Whistleblower software benefits - Most important reasons to set a whistleblower channel
- Tipi Koivisto
- Mar 20
- 8 min read
Updated: Mar 31
Background
EU Directive 2019/1937 describes the framework and reporting arrangements that countries need to implement. All countries in Europa have already adopted a country specific law.
The EU Whistleblower Directive and the Anti-Money Laundering (AML) legislation are interconnected in their goals to enhance transparency, accountability, and the detection of illegal activities.
Setting up a reporting system (Whistleblower channel) is required for companies with more than 50 employees, as well as public organizations, and businesses that are under money laundering jurisdiction, like banks, bookkeeping, real estate, and investment organizations, regardless of the size.
Prevention against wrongdoing
Prevention is always better and cheaper than handling a case afterward.
When installed properly, the whistleblower channel gives all stakeholders of a business a way to report any wrongdoing. Not restricted to employees, ex-management, customers, or a business partner can communicate a misdemeanor to be investigated and handled.
If a solution to easily and anonymously report is provided, a person probably chooses that option rather than considering going to the press or authorities, like a reporting channel provided by the Federal Office of Justice (Zentrale Meldestelle). Therefore, a simple, easy-to-use reporting channel that allows anonymous communication is the key.
A whistleblower channel additionally works as a reputation protection mechanism and crisis control system. If the case is known beforehand and can be properly researched and solved in-house. Early reporting gives the company time to fix the issue before it grows unmanageable.
In the worst-case scenario, the issue may become public. However, with early detection, management and public relations have adequate time to develop a strategy, implement measures, and prepare statements to minimize the impact before the situation escalates.
Think of a whistleblower reporting channel as an affordable form of insurance to mitigate potential harm. Ideally, you'll never need to use it, but when the need arises, it must be reliable and effective. Then you are in the driver's seat controlling the company's public image if the case blows in the face.
Minimize criminal activity and cost
This is the reason why the laws were written. The whistleblower software is the tool to realize the law. It can significantly reduce potential financial losses by creating a secure and confidential channel to report corruption, misconduct, fraud, embezzlement, or policy violations.
Criminal activity imposes a significant financial burden on businesses globally. It's estimated that fraud alone costs the global economy over US$5 trillion annually. The Association of Certified Fraud Examiners (ACFE) estimates that organizations lose about 5% of their annual revenues to fraud.
The whistleblower channel works as a preventive tool to not give a chance for wrongdoing. Another way to think about it is that the system serves as a deterrent to prevent misconduct; as the saying goes, "opportunity makes the thief."
Whistleblower software allows for the early reporting of suspicious activities, enabling companies to detect fraud, embezzlement, or other financial misconduct before it escalates. By catching these issues early, organizations can prevent losses that would otherwise accumulate over time. Early detection is the key.
If we think of cases like the WireCard gate or Volkswagen's emissions scandal (VW abgassskandal), the development took years. I bet there were many people who knew, but didn't have a proper tool and process to end criminal actions.
These two are, of course, extreme cases, but for a smaller business, reputational damage and financial losses can be proportionally even higher. Additionally, the benefits of a whistleblowing channel become evident when they are part of an international sales and value chain, where transparency and compliance with regulations present a more professional image of the company.
Company reputation
The damage to a company is not just counted in cash. Environmental crimes can get you heavy fines, but damage to brand, public image, compliance, and ethics are becoming more and more important when choosing a business partner.
Would you choose as a partner a law-abiding company that has a system in place for their employees and risk mitigation?
Even communicating outside as being a responsible company is more a norm than an exception today. A whistleblower software, therefore, works as a trust-building tool.
Areas where the reporting system helps to build a better reputation
Social responsibility
Environmental responsibility
Promotes sustainability
Prevent unethical behavior
Value chain reputation
Increases openness and transparency
Risk management and information security
EasyWhistle whistleblower software is an easy-to-set up and cost-effective way to publicly build a company's credibility. This leads to strengthening customer relationships and more business opportunities.
Faster response to misconduct through whistleblower reports
How many times have you heard a manager exclaim, "Why didn’t I know about this sooner?"
In many organizations, it can take weeks, months, or even longer for instances of misconduct to reach senior management - if they reach them at all. Factors like a perceived lack of importance, urgent workloads, or even fear of retaliation can prevent issues from being reported or properly addressed. Too often, problems are simply "swept under the rug," leading to missed opportunities for early intervention.
Delayed reporting can lead to several complications. As time passes, critical details might be forgotten, and reconstructing events becomes more challenging, complicating the investigation and making it harder to achieve an accurate resolution. Additionally, unresolved misconduct can escalate, potentially causing more significant harm to the company’s finances, reputation, and internal culture. It always starts small and builds up over time.
A proactive approach to misconduct, such as establishing an internal whistleblowing channel, allows companies to handle disputes in-house before they spiral out of control. With an effective early warning system in place, management can stay informed and respond quickly, ensuring issues are dealt with effectively and at the earliest opportunity.
Avoid regulatory fines
Obviously, one reason is regulatory compliance. Having a reporting channel in place that allows whistleblowers to create a report, it's handled in a timely manner, and allows bi-directional anonymous discussion meets the EU legal requirements.
All different non-compliance issues can impose significant fines, and dedicated whistleblowing software helps companies stay compliant by addressing potential violations early.
Because the fines and sanctions given are public, it's bad for companies' reputation. A bad reputation can lead to missed opportunities, damaged customer relationships, and a drain of experienced and qualified employees, and make it more challenging to recruit and attract new talents.
Better workplace atmosphere
Sexual harassment or bullying is not mentioned directly in the directive, but a low-level reporting system to report any wrongdoing at work reduces stress and creates a more free and productive environment to work. It's clear that unspoken misconduct affects people negatively. A safe reporting mechanism everyone knows about clearly prevents misconduct and creates more security and psychological safety. It increases employee trust and fosters a culture of transparency, encouraging employees to report unethical behavior rather than ignoring it.
In the era of misinformation and canceling even a rumor can cause considerable damage to a person. Rumors about employees can be investigated without exposing the identity of the person (e.g., sexual abuse allegations). Once again, the case can be handled in-house or the rumor can be killed before it grows. A career can be over without any merit.
Of course, other human rights violations, work safety, or complaints about working conditions are areas that a whistleblower channel can work as a starting point to fix those issues. The bar to reporting any of those issues is usually too high for an individual who is afraid of possible retaliation. The law, whistleblower protection act, is meant to protect the whistleblower in case their identity is revealed for some reason.
Whistleblower channel as feedback box
You can use the exact tool to collect ideas or criticize current company practices.
Our current culture tends to discourage — and even penalize — criticism, even when it's accurate. Additionally, suggesting new practices to drive innovation can be challenging in many companies due to organizational cultures that inadvertently discourage taking risks or speak up. It takes a lot of courage for an employee to come forward to suggest something totally new to their supervisor. Or the supervisor just simply doesn't understand or want to hear a critical matter. Many brilliant ideas never reach higher management. This is why having an anonymous platform for sharing ideas and initiatives can be a powerful tool.
The whistleblowing channel is intended solely for handling and managing whistleblowing reports. General feedback, ideas, and initiatives should be processed through other appropriate channels. However, advanced whistleblowing tools that can be customized by the customer’s admin users are also well-suited for these purposes. For instance, EasyWhistle’s customizable reporting form is an effective tool for various other use cases, with non-whistleblowing feedback managed in a separate, dedicated instance. This ensures that sensitive information remains secure and is not accidentally exposed to unauthorized users or mixed with other types of reports. This is the most effective and affordable way to fully leverage the benefits of a whistleblower system and ensure compliance.
EasyWhistle provides its customers with additional reporting channels dedicated to collecting feedback.
Employee engagement and recruitment
Company policy and the well-being of employees are more critical than ever. Building a company's reputation towards open communication where misconduct is prevented and zero tolerance feeds the atmosphere of a no-stress working environment.
When employees feel safe and heard, they’re more likely to stay loyal to the company, reducing costs related to turnover and recruitment.
Build good governance
Good governance is the ethical and effective management of an organization characterized by transparency, accountability, and legal compliance. It involves a set of principles and practices designed to ensure fair, efficient, and informed decision-making that consistently serves the best interests of all stakeholders.
Good governance covers:
Transparency: Clear communication of decisions and processes for stakeholder understanding.
Accountability: Decision-makers are answerable for actions, with channels to assess performance.
Equity and Inclusiveness: All stakeholders have a voice and access to resources.
Responsiveness: Promptly addressing stakeholder needs and adapting to changes.
Effectiveness and Efficiency: Wise resource use and streamlined processes for impact.
Rule of Law: Consistent, lawful application of policies and standards.
Strategic Vision: Decisions are made with a long-term, balanced perspective.
Good governance builds trust, supports growth, and provides stability. A quality whistleblowing solution is a crucial tool to enhance the above areas.
Establishing a proper reporting channel
How to set up a whistleblower channel correctly?
Requirements are:
A separate system that provides a channel to communicate anonymously with the report creator.
The system is safe when it comes to cybersecurity.
Conduct the Data Protection Impact Assessment (DPIA) and the risk assessment to evaluate and mitigate the risks related to the handling of highly sensitive personal data
Name a suitable supervisor and possible report processors.
Inform and educate the staff about the whistleblower law and system.
Once an easy-to-use whistleblower channel is set, company management mitigates concerns regarding potential misconduct, fostering greater peace of mind and confidence in compliance. In the end, it is all about the trust and reputation that further lowers the bar to report misconduct.
The EasyWhistle team supports you every step of the way.
Summary
Whistleblower software is a critical tool for fostering transparency, ensuring compliance, and promoting ethical practices in organizations. Mandated by the EU Whistleblower Directive, these systems enable anonymous reporting of misconduct, fraud, or policy violations, helping companies address issues early, protect their reputation, and stay legally compliant.
Key benefits include early detection of wrongdoing, strengthened trust and accountability, an improved workplace culture, and effective crisis management. By supporting good governance and reducing regulatory risks, whistleblower software has proven to be a cost-effective way to safeguard your organization’s future.
With an easy-to-use reporting channel in place, employees and stakeholders can report issues directly, providing valuable time to resolve concerns or prepare for external scrutiny.
Ready to establish your whistleblowing solution?
EasyWhistle is your all-in-one digital solution designed to ensure compliance with whistleblowing laws and related regulations. Take the first step toward protecting your organization today.
Book an Online Meeting for free and we will help you to find a optimal whistleblower channel for your business.
Comments