{"id":5886,"date":"2020-04-18T18:10:27","slug":"a-whistleblowing-system-to-create-good-corporate-governance","title":{"rendered":"Third Party Whistleblower System"},"content":{"rendered":"

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The\u00a0dynamic business world requires companies to be flexible and able to respond quickly to changes in the market.\u00a0Especially when the world is facing the Covid-19 pandemic as it is today. Given this dynamic condition, companies are required to consistently implement Good Corporate Governance (GCG).<\/p>\n

According to the Business Dictionary<\/i><\/em>, Corporate Governance is the framework of rules and practices by which a board of directors ensures the accountability, fairness and transparency of a company\u2019s relationship with all\u00a0its\u00a0stakeholders (financiers, customers, management, employees, government, and the community).<\/p>\n

The implementation and sustainability of Good\u00a0Corporate Governance\u00a0is imperative to ensure that the company runs effectively and efficiently\u00a0so\u00a0that its health is guaranteed. A company is said to have good governance if it adheres to the\u00a0following\u00a0three\u00a0principles:\u00a0accountability, fairness, and transparency.<\/p>\n

However, the path to implementing better corporate governance is not always smooth. Constraints such as the lack of integrity of individual employees or parties outside the company may lead to potential fraud and would impact on the health of the company. Unfortunately, ongoing fraud cases often remain undetected because the company\u2019s management would remain unaware of these practices. However, lower level employees often find out and even witness firsthand the ongoing fraud scheme.<\/p>\n

Why whistleblowing system are crucial for CGC<\/strong><\/span><\/h2>\n

The results of the study entitled Whistleblowing as a Tool for Good Corporate Governance-An Indian Perspective<\/i><\/em> suggested that there are five important mechanisms to be implemented to create better and more effective governance in institutions or organizations, one of which is the whistleblowing system.<\/p>\n

By implementing a whistleblowing system, a company would be\u00a0basically adhering\u00a0to the transparency principle. Through a whistleblowing system, employees can rise concerns\u00a0related to signs of fraud that they have\u00a0witnessed or experienced with guaranteed anonymity.\u00a0The whistleblowing system is by far the most effective tool for detecting fraud. According to ACFE\u2019s 2018 Report to The Nations, tips were by far the most common means of fraud detection\u00a0by\u00a0amounting to 40% of their studied\u00a0cases.<\/p>\n

Internal vs. third party whistleblower system<\/span><\/strong><\/h2>\n

Companies can choose a whistleblowing system that is managed internally or externally managed third party whistleblower system.<\/p>\n