About a year ago, I wrote an article for this blog about the strategic value of compliance. It stressed the need to invest properly in compliance initiatives, and to position purposefully the value of that investment for executive management and the board. My argument was simple: investment in compliance leads to reduced risk and improved business performance.
For those of us in the compliance profession, these points are both true and self-evident. But unfortunately, difficult to quantify. Until now.
On November 1, 2018 (today, for those of you who follow our blog closely) George Washington University (GWU) researchers published a groundbreaking new study: Evidence on the Use and Efficacy of Internal Whistleblowing Systems. It examines the statistical relationship between internal reporting system usage (whistleblower hotlines) and business performance.
Specifically, the research shows that increased hotline use is correlated with:
- Greater profitability and workforce productivity as measured by Return on Assets (ROA).
- Fewer material lawsuits brought against the company overall, and lower settlement costs if a lawsuit does occur.
- Fewer external whistleblower reports to regulatory agencies and other authorities.
The data also shows that internal hotline reporting activity and the performance results highlighted above are always positively correlated: the more reporting activity, the better the results. What’s more, the reverse is also true. That is, higher internal whistleblower activity never correlates with negative business outcomes.
With this new study in hand, compliance officers now have the first empirical evidence of something that what most of us already knew; investing in compliance brings a material advantage to the organization. It helps identify and resolve problems more quickly, which translates into fewer external complaints to regulators and fewer lawsuits. Further, it energizes your workforce and manifests itself in higher productivity and profitability.
I encourage everyone who is concerned with building a stronger, more productive workplace culture to read our analysis of the GWU study. (For those more statistically inclined, you can download the full GWU study itself and see the regression tables). Consider how it might influence the way you look at your own hotline reporting data. More importantly, consider how your CEO and Board of Directors may respond to learning about the direct correlation between investments in hotline reporting and positive organizational outcomes.
Full disclosure: NAVEX Global maintains the world’s largest hotline reporting database. Knowing this, the GWU researchers requested permission to use the dataset for their study; the request was unsolicited. After a rigorous vetting process, NAVEX Global allowed for secure, anonymized access to 14 years of hotline reporting records. Neither George Washington University, nor any members of the research team, received any financial consideration for this work. As is the case with our own Hotline and Incident Management Benchmark Reports, no company-identifiable information is included in the GWU report.
Download Findings: Strength in Numbers: The ROI of Compliance Program Hotline Reporting