MANAGING OUTSOURCED REPORTING SERVICES EFFECTIVELY

8
WHY ESTABLISH A REPORTING SERVICE
As was mentioned above, the need for an entity to establish a reporting service (whether
internally or outsourced) has become a critical component of any really effective risk
management strategy.
As mentioned above, having a reporting service is mandated for a number of private and
public organisations, the simple fact is that reporting services really do work! Most of the
recent international fraud surveys put reporting services among one of the most successful
methods of defeating unlawful and inappropriate activities. This is linked to the interesting
global trend where organisations are now allocating up to 80% of their resources to
prevention and only 20% to detection and investigation when only a few years ago the
reverse was true.
The following are some universally accepted reasons for establishing a reporting service
o It demonstrates an organisation’s commitment to the universal business principles of
transparency, integrity and honesty without which sound governance could not hope to
be sustained. This statement of commitment (and the commitment to actively follow up
and investigate every report received) is certain to add value to an organisation’s equity
and create and encourage trust and confidence among all stakeholders.
o It assists the directors and management to better manage and control their businesses
– isn’t that what governance is all about? Not only would a reporting service identify
potential or existing internal control breakdowns but also highlight collusive activities,
which traditional internal control systems are not designed to expose.
o It provides management with a mechanism to focus on their organisation’s reputational
risk (as well as their own!) and in so doing protect their organisation’s profile, standing
and reputation in the market place. A reporting service will seek to highlight this critical
risk internally first and provide senior management with the opportunity to manage the
risk before it becomes public knowledge. One need look no further than the recent
corporate failures in South Africa and elsewhere, to underline this point.
o It enables an organisation to comply substantially with the provisions of the Protected
Disclosures Act, referred to above. Subscription to an independently managed reporting
service would not only demonstrate compliance, but, more importantly, practically
demonstrate management’s intentions to provide benefits and rights to employees,
rather than simply paying lip service to it.
o There is a widely held (yet not empirically tested) belief that 10% of all people will
always be honest, 10% will always take any opportunity that presents itself to be
dishonest and the remaining 80% will drift and float from the one extreme to the other
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