Whistleblowing means whistling in Hungarian. At the same time, in the corporate sphere, the term is used for breach reporting systems and covers a procedure that allows employees in a given organization to report, for example, abuse, corruption, fraud, theft without having to fear retaliation for reporting. In Hungary, such a solution is typically used by companies that are obliged to by law (e.g. financial service providers, auditors, tax advisors), which have a large number of employees, where transparency is of paramount importance due to their activities, or their purpose is increasing reputation. And soon it will be mandatory for all employers with at least 50 employees to establish the framework.

The mechanism, also called ethics hotline, aims to increase trust within the organization and to investigate behaviours and acts that are illegal or the ones a company declares unethical and prohibited. According to international studies, the most common types of breaches include various forms of corruption, stock theft, and financial breaches.

It is worthwhile for companies to design the reporting system in such a way that it does not function as an additional burden, or merely as an administrative task, but as a factor supporting the operation of the organization, as the demoralizing environment does not pay off for either party in long term.

What are the benefits of a well designed implementation of the rules?

Damage prevention – property protection: less harmful behaviour or infringements stay unrevealed.

Transparency: Predefined rules make the system predictable, everyone knows how a process works and what security measures can be taken to avoid personalization and retaliation. The appropriate procedures ensure that the data is kept confidential, and that the identity of the notifier is protected throughout the reporting and investigation phases.

Employer brand: the system built by a responsible manager builds a high degree of trust in the employees because it makes it visible that regardless of the position in the work hierarchy, action is taken in case of breach, which increases loyalty to the company.

Reputation: A company that operates properly and transparently can always count on recognition by its customers and suppliers, and “shady dealing”, that distorts competitiveness, can be avoided.

Of course, building a breach reporting system requires financial and time commitment by the management, but that investment pays off even in short term. We expect a turmoil in many cases similar to GDPR compliance procedures some years ago. However, that can be avoided by companies that step in on time and thoughtfully commit themselves into implementation.