Economic and Operational Benefits of
Whistleblowing Channels

Economic and Operational Benefits of Whistleblowing Channels

Whistleblowing channels, particularly when established with digital technology, are immensely advantageous in today's world, where news, even false news, spreads rapidly. The benefits of a whistleblowing channel can be summarized as follows:

Reputation: An organization known for corruption may risk extinction. In the United States, corporate scandals like Enron and WorldCom led to the downfall of Arthur Andersen, one of the top five global auditing firms at the time, which has since disappeared. A similar fate befell Latin America's largest construction company, Odebrecht.

Even in cases not as extreme as those mentioned above, regulatory agencies DO HAVE WHISTLEBLOWING CHANNELS. If they become aware of irregularities affecting their supervised companies without the companies' prior knowledge:

• Frauds will continue for a longer period and result in greater losses.
• Regulatory supervision will become more intense, frequent, and costly to manage for companies due to increased risk perception.
• Sanctions for regulatory compliance deficiencies may eventually be imposed.

Economic: Corporate fraud, according to ACFE estimates, involves approximately 5% of organizations' gross sales. Of this, almost half of the cases are initially detected through whistleblowing, which in turn reduces the duration and average loss by half. Imagine the opportunity of increasing your sales by 2.5% without incurring more than the cost of establishing and managing a whistleblowing channel, which is insignificant in comparison.

Additionally, there are hidden costs of fraud and corruption that are not fully quantified in these estimations, such as:

• The overpricing applied to products from suppliers who pay bribes. Lower quality of services.
• Restrictions imposed by financial and capital markets on companies with a poor reputation.

Internal Climate: For the organization's personnel, witnessing corrupt individuals enriching themselves while honest individuals struggle without comparable income, and seeing the organization deteriorate day by day, threatening their source of income, is concerning and demotivating. The perception of integrity and fairness is a strong motivator for a positive work environment and optimal productivity.

Author: Guillermo Casal
International consultant and trainer in fraud prevention and investigation and anti-money laundering. He is a Certified Public Accountant, holds a Master's degree in Economics and Administration, and has six international certifications, including the CFE (Certified Fraud Examiner), CIA (Certified Internal Auditor), and CISA (Certified Information Systems Auditor).