Internal reporting within the company

The advantages of the company’s internal reporting system lie in two aspects: firstly, it is often the easiest to detect illegal and irregular behaviors within the enterprise. Employees in production, sales, finance, legal and other departments are the most familiar with the improper behaviors in their industry and department. The earlier the improper behaviors are exposed, the less likely the company’s legal risks and economic losses will occur; Secondly, internal reporting is one of the important standards for measuring the integrity and effectiveness of a company’s internal compliance system. The effective establishment of an internal reporting system can enable companies to promptly understand compliance issues that exist in the business development process, and quickly conduct investigations and responses. This can also help companies avoid future situations of “losing control”.

In the construction of the compliance system, it is necessary to establish and maintain effective communication channels between compliance personnel and all employees, including internal reporting and complaint procedures. Open communication channels can enhance employees’ trust in management, thereby having a positive impact on company operations. A survey pointed out that companies that actively use internal reporting systems face fewer major lawsuits and lower settlement amounts than companies that neglect or use this channel less. If improper behavior is reported in advance, the enterprise can solve the problem properly before it becomes serious and expands, which also reduces the potential litigation costs for the enterprise in the future.