development

¨  Key to consider existing corporate culture ¨  Creating tone at the top – walk the walk, speak the

speak all the way to the Middle ¨  Clear, easy to understand policy ¨  Non-retaliatory in nature ¨  Dissemination and training

Policy Considerations ¨  Ensure decision making is consistent & sets ethical

considerations ¨  Examine industry specific risk to identify additional

fraud protection ¨  Policy needs to have clear expectations and

anticipated outcomes ¨  Code clearly defines level of expected behaviour

Canadian Regulations ¨  Multi-Lateral 52-110

¤ Audit Committee must establish procedures for receipt, retention & treatment of complaints

¨  Imagine Canada accreditation for charities and non-profits

¨  Potential new OSC whistleblower hotline

Impact of Hotlines ¨  Tips are the best

method method to detect fraud

¨  Over 40% of fraud is discovered by a tip ¤  Source: ACFE Report to the

Nations 2013

¨  The better you are at collecting and responding to fraud, the better you will be at detecting it and limiting losses

Trends ¨  5 year trend of rising report volumes continues

¨  Case closure times continue to climb

¨  Low rate of anonymous reporters who follow-up with their initial report extremely low

¨  Substantiation rates for reports of retaliation increased by 3 times

¨  80/20 split of calls between reports & inquiries ¤  Source: Navex Global Hotline Benchmark Report 2015

Setting Up the System ¨  Average hotline volume amounts to 2-5% of

employee population annually ¨  Volume varies dependent on:

¤ Corporate culture ¤ Promotion & training ¤ Confidence in management’s commitment ¤ Current issues facing company ¤ Past behaviors and reactions

Outsource or Internal Considerations ¨  Cost effectiveness ¨  Availability ¨  Regional/National/

Global Needs ¨  Training, Promotion ¨  Responsiveness

¨  Anonymity option is key, but system must incorporate ability to communicate with the reporter

¨  Bottom Line: Any system is better than none!

Outsource or Internal Hotline ¨  In-house system does not always provide the level of

confidentiality and protection of anonymity

¨  In-house system may not have requisite sophistication designed for this program

¨  Perceptions exists that management is truly committed if third party introduced

Outsource or Internal Hotline

¨  Voicemail can compromise anonymity

¨  Trained agents more likely to elicit important information

¨  Trained agents not distracted by other duties

¨  24/7/365 access is key

Outsource or Internal Hotline ¨  Comprehensive back-end incident management

system & cataloguing capabilities ¨  Reporting, analytics and holistic oversight ¨  In-house operations hampered by employee

vacation, sick time and other duties ¨  Marketing materials and training ¨  Translation and interpretation requirements

Case Lifecycle

Claim

Receive

Analyze

Investigate Resolve

Report

Retain

Decision & Implementation Priorities

¨  Code of Conduct Development

¨  Whistleblower Policy Development

¨  Infrastructure and processes built out

¨  Communications Planning Strategy

¨  Train, Train and Retrain

¨  Senior Management Engagement

Program Launch ¨  Code of Conduct ¨  Toll free lines setup ¨  Scripting ¨  Web portal

development ¨  Responsive Workflows ¨  Translation &

Interpretation

¨  Anonymous dialogue workflows

¨  Reporting, follow-up and analysis

¨  Training in-house personnel

¨  Marketing & Collateral materials

Implementation ¨  Introduction of Code & related policies ¨  Training

¤ Lunch & Learns ¤ E-training ¤ Corporate Intranet & Newsletter ¤ Role Playing ¤ Sanitized Case Studies

“Berkeshire would be more valuable today if I had put in a whistleblowing (hot) line decades ago. The issues raised are usually not of a type discoverable by audit, but relate instead to personnel and business practices.”

Warren Buffett, Chairman of Berkeshire Hathaway 2005

Retaliation – The Reality ¨  The mere perception of retaliation is enough to deter

reporting of misconduct ¨  Where trust is high and perceptions of management

and peers are more positive, retaliation is far less prevalent

¨  Zero tolerance = 8% of employees experience retaliation as opposed to 38% where top management does not take a stand against retaliatory behavior

Retaliation – The Experience

¨  Retaliation is now the most common form of discrimination alleged in the US topping both race and gender.

¨  82% of whistleblowers experience harassment after making allegations

¨  60% were discharged from their jobs

Retaliation Experience Whistleblowers may experience:

¤  Blacklisted from future employers ¤  Face social ostracism from co-workers ¤ Undergo stressful psychological strain ¤  Forced to transfer jobs ¤  Legal Actions ¤ Dismissal ¤  Blocked Promotion

Anti-Retaliation Policy ¨  Implement zero

tolerance policy

¨  Train all employees

¨  Effectively manage investigations

¨  Position whistleblowing as not disloyal but supportive and expected behaviour

¨  Share examples of retaliatory conduct

Anti-Retaliation Policy ¨  Apply policies

consistently ¨  Do not ignore or

isolate claimants ¨  Address & document

performance issues immediately

¨  Carefully review discipline & termination decisions

¨  Ensure communication is reinforced

Anti-Retaliation Support ¨  Ensure supervisors/decision makers trained on the

following: ¤ Policy prohibits retaliation ¤ Basic element of retaliation claims ¤ How to communicate and reinforce anti-retaliation

policy ¤ How to observe employee non-compliance

Summary ¨  Any hotline and case management system is better than

none ¨  Whistleblower hotlines and policies that support them

are designed to create a culture of integrity, empower employees and improve morale

¨  Anti-retaliation policies encourage use of hotlines and reinforce management’s commitment to transparency

Contact Information: Shannon Walker WhistleBlower Security 604.921.6875 shannon@whistleblowersecurity.com www.whistleblowersecurity.com