An essential component of a functional compliance culture is the establishment of a whistleblower system - specifically the appointment of an ombudsperson. This ensures that compliance-relevant incidents can be reported (anonymously if necessary) and that everything possible is done to ensure compliance with rules and regulations without the reported incident causing further disruption to the company, its employees or business relationships.
A whistleblower system serves as a central instrument for employees and business partners as well as customers and other stakeholders to be able to identify possible misconduct. This system for obtaining information, which can be used by investigators in both companies and nonprofit organizations, establishes the opportunity to enable very quick responses to any grievances or incidents of abuse and thus avert damage to reputation, improve internal processes and design the processes more effectively. Due to the new legal requirements, this topic is more present than ever - the establishment of a whistleblower system is mandatory as of December 2021.
“Whistleblowing" is the term used when an internal or external informant reports irregular activities within a company or nonprofit organization. This confidential report may contain indications and/or well-founded suspicions of potential or actual infringements - both future and retrospective.
Whistleblower systems act as internal quality assurance and contribute to the avoidance or reduction of liability cases and reputational damage in external relations. The implementation of a whistleblower system can even have a preventive effect: An implemented whistleblower system makes it possible to uncover (potential) violations and is thus an integral part of an effective compliance management system in Germany.
The Directive "on the protection of persons who report infringements of Union law" (EU Whistleblower Directive 2019/1937) shall be implemented by Member States by the end of 2021. Germany will put this into effect with a new whistleblower protection law.
The obligation to introduce a whistleblower system affects companies and organizations in the public and private sectors, depending on the number of employees, with the following requirements, among others:
- Establishment of procedures for internal reporting and follow-up measures, including the possibility of written and oral reporting
- Protection of the identity of the whistleblower and the third parties mentioned in the report
- Acknowledgement of receipt as well as feedback to the whistleblower within a specified period of time
- Documentation of all incoming messages
- Measures to prevent reprisals against the whistleblower
Whistleblower systems help to protect the company from legal and economic damage. In this way, they enable their own staff and business partners to report suspicious observations without bias and, above all, to avoid premature contact with external third parties.
A properly implemented and actively used whistleblower system is much more than the mere fulfillment of a legal obligation. It serves to build trust among employees, business partners and the public, has a control function as a type of "early warning system" and helps to raise awareness of misconduct at an early stage. Existing processes can be optimized in this way; that is, weak points can ideally be identified and eliminated at an early stage.
Moreover, it promotes trusting cooperation and, last but not least, reduces potential legal and economic risks:
- Reputational damage can be prevented by avoiding the release of negative reports in the press and social media.
- Financial damage can be prevented or reduced. The role whistleblower systems, for example, play in averting fines or court costs as well as losses in share prices or sales cannot be underestimated.
The obligation to avoid violations of the law, which are punishable by sanctions, implies an organizational obligation on the part of companies to ensure adequate control of all entrepreneurial activities. An essential prerequisite for this is the organization of the information flow and internal communication: Management must receive all risk-relevant information. This also includes the duty to create the appropriate conditions for the detection of compliance violations and the corresponding discretionary and error-free response. For these reasons, a whistleblower system should be seen as an important component of an effective compliance management system.
The whistleblower system consists of various interrelated components: In addition to the process of transparent processing and clarification, there is a pre-deﬁned process for all action steps, which makes anonymous reporting for whistleblowers and complete process documentation possible. Further, there are internal guidelines that define the rights and duties of the parties involved, such as whistleblowers, any accused persons and the investigating body. These stringently defined procedures can ensure that appropriate (follow-up) measures are taken, together with measures to minimize recurrences.
A whistleblower system must be integrated into compliance management structures or be included as a component of them. These shall precisely define what is reportable and mandatory to follow up or clarify in order to prevent a culture of "snitching" and "exposing" and of discrediting and abusing a whistleblower system for presumed personal gain. Our experienced lawyers can help setting up a legally secure whistleblowing system for your company.
Our lawyers can provide your company with a whistleblower option in the form of a legal ombudsperson. This gives employees and business partners another important opportunity to openly address identified risks, suspicious observations or specific legal violations or infringements of internal regulations. In addition, we support you within the scope of
- Analysis and application of legal regulations within the framework of your processes and compliance culture,
- Creation of customized reporting and processing procedures,
- Establishment and implementation policies for handling whistleblowing, conducting investigations and protecting whistleblowers.
WINHELLER supports you in the development, adaptation and implementation of your own internal documentation tools as well as training measures. Our attorneys will integrate a whistleblower system in accordance with your requirements into existing compliance management structures or formulate the necessary structures and implement them in accordance with your corporate risk and requirements.
Are you looking to set up a new whistleblower system? Would you like to update an existing whistleblowing policy for your company? We will be happy to assist you with advice and support.
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