Who will your disgruntled employee talk to first? You or the SFO? The SFO is putting paid for advertising into the media asking for whistleblowers to come forward see here, or for a legal perspective, see DLA Piper’s note on the subject: see here.
What are the business implications? What can you be doing right now?
Here we are in the worst recession in ages, if not since records began, and employees are under incredible pressure to produce results. Investors want results, boards are demanding results, managers are shouting for results, and who produces them? But staff cannot pull rabbits out of hats, so they are feeling coerced into manufacturing results that simply do not exist.
People who have led blame free lives, who would not say boo to a goose, are being encouraged to come up with results for their managers, or risk losing their jobs. Accountants and others are losing sleep over the “temporary” adjustments they have made – all in the expectation of making good next month. Except next month is even worse. Ask Bernie Madoff – and look where he ended up.
These staff, who are under excruciating pressure need to be able to let off steam. So who will they call: someone in your organisation, or the SFO? Indications are that more and more people are calling the SFO. And while we can all applaud the efforts to catch the crooks – is this really where you want to be spending your hard-earned management time: dealing with an SFO investigation?
So what can you do?
1. Review your ethics and compliance approaches: do you have an ethics programme? Do you know that you are in compliance with legal and regulatory requirements? Is it time to dust your programme down and remind people that is exists? Or do you need to create a framework right now?
2. Ensure that you have space for staff to let off steam. Vague whistleblowing policies about letting someone know somewhere in the organisation don’t usually work: there needs to be an independent (but that does not necessarily mean outsourced) mechanism that is both credible and seen to work. Make sure that communication programmes are in place, and that people feel that ethics is as much there to support them as it is for the organisation. This needs two-way risk-free communication.
3. Conduct an independent, anonymous survey of attitudes amongst senior managers and front line accountants – those who are most likely to know what is going on. Surveys in the States have shown that whereas a typical whistleblowing facility may have 1% of the staff using it for its primary purpose, a further 4% might explore ideas which could prevent abuses. And yet as many as 50% of staff, according to surveys, claim to have witnessed illegal or potentially seriously embarrassing unethical behaviour. Where did that 45% go?
4. Talk to partners, suppliers and customers – proper engagement with them, so that you have a dialogue which helps to reveal where pressure points are in the value chain.
5. Review those reconciliations and funny accounts – all the ones that are full of judgemental values. This is often where dodgy results start – implement a zero-tolerance policy with regard to unauthorised adjustments to these accounts.
6. Get your internal auditors on to the case: a few deep dives into trial balances and transactions sends out a message.
7. Bring your risk management down from the Olympian heights of governance compliance and turn to operational risks.
And if all of that sounds like yet more expense – well its better than having your collar felt by the SFO because you never got round to it...
Oh, and while this has a UK flavour (note the "u" in that word) it is relevant right round the world.