In the first part of our series of articles, we reviewed who is obliged to establish an internal whistleblowing system, while in the second part we highlighted the benefits of such system beyond the legal requirements. This time, we would like to point out the possible implementation methods of organizing the internal system internally and externally and thus, how reports can be received and investigated. Furthermore, we elaborate those particularly relevant factors that can help determine the way the process is executed.
Expectations about whistleblowing systems
The most important requirement of a whistleblowing system – beyond the legal compliance – is that it is capable to effectively investigate the reports. The legislator’s aim is to ensure that the rules are properly applied, while the management of an organization expects increase in efficiency, transparency and trust, meanwhile reduction in risks and costs. In addition, the reporting person would be confident that his complaint will be investigated and that a fair procedure will be followed, while ensuring maximum protection of his interests.
There are two main ways of complaint handling. Some companies designate a separate person or department within their organization for this task, while others outsource that to a third party – in our view, both solutions may be appropriate. However, deciding whether to investigate the reports in-house or by a professional is not an easy question, especially for businesses that previously had no such whistleblowing system in place and now are legally obliged to establish its rules with a tight deadline. Although there are countries where reporting systems are more widespread and companies have more experience in this area, in Hungary this procedure still in its infancy. We review below some of the circumstances and criterias that may help to consider what would be the most ideal solution for a given organization.
The in-house reporting system
In case of appointment of an in-house person, the report stays entirely within the organization, and it is also investigated there. A further advantage is, that the persons handling the reports know the company, its activities, structure and organizational culture, therefore they can better contextualize the complaints received, taking into account local conditions, and find a more targeted solution to the problem. However, the system may have the disadvantage that the investigator is likely to identify the reporting person and the person involved in the infringement, which could compromise the requirement of objectivity and confidentiality. In addition, it may also be a difficulty for the investigator to carry out his work separately within the organization, so that neither the management nor other unauthorized persons have access to that. This can be a problem particularly in small and medium-sized companies, where colleagues are already closely linked to each other.
Outsourcing the handling of whistleblowing reports
The advantage of outsourcing is that the person investigating the potential infringement is independent and impartial to the process. An additional advantage is that service providers have specific expertise and thus they can help remedy infringements and assist with possible further procedures and actions. If the activity is outsourced, the management of the organization does not need to deal with the establishment of a procedural protocol, which results in ease of administration and time efficiency. It is however important to bear in mind that external persons do not have the necessary local knowledge, therefore the complete exploration of the internal processes shall always be part of the assignment.
Requirements against the investigator
Whatever the company decides regarding the implementation, it is always true that the person carrying out the inspection must have appropriate qualities. He should be able to determine whether the report is an actual infringement or it is another complaint (i.e., grievance arising from personal conflict), not falling under the scope of the Whistleblowing Directive. It is also necessary that the investigator is aware of the nature of infringements reported, as those may concern a wide variety of areas (e.g. abuse of public procurement rules, tax evasion, embezzlement etc.). In addition, the highest degree of discretion, impartiality and professionalism shall be the hallmarks of the person designated, to whom whistleblowers can turn with trust, if necessary.
In conclusion, it can be ascertained that the person assigned to investigate the reports must have certain skills and competences. Whether this task should be carried out by a designated employee of the company or by an external professional is a matter for individual assessment of all relevant circumstances.