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Third-party ethics hotlines are a requirement for publicly traded companies, but many other organizations choose to employ these anonymous reporting systems because of their benefits.

What is an ethics hotline, and could your company benefit from having one?

This guide will provide a primer and help you decide whether an ethics hotline solution makes sense for your organization.

What is an Ethics Hotline?

An ethics hotline is an independent telephone (and web-based) service that allows employees to report concerns within the company anonymously. It functions best as part of a holistic ethics & compliance program and can have many added benefits for companies.

Business ethics requirements are complicated and multifaceted, but failure to consider them can spell disaster. An independent third-party hotline gathers the information you need to be proactive in your implementation.

Some businesses use a variation on this service in the form of an in-house hotline; however, the problem with these solutions is that they are not found to have the same anonymity promise as an independent line.

An ethics hotline allows whistleblowers to safely present their concerns to an outlet that will directly send the communication to your organization — with the option of maintaining anonymity. Ultimately, this allows your company to collect and receive actionable information to improve your ethical business endeavors.

The Importance of an Ethics Hotline

Ethics hotlines help protect companies from legal liabilities

Ethics hotlines are essential for a variety of reasons. First and foremost, they go a long way towards satisfying corporate ethics requirements. Still, there are also many sensible reasons to employ a hotline, even if your company is not legally bound to do so. 

Here are some of the main benefits: 

Effective Fraud Deterrent

First and foremost, having a dedicated and publicized way for any employee to report allegations of fraud safely serves as a strong psychological deterrent for anyone who might consider trying to get away with misconduct at your organization. 

According to the 2018 Global Study on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners, organizations without a hotline were 50% more likely to discover fraud within their organization by accident or as part of an external audit. The only thing worse, as a company, than discovering fraud is to be publicly caught off guard when it happens. 

With a proven ethical hotline service, you can prevent corporate misconduct before it happens and take care of any potential allegations as soon as they are identified. 

Trusted by Employees

Third-party whistleblower hotline services are the most trusted reporting method among employees. 

While many tips are received internally through direct reporting, having an anonymous hotline adds another layer of monitoring and prevention. 

According to the 2018 study mentioned above, of the many reporting mechanisms available to whistleblowers, 42% of complaints were given through a telephone hotline. 

However, when no other reporting mechanisms were in place, speaking with a direct supervisor was the next most popular way to report internally, with 32% of tips received in this manner. 

This metric represents the high level of trust employees place in having accessible and comfortable reporting methods. 

24/7 Convenience

Another perk of outsourcing compliance hotlines is that the service can be available to employees and actively doing work for your benefit, 24 hours a day, 7 days a week. 

Meaning, hesitant employees can call in a report from the comfort of their own homes after mulling it over in a neutral environment, outside of the workplace. 

Further, the hotline will anonymously collect all the information you need and have it ready and waiting for human resources or a dedicated compliance officer to review it first thing the next day. 

The service can also easily send follow-ups when the investigation has been completed, notifying the person who lodged the complaint of the outcome or the consequences that were able to be enacted due to their due diligence. 

Collects Evidence

While not every tip that comes through will represent a warranted grievance, creating a database of evidence in the form of a case management system, your organization will have the capacity to notice reporting patterns and latent concerns with individual departments or managers. 

Sometimes a corporate misconduct concern isn’t one big conspiracy but, in fact, a variety of small grievances that categorically affect the treatment of a given team, hurting morale and decreasing productivity. 

Further, according to the Association of Certified Fraud Examiners, half of all corruption cases were identified as the result of a tip, and businesses employing independent hotlines were 16% more likely to detect fraud by tip than those without.

These are just some of the many organizational concerns that can be uncovered and solved with an independent hotline. 

Saves Money & Protects Your Organization

Suppose, for some unavoidable reason, a concern reported through a hotline does lead to later legal repercussions. In that case, the evidence and previous investigation performed by your organization as a result of a hotline tip can help mitigate the damages or exonerate you entirely. 

While there will always be those who decide to pursue legal action, knowing that complaints were documented and HR investigations were conducted thoroughly can deter potential retaliation. 

According to the same study mentioned above, organizations that utilized independent ethical hotlines saw 50% lower monetary losses associated with the fraud. 

In the long run, employing a hotline will save you and your organization more money. 

How To Implement an Ethics Hotline for Your Business

Contact CMS to implement an ethics hotline for your business today. We offer fully customizable services that will be available to your employees 24/7 and utilize US-based live operators in our call center.

Our hotlines also boast nuanced software integration and web-based tools to get the best, full-service solution with everything your business needs and nothing it doesn’t.

To get started, view plans and pricing or request a custom quote.

By Last Updated: August 23, 2022Categories: Blog4.8 min read