INTERNAL INVESTIGATIONS ¿Why are they necessary?

When a tip is received by an organization, either through the reporting channel or because it was reported to the working line (as would be the case of reports to direct boss or the internal departments such as Compliance, HR, Legal or Audit) it is key to start with a verification on whether the tip is for real, and if so, to proceed to its investigation.         

The most important reason for doing so resides on the fact that the internal report is the main source of information on misconduct (or possible misconduct) and therefore turns out to be a major tool for detecting events that could damage -or put at risk- the organization and their people.

There are several issues that allow an internal reporting system to function effectively. We will not get into them because they are part of another article, but it is worth mentioning that one of the requisites is that the system must generate a culture of solid and stable trust. That is to say, if a tip is submitted, the allegation will be received by the organization which will make sure the misconduct will cease, the responsible people will be sanctioned for it and the damages will be remediated. However, for an organization to be able to do this, it requires to investigate what has happened, when, where, how it had happened, who are responsible for it, what damages have taken place, quantify them, verify whether internal processes have been affected, and if necessary, correct deficiencies and weaknesses. All this will be part of the tasks carried out throughout an internal investigation.

The investigation of reported misbehavior contributes to the organization in various ways, mainly (i) it provides them with the elements to understand the occurred events, their extent, the people responsible and the resulting damage; (ii) it reinforces the trust within the people that are part of the organization, and therefore, the trust in the organization itself because it shows that people are heard and that their contribution is being appreciated; (iii) it gives a clear indication that certain behavior will not be tolerated imposing clear consequence to the responsible ones, generating what is known in the legal field as a general preventive effect for the rest of the members of the organization.

The contribution of the internal investigation to an organization goes beyond the three mentioned issues, but we would like to highlight the second one, since getting people to trust the functioning of the reporting channel is probably one of the hardest objectives to attain.

We usually find organizations where the internal reporting channel receives very few tips, or tips on minor issues which may involve small frauds. It is in part the result of an inefficient management of the reporting channel, which may translate into:

  • Many tips that lack from the minimum elements required to start an investigation (e.g. no indication of the area where the misconduct has taken place)
  • The tips contain only general broadly comments and so it very hard to identify the place or area where the events have occurred or the people or third parties that are involved
  • The tips are received by untrained personnel and therefore the opportunity to pose the right questions to the informant and to obtain the necessary information to move on in an investigation is missed.

But also, we find situations where the internal reporting channel stops working when people perceive that “nothing happens”, that the tips are not being investigated, that those who misbehave continue to do so and get undue benefit to the expense of the organization. The negative impact generated is hard to be calculated but predictable. Today Neuroscience and Behavioral Science provide us with useful information in this field: they allow us to know that most of us, as human beings, are not completely honest and that the environment in which we are has a powerful influence in our behavior. Being in an environment where who misbehave remains without being noticed over time and obtaining extra benefit without being punished, may possibly lead many of us to get to understand that these are the rules to follow in that place and to be inclined to behave in a similar way. For an organization this will mean future higher risk and possibly more damage.

For any organization that pretends to count on the internal reporting -which is actually the main tool that an organization may have for detecting internal fraud and corruption minimizing the resulting damage-, it is key to investigate reported misconduct.

It is fair to say that internal investigations may general unwanted impact over the organization:

  • Every internal investigation -especially in the case of large investigations- generates certain discomfort within the areas involved through the process;
  • More workload is generated on staff, because besides of doing their usual work they may be required to collaborate with the identification, collection and preparation of the necessary documents for the investigation;
  • Some of the employees may need to assign part of their working time to take part in the interviews with the investigators.

These implications are collateral effects that cannot be bypassed. Therefore, it is key to know how to manage internal investigations in an efficient way in order to minimize them. Our recommendation is simple: seek for experts. But this will be part of another article.

At G5 Integritas we can help you assessing the internal tips received for investigation, and also providing our expert team to conduct the investigations following the best practices and in compliance with local and international regulations. For more information, please contact us at [email protected] or visit our website www.g5integritaslatam.com 

Equipo G5 Integritas Latam

Equipo G5 Integritas Latam

Equipo G5 Integritas Latam

G5 Integritas is a consulting and strategic advisory firm for corporate clients, financial institutions, law firms, entrepreneurs and investors, specialized in: RISK AND COMPLIANCE DUE DILIGENCE AND BACKGROUND CHECK INVESTIGATIONS AND BUSINESS INTELLIGENCE SECURITY CONSULTING FORENSIC INFORMATION AND DATA RECOVERY

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