Benchmarking the Hotline

Norman Marks, CRMA, CPA, is a vice president for SAP and has been a chief audit executive and chief risk officer at major global corporations for more than 20 years.

 

A study and report by The Network, 2012 Corporate Governance and Compliance Hotline Benchmarking Report, should be essential reading for everybody responsible for or assessing the performance of their organization’s hotline capability.

While I didn’t see anything dramatic or surprising, the content is an excellent source of information and comparative data and a reminder of critical actions if the hotline capability is to be effective.

Some excerpts:

  • “Many organizations are struggling with 'check-the-box compliance.' While these organizations are establishing typical compliance activities — a hotline, a few basic policies, some ethics training and maybe putting up some awareness posters — they are failing to establish an integrated and holistic program. This siloed approach often results in little to no coordination of activities, with very little oversight or monitoring, and leaves organizations with a false sense of security which fails them when true compliance issues arise.”
     
  • “One of the most essential compliance best practices is employee ethics training, which requires a thorough, ongoing review of an organization’s training program. Having employees who are well aware of boundaries, laws and how to engage in the compliance lifecycle makes for a robust and proactive fraud control measure. Training has evolved and cannot be a “watch a video” and check box stating that it was understood. It must be interactive, challenging employees to engage and retain the information presented to them. Based on an organization’s employee makeup, training methods and tools will be different. For a young employee base, it may be heavily weighted in social media-like methods, while a more mature employee base will typically respond better to classes and traditional teaching methods.”

Other interesting observations include:

  • The report notes a small increase in the level of reports about suspected inappropriate activity, and a small increase (to 52%) of the number of employees willing to provide their name rather than be anonymous.
  • A troubling issue, reported in other studies as well, is an increase in the level of retaliation for reporting issues. The number varies by industry, but overall is involved in 2.9% of incidents.
  • The great majority (85.0%) of reports are made by phone, although the number of reports over the Internet is increasing (now 13.9%).
  • The number of reports per 1,000 employees also varies by industry. Overall, the average is 8.58.
  • The frequency of the different types of complaint is not changing. 47% relate to "personnel management," 14% to "employment law violation," and 12% to "corruption and fraud."
  • 72% of employees do not report an issue to management before contacting the hotline.
  • The disposition of reports is interesting: 16% are closed with no investigation warranted; 41% are investigated and corrective actions taken; and, 26% are investigated and no corrective actions are required.
  • In another table, the study showed that 22% of cases are closed with no action taken; 38% in disciplinary actions; and 12% in terminations.

How do the study results compare with experience at your organization?

Posted on Oct 9, 2012 by Norman Marks

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  1. Employees who have tips to the hotline is a wonderful way to improve an organization's control environment and help prevent/detect frauds.  You don't have to look much further than Norman's comments or the ACFE Report to the Nations (http://www.acfe.com/rttn/).  

    An organization should NEVER retailiate against a good-faith tipster.  If one does, it would be the ultimate negative 'benchmark' of the tipline.  

    Good article, Norman!

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