Introduction
Much of the world appears to be heading towards a recession.
According to the Office for National Statistics ONS, despite Sterling's recent rise against the dollar, the UK economy remains 0.2% below pre-Covid 19 levels. And given the current economic conditions, City forecasters say it is a case of 'when' rather than 'if' the UK eventually falls into recession.
What might it mean for businesses and organisations across the world? And what might it mean specifically for whistleblowing managers?
Well, there is a generally held belief that wrongdoing – especially fraud and theft – increases during times of recession.
In this article we'll ask the question, is this true? We'll also offer practical tips to bolster your Whistleblower line and prevent or minimise fraud and theft in your business.
Wrongdoing in businesses and organisations during recessions
Intuitively, it makes sense that people might turn to theft and fraud during desperate times.
If crime was driven purely by the economy on its own, then it would increase as the economy declined and decrease during times of prosperity.
We don't see this.
But, what we do see is the combined consequences of high unemployment, falling incomes, and reduced economic activity having an increased impact on crime and whistleblowing over time.
And considering we're facing the compounded effect of the
world reemerging from the Covid-19 pandemic in tandem with an
imminent economic recession caused by spiralling inflation, it
seems reasonable to believe fraud and theft will rise.
So, what does history tell us?
We take a look at fraud as an example key area to delve deeper into this question.
Fraud during recessions
Three factors are generally accepted as necessary for fraud to increase: pressure, opportunity, and the ability to rationalise illegal behaviour.
Unfortunately, all three factors can come into play during a recession.
More recently, a report from TransUnion found a 149% increase in
fraud attempts in the first four months of 2021. 1
Looking back at the UK's previous recessions, against falling
GPD, Professor Mark Button, Director of the Centre for Counter
Fraud Studies at the University of Portsmouth found that:
"Previous recessions show a direct correlation between a fall
in economic output and a rise in fraud." 2
- 1980 recession: 3% fall in GDP - 5.6% increase in fraud offences
- 1990 recession: 1.7% fall in GDP - 9% increase in fraud offences
- 2008 recession: 1% fall in GDP - 7.3% increase in fraud offences
Looking at the overall picture, we have to acknowledge that there are other factors at play too. From recessions spurring businesses to conduct detailed internal reviews - leading them to discover past or ongoing deceptions - to nervous employees blowing the whistle on others - all leading to increasing fraud reports.
What might you reasonably expect if you're managing whistleblowing processes over the next 12-months?
While no one can predict the future, thanks to our 2021 and 2022 whistleblowing benchmark reports - covering the most recent Covid-19 recession - we can share our own experience to help inform you of what might be to come:
- A large increase in the number of whistleblowing reports. But
with a word of caution as this is not the case for all sectors,
take healthcare as an example; additional pressures and less time
to reflect might contribute to a decrease in reports. So be
aware.
- An increase in the number of anonymous whistleblower reports
driven by job insecurity and fear of dismissal.
- A shift away from speak up hotline calls to web reports thanks
in part to the increase in "Gen-Z" and
"millennials" within the workforce who might prefer
reporting virtually.
- Whistleblowing reports to be predominantly HR related with over
55% of the share of our reports in 2021 related to HR.
How to recession-proof your whistleblowing processes and policies
We spoke to Greg Ogle, one of our Safecall Account Managers. Greg worked on both the 2021 and 2022 Whistleblowing Benchmark Reports, and speaks with whistleblowing managers each and every day.
If anyone is well placed to give advice on recession-proofing your whistleblowing processes, it would be Greg, because he understands the reality behind what happened to whistleblowing reports during the pandemic.
"It's all about being prepared. These are the key
actions you can take right now to bolster the benefits of
whistleblowing for your business or organisation:"
- Internal audit: Review your existing
whistleblowing management system. Ask yourself, are your policies,
processes and plans effective? Are they up-to-date?
Maintaining and improving your systems will help you to identify nonconformity and where you need to take corrective action. This continual improvement will ensure compliance with your organisation's policies, and procedures as well as its legal and social obligations.
- Awareness: Ask yourself, are your staff, at
all levels, trained on your whistleblowing management
system, understand how to report wrongdoing, and feel empowered
to make reports?
Clear communication is key to encouraging and facilitating the reporting of wrongdoing. Especially when it comes to highlighting that staff can maintain their anonymity. This enables your employees to follow whistleblower best practices in identifying and addressing wrongdoing at the earliest opportunity. It also demonstrates leadership commitment to preventing and tackling wrongdoing.
The benefits of external training can be found here.
- Competence & resources: Ensure your investigators are adequately
trained and resourced to effectively and thoroughly process a
report of wrongdoing in a timely manner.
This is crucial. Not only to help prevent or minimise loss of assets - as well as aiding the recovery of lost assets - but also to support and protect whistleblowers. Reducing and preventing detrimental treatment of those involved fosters trust in your system.
- Communications: Foster a culture of openness,
transparency, integrity and accountability.
How this is achieved differs for each organisation from leadership buy-in to internal communications or bolstered training. There's no one size fits all answer, however, the benefits of addressing your culture can help your organisation to attract and retain personnel committed to your values.
- Continual improvement: Following taking the
above actions, how are you going to monitor, measure and evaluate
your policies and procedures going forwards?
The benefits of dedicating time and resources to maintaining and improving your whistleblowing management system are two-fold. You can actively help to reduce the risks of wrongdoing while also demonstrating sound, ethical governance practices to society, your markets, regulators, owners and other interested parties.
We're always happy to share our expertise if it will help guard your business reputation and look after the safety of your employees."
Footnotes
2. https://www.port.ac.uk/news-events-and-blogs/news/coronavirus-economic-recession-approaching
4. https://aru.ac.uk/news/workplace-homophobia-rises-during-recessions
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
