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Overview of Compliance Investigations in 2021

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One of the world's largest outsourcers of misconduct complaint channels, Navex, has published a report referring to 2021 statistics on daily reports made in its channels by employees of small, medium, and large companies all over the world.

Navex begins the report by stating that the criterion used to calculate the statistical data only includes organizations that have received 10 or more complaints in the entire year of 2021, which despite reducing the number of considered companies, does not invalidate the result of the analysis, as it adds up to a total of 3,470 companies that totaled 1.37 million complaints.

The report consists of six categories:

  1. Accounting, Auditing & Financial Reporting
  2. Business Integrity
  3. Human Resources, Diversity & Workplace Respect
  4. Environmental, Health & Safety
  5. Misuse, Misappropriation of Corporate Assets
  6. Other.

However, from these six categories, three were subdivided, as set out below:

Business Integrity
  1. Industry Specific Regulations
  2. Free and Fair Competition
  3. Other Business Integrity
  4. Conflicts of Interest
  5. Data Privacy and Protection
  6. Confidential Proprietary Information
  7. Bribery and Corruption
  8. Insider Trading
  9. Political Activity
  10. Product Quality and (Product) Safety
  11. Human Rights
  12. Global Trade

Human Resources, Diversity & Workplace Respect
  1. Substance Abuse
  2. Other Human Resources
  3. Compensation and Benefits
  4. Discrimination
  5. Harassment
  6. Retaliation

Environmental, Health & Safety
  1. Environmental
  2. Health and safety
  3. Threat to a Person or Property

1.14. ANONYMOUS REPORT

Well, a first aspect to consider is the decrease in the number of anonymous reports, that is, whistleblowers felt more motivated to identify themselves, which is a great sign. There was a 13.8% reduction in the number of anonymous whistleblowers in 2020:

In the chart below, we have the evolution since 2009:

It is also interesting to understand that the most used channel for anonymous reporting is not the phone but the website, as shown in the following chart:

Another significant fact is understanding in which category anonymous complaints prevail, with Environmental, Health & Safety taking the lead in 2021:

It is also noteworthy the percentage of anonymous reports in which the whistleblower followed-up, at least once, on how the investigation was developing. Let's see below:

But perhaps the most interesting data regarding anonymous reports is the percentage that has been actually confirmed in the investigation. I admit that the number was well below my expectations, though it was not significantly different from previous years:

It also draws attention the fact that a reasonable number of companies, specifically 11%, did not have any anonymous report.

1.15. MEANS USED FOR COMPLAINT

While in 2019 and previous years, at least 1/3 of companies received the majority of complaints over the phone, in 2020 this number dropped to 20%, but in 2021, the number grew again to 31%, which can be attributed to Covid-19.

On the other hand, the number of complaints received on the website totaled 29%; through other means, especially direct contact with the compliance officer or manager, totaled 40%. The comparison against 2020 can be observed in the chart below:

1.16. NUMBER OF COMPLAINTS

For many years, the number of complaints collected annually reached 1.4 million. However, in 2020, that number dropped to 1.3 million, and in 2021, it represented 1.3 million again.

1.17. TIME TAKEN TO FILE THE COMPLAINT

We saw a significant decrease in the number of days between the fact occurred and the complaint in 2021. While in 2020 this interval was 36 days on average, there was a reduction to just 27 days on average in 2021. However, this number is still far from the 16 days reached in 2019.

1.18. COMPLAINTS SPREAD AROUND THE WORLD

The data presented by Navex is interesting from the perspective of geolocation of the of complaints spread around the world, with North America having much higher percentage than other continents, that is, 74.5% of all complaints. This fact can have two explanations: 1. the greater number of Navex customers in the USA, and 2. the consolidation of the compliance culture in the USA, in addition to the legislation that encourages whistleblowers to file a complaint. Let's look at the chart below:

1.19. NUMBER OF COMPLAINTS PER MONTH

The number of complaints per month is also a remarkable fact: while March, 2020, was the month with the highest number, in 2021 it was December, as shown in the table below:

1.20. REPORTS BY CATEGORIES

Now we finally reach the statistic of complaints by category and it is no surprise that the lead is Human Resources, Diversity & Workplace Respect, which shows 50% of all complaints, as in the table below:

The percentages for each of the subcategories created by Navex in 2021 can be observed below:

1.21. NUMBER OF WHISTLEBLOWERS WHOSE REPORTS HAVE REACHED THE SEC

The number of whistleblowers whose complaints reached the Securities & Exchange Commission (SEC) is also important since it rose exponentially, as shown in the following chart:

1.22. TOTAL PROVEN COMPLAINTS

Although we have seen above that the percentage of anonymous reports that were proven did not exceed 10%, the total number of reports that ended up being proven, including the identified whistleblowers, reached 43%, as shown below:

1.23. TIME FOR INVESTIGATION CLOSURE

The average time for closing the investigations increased from 39 days in 2020 to 42 days in 2021. This is a significant jump in annual terms but still smaller than what was calculated in 2019, that is, 45 days. However, it’s equivalent to the average closing times in the late 2010s, which ranged between 40 and 46 days.

Let’s look now at the average time to close investigations according to each category:

1.24. RETALIATION

The percentage of retaliations identified in 2021 was around 1.72% of cases, growing tremendously compared to 2020, when it had been 0.90%, as shown below:

1.25. HARASSMENT AND DISCRIMINATION

The issues that always generate a lot of concern in companies are harassment and discrimination. And it is concerning that the percentages in relation to harassment and discrimination rose in 2021, as shown in the chart below:

1.26. RECOMMENDATION AFTER INVESTIGATION

Now, let's see the result in percentages of which remedial plans are indicated at the end of the investigations:

Undoubtedly, Navex's report provides a broad view of significant data that calls the attention of many companies to start looking at their numbers in order to understand what is happening therein, so as to focus on what can be improved within their compliance program.

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