Expanded Japanese Whistleblowing Rules Reach Small & Medium Business

November 11, 2022

Expanded Japanese whistleblowing rules are among the latest to come into effect as part of a broad trend of increasing regulatory requirements for incident reporting across the globe.

Previously in effect for large organizations, the expanded Whistleblower Protection Act requires smaller companies operating in Japan to implement systems that enable and protect reporters of misconduct. The updated regulation went into effect on June 1, 2022.   

Among the main requirements are the designation of personnel to receive and investigate incident reports, and the establishment of an internal system to administer the process, according to a thorough overview from the blog of global law firm Baker McKenzie. For organizations with 300 or fewer employees, the requirement for an internal system are reduced to “make efforts.”

The regulations come as nations in the European Union are also implementing rules from the EU Whistleblowing Directive. Like Japan’s Act, the regulation requires many organizations to deploy robust incident reporting programs.

With Japan’s standing as the world’s fourth-largest exporter, according to data from Eurostat, the Japanese regulations stand to have a major impact on the global compliance landscape. The same holds true for whistleblowing regulations across the 27-member EU bloc – the world’s second-largest exporter.

Concerningly, it’s not clear that organizations are making whistleblowing enough of a priority despite the accelerating compliance landscape. Only 43% of survey respondents ranked the importance of whistleblowing, reporting and retaliation as “absolutely essential” to their organization – the strongest of six response options – in NAVEX’s 2022 Definitive Risk & Compliance Benchmark Report.

While regulatory compliance is a clear priority, hotline and incident management systems also represent a clear best practice. Organizations with a trusted mechanism to report misconduct have stronger, more ethical cultures. This results in a host of better business outcomes.

Japanese organizations should not be the only ones to take notice of the new requirements. In today’s interconnected global economy, compliance, legal and risk professionals outside of the country should also consider if the regulations have an impact on their own operations and that of their third parties.

Final words

To learn more about Japan’s Whistleblower Protection Act, watch the on-demand webinar, “Japanese Whistleblower Solution: Successful Implementation,” featuring Baker McKenzie Partner Takeshi Yoshida and NAVEX EU Whistleblowing Specialist Jan Stappers. Offered in Japanese with selected parts in English, and with professional audio translation for both languages offered throughout, this webinar will help explain the implications of the new regulation.

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