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The Network And BDO Consulting Release 4th Quarter 2012 Findings: Quarterly Corporate Fraud Index™

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The Network And BDO Consulting Release 4th Quarter 2012 Findings: Quarterly Corporate Fraud Index™

Rising trend in fraud reporting continues despite slight drop from previous quarter’s all-time high; examiners point to increased regulatory scrutiny, employee confidence in reporting systems.

ATLANTA – May 15, 2013The Network, Inc., a leading provider of governance, risk and compliance (GRC) solutions, and BDO Consulting, a leading provider of litigation, investigation, restructuring and risk advisory services, today announced the fourth quarter 2012 findings in the Quarterly Corporate Fraud Index™, a comprehensive examination of fraud reporting activity from almost 15 million employees worldwide.

For the fourth quarter of 2012, the Fraud Reporting Percentage (FRP) decreased slightly from the previous quarter to 24.6 percent, following the record-high for fraud reporting set in the third quarter of the year, when the FRP stood at 25.0 percent. The FRP statistic measures fraud reporting in comparison to all compliance reporting activity from more than 1,400 organizations worldwide, including nearly half of the Fortune 500. The fourth quarter 2012 Corporate Fraud Index also includes the Fraud Related Incidents (FRI) statistic, which measures the volume of fraud-related calls.

Other key fourth quarter 2012 findings include the following:

  • FRP increased 3.0 percentage points – from 21.6 to 24.6 percent – compared with the same quarter in 2011, representing a 13.9 percent rise
  • FRP declined by a marginal 0.4 percent from the third quarter 2012
  • FRI increased significantly – up 17.6 percent – compared to the same quarter in 2011
  • FRI (fraud related incidents) decreased 8.9 percent from the third quarter 2012

“Unfortunately, fraud and corporate malfeasance continue to threaten the workplace, in terms of revenue, reputation and employee morale,” said Luis Ramos, CEO of the Network. “While the upward trend in fraud reporting at first may seem alarming, it’s important to remember that organizations are working harder than ever to engage their employees to recognize bad behavior and to make them feel confident about their options to report this activity.”

Fourth quarter comparisons of FRP for the past eight years are as follows:

4th Quarter Comparison of Fraud Reporting Percentage (FRP)

4Q 2005 = 11.6%
4Q 2006 = 13.3%
4Q 2007 = 13.0%
4Q 2008 = 18.9%
4Q 2009 = 20.2%
4Q 2010 = 19.6%
4Q 2011 = 21.6%
4Q 2012 = 24.6%

Fourth quarter comparisons of FRI for the past eight years are as follows:

4th Quarter Comparison of Fraud-Related Incidents (FRI)

4Q 2005 = 2822
4Q 2006 = 3937
4Q 2007 = 4478
4Q 2008 = 5392
4Q 2009 = 5804
4Q 2010 = 5915
4Q 2011 = 6816
4Q 2012 = 8018

“Despite incentives from regulators for employees and others to report malfeasance directly to regulators, the volume of internal reporting pertaining to fraud continues to rise,” said Glenn Pomerantz, partner at BDO Consulting and a Certified Public Accountant and Certified Fraud Examiner.

The Quarterly Corporate Fraud Index is compiled from actual incidents reported by clients of The Network and is analyzed by The Network and BDO Consulting. Fraud-related incidents reflected in the Fraud Index include reports on corruption, theft, accounting and audit irregularities, misuse of assets, conflicts of interest, and violations of FCPA, UK anti-bribery and SEC legislation.

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