KPMG Ford, Rhodes, Thornton & Co.’s Forensic Advisory practice recently announced the launch of a confidential hotline with the signing of its first client in Sri Lanka.
The feature known as an Ethics Hotline promotes the concept of good corporate governance, transparency and ethical conduct which could benefit local companies, said Jagath Perera, Partner and Head of Forensic and Internal Audit of KPMG in Sri Lanka.
“The main benefit of the ethics hotline is that it provides a direct and confidential channel which enables employees and even external stakeholders to report corporate fraud or any unethical practices to an independent third party which would then investigate or report to the very top levels of management within the company,” he added.
The toll free hotline enables whistle blowers to raise genuine concerns about possible fraudulent or improper conduct in confidence, allowing their organisation to take prompt and effective action. The Ethics Hotline is intended to uncover unethical behaviour among staff and managers and to reduce fraud related costs.
Employees within companies sometimes suspect that fraudulent activity is going on but are often reluctant to report or ‘blow the whistle’ due to lack of confidence in internal reporting systems, or fear of victimisation or retribution.
“Employers should do all they can to remove these obstacles, and a whistle blowing hotline is one element of the solution. Statistics from KPMG’s India Fraud Survey in 2010 suggest that approximately 50% of frauds are discovered following an employee reporting the concern or an anonymous call often abbreviated as blowing the whistle,” Perera said.
A hotline not only helps avoid employees turning a blind eye to suspicions of unlawful activity, but also reduces the risk of them going outside the organisation with their concerns, potentially causing unnecessary financial and reputational damage.
“Ethics hotlines are used commonly by multinationals and large scale companies in many countries across the globe, the feature however is not dependent on scale and varied models could be adopted for any scale of organisation, even SMEs,” Jagath Perera added.
Measures such as ethics hotlines enable companies to proactively uncover the risk of fraud and other irregularities even before incidents occur. It also creates a transparent environment where potential fraud is deterred. This is because people are less likely to commit fraud if they know there is a higher chance of getting caught.
The 2010 ACFE Report to the nation outlined that ‘Where an Ethics Hotline was in place, the average duration of a fraud scheme was reduced by seven months and the median loss was reduced by 59%’.