Rebuild Trust Post-Scandal: Turn Crisis into Opportunity
Jan 2024
8 Minutes

Rebuild Trust Post-Scandal: Turn Crisis into Opportunity

In the wake of a public scandal, companies face a daunting challenge: restoring trust. The journey from a governance failure to regained confidence is complex, yet critical. Here, the role of a robust whistleblowing program is indispensable.

In an ideal world, businesses of all sizes would provide clear pathways for reporting misconduct internally. Whistleblowers could anonymously share their concerns with the appropriate entities without having to resort to reporting to authorities outside the company walls; equipping your organisation with the insights to solve these problems in their infancy.

As a company grows in scale, however, keeping track of all internal affairs becomes increasingly challenging. Should misconduct occur, whistleblowers need the proper avenues to report this misconduct and they need to know that they will be able to truly remain anonymous. This is only made possible by proper internal reporting processes and tools. 

Yet, research shows that internal reporting is on the decline, likely due to a lack of security for whistleblowers. A 2023 survey reveals that just 36% of financial services professionals would report misconduct to their direct boss, compared to 43% in 2020.

Restoring Stakeholder Trust: A Three-Pronged Approach

  1. Addressing Losses and Ensuring Ongoing Trust: Stakeholders need assurance of a company’s commitment to transparency and integrity.
  2. Empowering Employees to Report Misconduct: By providing secure, anonymous reporting channels, employees become allies in maintaining corporate integrity.
  3. Communicating Effectively with Customers and Stakeholders: Transparency in actions taken and progress made is vital.

Keep these three challenges in mind as we explore how to effectively approach restoring trust after a governance failure turns into a public scandal.

The Crucial First Step: Recognising the Impact of Governance Failures

Understanding the full scope of a governance failure is the first step in determining how to counteract the adverse effects of a public scandal.

In some of the most severe cases, billions in investments and shareholders funds have been wiped from the board completely, leaving companies in ruins due to the public backlash sparked by the lack of proper internal governance and the losses faced by shareholders.

The FTX collapse of 2022 is a perfect example of the consequences of poor governance. 

According to a 2023 Market Watch report, FTX had “severe governance and regulatory issues,” and that the “flouting of internal control requirements and commingling of client funds was so glaring that several witnesses felt compelled to say something.” Due to the lack of due diligence applied to whistleblower claims about FTX, the events that would unfold ultimately led to roughly US$8.7 billion in total losses and shareholders writing their 32 billion valuation to zero prior to the complete dissolution of the company. 

In an earlier 2020 scandal, the now defunct payments company Wirecard was exposed for owing nearly US$4 billion to creditors due to “sophisticated global fraud.” This event would eventually lead to the inception of Confide in an effort to increase effectiveness of whistleblower programs around the globe. 

While FTX and Wirecard are particularly nefarious cases, the risk of governance failure remains a pressing threat for all businesses. Aside from the often severe financial blows, governance failure can significantly influence public opinion about a company as well. 

The European Corporate Governance Review 2023 reports that 53% of all ESG activist demands fall within the governance category. Moreover, shareholder activism is proving to be a growing trend, signifying a shift in shareholders’ expectations towards governance moving forward.

Whether a company is working to recover from a scandal or to prevent one from occurring in the first place, their vital course of action centres around optimising the company’s approach to whistleblowing.

Ensuring Accountability: The Vital Role of Whistleblowers in Rebuilding Trust

Whistleblowers are often key players in public scandals. 

Earning trust from customers and shareholders depends on the solidity of a company’s foundation. Though it may seem counterintuitive, creating a system that enables employees to report the company for potential wrongdoing more easily fosters greater trust between the two.  

If a company is lax on its governance strategy, misconduct can easily occur. To balance this, regulators around the globe require certain standards for reporting suspicious activity, including a variety of protections for whistleblowers. One of the most comprehensive of these regulations is the EU Whistleblowing Directive, which aims to establish a standardised legal framework for whistleblowing.

Oftentimes, an organisation will overlook the reports of whistleblowers — or even intimidate them into silence — leading the whistleblower to seek help from an outside authority. Worst case scenario, the outside authority takes the case public, damaging the company and its reputation further.  

When rebuilding a company reputation, focusing on strengthening the company’s whistleblowing strategy is an excellent starting point. Outdated systems are a common cause behind a weak whistleblowing program due to a lack of sophistication for managing increasing program complexity. 

Technology upgrades can greatly facilitate a more fluid and seamless system. With the right whistleblowing software optimising a governance system, organisations can more easily demonstrate compliance and program effectiveness to stakeholders, earning back crucial trust along the way. 

Additionally, an upgraded whistleblowing system can integrate with multiple workflows, creating a cross-functional system that increases transparency across the entire business.

Speak Up: Encouraging a Culture of Compliance & Rebuilding Relationships

Giving employees the confidence to report wrongdoing requires one crucial element: anonymity. 

Building a trustworthy business requires companies to create a culture of compliance where speaking up is encouraged. Yet, even when organisations actively promote reporting capabilities, many employees still hesitate to engage with whistleblowing technologies out of fear of retaliation.

It is pertinent when building a culture of compliance to consider the privacy and security concerns of the individual. Granting full anonymity to whistleblowers is vital not only for compliance with whistleblowing regulations but also for assuring employees that the whistleblowing program is a safe and reliable process for alerting company leaders to instances of misconduct. 

Communicating the anonymity of reporting to employees can ensure these reporting channels are properly leveraged as needed. 

Likewise, companies must also communicate openly with stakeholders about the failures that led to a scandal and the new whistleblowing measures in place to prevent future governance disruptions. Examples of key information to communicate to stakeholders includes:

  • Addressing the organisational culture issues that contributed to the scandal
  • Explaining any new training or reporting mechanisms that have been implemented 
  • Highlighting the tangible steps taken by company leadership to prevent future misconduct
  • Creating a regular reporting schedule on governance progress and improvements
  • Seeking external validation through audits or third-party assessments

Transparency starts with clear communication. By opening up improved feedback channels for both employees and stakeholders, companies can demonstrate greater overall transparency and progress following the events of a public scandal. 

Synonymising Company Branding with Strong Governance, Trust, & Integrity

While no one hopes to find themselves in the midst of a scandal, forward-thinking companies can recognize the public attention as an opportunity to showcase improvements to their governance.

Rarely is the public’s attention so honed in on a governance failure as it is during a major public scandal. Though this attention can cause damage to a company’s reputation and success, the company still has a limited amount of time to prove they can change for the better. 

Taking the time to express accountability for a governance failure is a great first step. To truly win back the favour of customers and stakeholders, however, the company must act swiftly to associate itself with a strong whistleblowing program centred around transparency and integrity. 

By formally aligning with a well-known and highly trusted whistleblowing software provider or platform, companies can dispel much of the negative public opinion surrounding the strength of their governance. 

Confide Enables Fearless Reporting for Whistleblowers

Confide was born out of a need to develop more effective whistleblowing solutions. After going head-to-head with Wirecard, Confide Founder Pav Gill set out on a mission to create more secure, transparent, and trustworthy whistleblowing environments. 

Combatting modern governance risks requires an end-to-end solution. With Confide’s Corporate Governance and Integrity platform, companies can empower fearless reporting via our cutting-edge — and fully anonymous — whistleblowing technology. The Confide platform provides many benefits that can help organisations re-imagine their reputations following a scandal, such as:

  • Early Risk Detection & Management: Governance teams are alerted to problems with greater speed, ensuring whistleblowers’ reports are received and reducing the risk of those reports arriving at external channels for further review.
  • Redefined GRC: Governance, Risk, and Compliance training can be one of the more challenging aspects of risk management for companies to handle on their own. Confide provides the content and resources necessary to simplify GRC strategies and training. 
  • Corporate Culture: Confide is designed to combat cultures of silence and encourage team members to speak up when they witness misconduct. Through Confide, companies can synonymise their business with trust, accountability, and transparency.

At Confide, our deep understanding of the intricacies of whistleblowing gives us the advantage modern companies need to bounce back from a scandal. Together, we can build a safer world for whistleblowers and a business environment centred around integrity.

Contact us today to get started.

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