The Network Press Releases

The Network and BDO Consulting Release 2Q 2011 Findings in the Quarterly Corporate Fraud Index

August 30 2011

Fraud incident reporting stands at its highest level ever; number of fraud reports also increases substantially

ATLANTA – August 30, 2011 – The Network, Inc. , a leading provider of governance, risk and compliance (GRC) solutions, and BDO Consulting, a division of BDO USA, LLP, today announced the second quarter 2011 findings of the Quarterly Corporate Fraud Index™, a comprehensive examination of fraud incident report activity from almost 15 million employees worldwide.

For the second quarter of 2011, the Fraud Reporting Percentage (FRP) was reported at 20.8 percent – the highest quarterly rate since the inception of the Index in 2005. The FRP statistic measures fraud reporting in comparison to all compliance reporting activity from more than 1,000 organizations worldwide. FRP also rose 2.5 percent since last quarter.

Other second quarter 2011 findings include the following:

FRP (fraud-related reports versus all reporting activity) increased 1.2 percentage points – from 19.6 percent to 20.8 percent – compared to the same quarter in 2010
Fraud-Related Incidents (FRI), the total number of reported fraud-related incidents, increased significantly – 18.3 percent – compared to the same quarter in 2010
FRI also increased significantly in comparison to the first quarter 2011 – 15.4 percent

”This is the highest quarterly rate we’ve ever witnessed,” said Luis Ramos , chief executive officer of The Network. “However, a high fraud reporting rate may have a silver lining. Organizations are experiencing more incidents, but they are capturing more, too. Therefore, they have a greater chance to reduce ongoing loss.”

Ramos continued, “We know from experience that trends around fraud incidents usually follow the economic curve, but the reporting of fraud often occurs days, even weeks or months, after incidents begin taking place.”

Second quarter comparisons of FRP for the past seven years are as follows:

2Q 2011 FRP Graph

2Q 2005 = 9.2%
2Q 2006 = 11.9%
2Q 2007 = 13.8%
2Q 2008 = 19.4%
2Q 2009 = 20.7%
2Q 2010 = 19.6%
2Q 2011 = 20.8%

Second quarter comparisons of FRI for the past seven years are as follows:

2Q 2011 FRI Graph

2Q 2005 = 2348
2Q 2006 = 3406
2Q 2007 = 4780
2Q 2008 = 5862
2Q 2009 = 6037
2Q 2010 = 5963
2Q 2011 = 7054

“A confluence of factors that impact employees’ awareness and willingness to report may be attributable to the increase in the number of incidents reported recently, including a challenging economy, greater enforcement of anti-corruption legislation and the financial incentives arising from the implementation of the Dodd-Frank Act,” said Timothy Mohr, Certified Fraud Examiner and partner at BDO Consulting . “Given the rise in incident reporting, it’s important for companies to evaluate when a formal investigation is warranted and have procedures in place to outline the action steps necessary to resolve incidents in a timely manner so that further risk can be mitigated.”

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 include reports on corruption and fraud, theft, misuse of assets, conflicts of interest and FCPA violations.

For more information regarding the Quarterly Corporate Fraud Index, visit www.tnwinc.com or email .(JavaScript must be enabled to view this email address).

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