Why Trust is Essential for Whistleblower Programs to Be Effective

by ANDREAS PYRCEK

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Why Trust
Is Essential for
Whistleblowing Programs
to Be Effective

by ANDREAS PYRCEK

Whistleblowing protection mechanisms promote integrity, accountability and ethical practices within organizations and society. They’re potent tools that empower individuals to speak up against misconduct and unethical behavior. These mechanisms also serve as crucial safeguards against corruption, fraud and other forms of wrongdoing—provided they are properly implemented and respected within an organization.

Some of the largest misconduct cases in recent memory—defective parts and quality shortcuts at a prominent aerospace company, or the falsification of medical testing devices at a health technology startup, or massive accounting fraud at an energy company—are a result of whistleblowers who risked everything to do the right thing. Employees must be able to trust that when they see wrongdoing, they can report it without fear of retaliation and have confidence that leaders will act. Given that 43% of all fraud is uncovered through tips by whistleblowers¹—more than three times that of the next common method (internal audit)—it’s imperative for organizations to get whistleblowing protection programs right.

But what happens when leaders themselves feel the pressure to look the other way? In the EY Global Integrity Report 2024, we surveyed 5,464 board members, senior managers, managers and employees of large organizations across 53 countries and more than a dozen industries.

Our findings indicate that 64% of board members and 57% of senior managers felt under pressure not to

report misconduct (versus 54% of employees). Four in 10 board members also admit that when an issue is reported, they themselves have faced retaliation, or have witnessed adverse consequences toward someone else who reported misconduct through the organization’s whistleblowing mechanism (versus 17% of employees).

New regulations are pushing organizations to do more to support whistleblowers. In 2023, the U.S.² and the EU³ introduced new whistleblowing legislation to improve protection mechanisms and make them mandatory for more companies. The introduction and expansion of such whistleblower protection laws, along with increased awareness on the importance of reporting misconduct and advancements in communication technology, have created more efficient and effective channels to report wrongdoing.

While there is some concern about dilution, particularly with President Trump’s recent executive order pausing all enforcement of the Foreign Corrupt Practices Act, there is hope that new and enhanced regulations will ultimately strengthen whistleblowing protection mechanisms.

New whistleblowing laws and regulations, several with slightly different compliance requirements, have increased scrutiny of whistleblowing processes and compliance obligations for global organizations. However, those that embrace the compliance challenge and make an investment into an effective whistleblowing program will find that the value is clear. As the Association of Certified Fraud Examiners (ACFE) notes in its recent report,⁴ the presence of a formal reporting mechanism, such as a hotline, can reduce the median loss due to fraud, as well as the duration of the fraud by 50%.

New legislations in several jurisdictions around the world are improving safeguards for whistleblowers. In 2024, countries in the Americas, EU, United Kingdom (UK), the Middle East and Asia-Pacific have drafted or enacted new whistleblowing laws and regulations or enhanced existing laws. In countries that have strengthened whistleblower protection mechanisms, or where monetary incentives are offered, more individuals appear emboldened to step forward with knowledge of wrongdoing.

Despite efforts to strengthen whistleblowing protection mechanisms, attitudes toward integrity slow to change. According to the EY Global Integrity Report 2024, attitudes toward integrity and conduct show that organizations are

resistant to change. Our report suggests that although board members and management say they feel more confident that the whistleblowing environment has improved over the last two years, employees are less convinced:

More than one-third (36%) of senior management say it has become easier for employees to report their concerns, versus only a quarter of employees.
Four out of 10 members of senior management say that solutions for whistleblowing are more advanced and offer greater anonymity and flexibility to raise concerns, versus 18% of employees.
Roughly one-third of senior management say whistleblowers are now offered more protection from retaliation, versus 14% of employees.

36% of senior management say it has become easier for employees to report their concerns, versus only a quarter of employees.
Four out of 10 members of senior management say that solutions for whistleblowing are more advanced and offer greater anonymity and flexibility to raise concerns, versus 18% of employees.
Roughly one-third of senior management say whistleblowers are now offered more protection from retaliation, versus 14% of employees.

The data suggests that despite whistleblower protection laws, whistleblower reporting procedures don’t always offer required protection or provide easier reporting, so many potential whistleblowers still don’t trust the process.

To improve the risk management benefits of their whistleblowing framework, organizations need to win the trust of their employees. Here are four actions organizations can take to strengthen the integrity of their whistleblowing programs.

1 | Nurture an integrity-first culture

Organizations need to create an environment where employees feel psychologically safe to speak up and are confident that their concerns will not only be heard but also acted upon. This is easier said than done. The 2023 LRN Code of Conduct Report,⁹ published by LRN Corporation, found that globally, a “speak up” culture appears deficient in most organizations. The 2023 LRN Code of Conduct Report reviewed the codes of conduct of top publicly traded companies across Europe, North America and Asia, assessing them on metrics such as the ease of speaking up about risky topics, usability of the codes of conduct and knowledge reinforcement through learning and development initiatives. Slightly more than half (57%) of the studied codes have a strong non-retaliation policy for employees who speak up about misconduct.¹⁰

Creating a culture that focuses on employee engagement and raising awareness around integrity and accountability is important. According to research¹¹ by the Einaudi Institute for Economics and Finance (EIEF), the Kellogg School of Management, and the University of Chicago Booth School of Business, the higher the measure of integrity, the better the firm’s performance. Companies with an integrity-first culture were more often chosen by students as an attractive place to work and less likely to be subject to unionization attempts. Yet, even with robust whistleblower programs in place, cultural influences can be a significant factor when it comes to speaking up. In some countries, a culture of deference to more senior members in the workplace may contribute to individuals being fearful of reporting misconduct.

Consequently, leaders need to do more than encourage employees to speak up when they see wrongdoing—they need to actively engage them. More than making space for employees to speak, leaders need to be proactively soliciting their opinion. It’s less about broadcasting a message and more about establishing multidirectional dialogue. As such, leaders need to not only listen to their employees but also act on what they hear.

2 | Increase awareness, training and communication

According to the findings of the EY Global Integrity Report 2024, more organizations have implemented whistleblowing hotlines, with the percentage of respondents who said that their organization doesn’t have one dropping to 7% from 14% two years ago. Furthermore, one-third of all respondents indicated it has become easier to report concerns, and that the solutions for whistleblowing are more advanced and offer greater anonymity. These advancements may, at least in part, explain why board members and senior management say they feel more confident that the whistleblowing environment has improved over the last two years. Yet, when respondents in the EY Global Integrity Report 2024 were asked how often they had heard management communicate about the importance of behaving with integrity, only fewer than half of all respondents (47%) said communication was frequent. Among employees, the percentage falls to one-third (33%).

When asked how much they knew about the legal protection or policies their organization or country had in place to safeguard whistleblowers from retaliation, 44% of all respondents said they knew a great deal or a fair amount. One-quarter knew nothing about, had never heard of or didn’t know about what whistleblower protection programs e available to them.

Awareness, training and communication are critical to strengthening and maintaining an integrity-first culture, particularly when it comes to whistleblowing. It’s associated with both faster detection of fraud and lower losses. According to the ACFE, organizations that didn’t provide fraud awareness training to their employees lost nearly two times more financially than those who did provide training.

To maximize the effectiveness of whistleblowing programs, organizations should regularly track stakeholders’ awareness and confidence in these initiatives, for instance, through staff engagement surveys. The point is not only to ensure that employees feel empowered to report issues, but that they also feel that their information is appreciated and acted upon, and that the organization demonstrates a willingness to continually evolve the program in response to employees’ needs.

3 | Use technology to augment traditional channels of whistleblowing communication & reporting

As critical as training and communication are in developing a robust integrity-first culture, traditional tools aren’t always effective. Employees may miss an email outlining the organization’s whistleblowing policy or forget what they have learned in a training module. Technology advancements are, therefore, being used to augment and improve communication and management of whistleblowing programs.

In addition to technology innovations to improve communications channels for whistleblowers, evolving technology is also helping organizations to monitor, store, manage and address misconduct reports. This includes external report management, online repositories to securely store and share relevant documents, audit trails, intuitive case management, anonymization and archiving for General Data Protection Regulation (GDPR) compliance, configurable access rights management, and internal chat platforms for secure exchange of messages and documents among teams and external advisors.

Artificial intelligence (AI) and generative AI (GenAI) are also making their way into whistleblowing frameworks, from individual report analysis (content and document analyses, as well as activity logging) to database analyses (natural language processing, pattern recognition and trend analysis).

4 | Embed whistleblower program into the organization’s global compliance strategy

Whistleblowing programs, which are crucial for organizations, shouldn’t be considered as siloed risk management components. The program needs to be integrated into an overall compliance and risk management strategy and operations to enable the organization to not only manage and mitigate risks, but also help employees to feel confident, heard and protected. When employees and third-parties feel confident that their concerns will be taken seriously, it reinforces the importance of compliance across the organization, ultimately reducing the likelihood of future misconduct. Real-life examples, such as the role whistleblowers played in exposing corporate scandals like defective parts and quality short cuts at a prominent aerospace company or the falsification of medical testing devices at a health technology start-up, demonstrate how intervention can prevent future harm.

Summary

Employees must be able to trust that when they see wrongdoing, they can report it without fear of retaliation and have confidence that leaders will act. New regulations are pushing organizations to do more, but whistleblowers still face challenges as attitudes toward integrity are slow to change. By taking action to strengthen the integrity of their whistleblowing programs, and uncovering potential issues early, organizations will find the value they gain far outweighs the cost. ■

Read the full article in its original form here.

Sources

¹ Association of Certified Fraud Examiners (ACFE), Occupational Fraud 2024: A Report to the Nations, Association of Certified Fraud Examiners, Inc., © 2024. Accessed on 4 March 2025.
² U.S. Congress. S.811 - SEC Whistleblower Reform Act of 2023. 118th Congress, 2023.
³ European Parliament and Council of the European Union. Directive (EU) 2019/1937 on the protection of persons who report breaches of Union law. Official Journal of the European Union, 2019.
⁴ Ibid.
⁵ U.S. Securities and Exchange Commission Office of the Whistleblower, Securities and Exchange Commission Office of the Whistleblower Annual Report to Congress for Fiscal Year 2024, 15 November 2024. Accessed 4 March 2025.
⁶ Financial Conduct Authority (FCA), Prescribed Persons Annual Report 2023/24, 5 September 2024, FCA. Accessed 4 March 2025.
⁷ Moore TK, “Increasing Reporting Numbers Show Growing Importance of Whistleblowing Directive,” 30 October 2024, Moore TK. Accessed 4 March 2025.

⁸ Proctor, Emily, “More Dutch employees reported to the House for Whistleblowers in 2023,” 28 March 2024, I Am Expat. Accessed 4 March 2025.
⁹ International Compliance Association, The 2023 LRN Code of Conduct Report, October 2023, ICA. Accessed 4 March 2025.
¹⁰ Businesswire, “LRN Report Reveals 2 In 5 Codes of Conduct for the World’s Top Publicly Traded Companies Fall Short,” 25 July 2023, businesswire. Accessed 4 March 2025.
¹¹ Ideas for Leaders, “How a Culture of Integrity Boosts the Bottom Line,” Ideas for Leaders. Accessed 4 March 2025.

Andreas Pyrcek is a Partner at Ernst & Young – Germany in the Forensic & Integrity Services practice.

This article was originally published on EY.com. To read the original version, click here.