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The Network and BDO Consulting Release 3Q 2011 Findings in the Corporate Fraud Index

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The Network and BDO Consulting Release 3Q 2011 Findings in the Corporate Fraud Index

Led by reports of theft, fraud incident reporting sets high mark; reporting volume increases substantially from previous year

ATLANTA – November 22, 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 third 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 third quarter of 2011, the Fraud Reporting Percentage (FRP) increased to an all-time high of 21.1 percent, exceeding the previous record high set last quarter. The FRP statistic measures fraud reporting in comparison to all compliance reporting activity from more than 1,400 organizations worldwide.

Other third quarter 2011 findings include the following:

  • FRP (the percentage of fraud-related reports versus all reporting activity) increased 2.2 percentage points – from 18.9 to 21.1 percent – compared to the same quarter in 2010
  • Fraud-Related Incidents (FRI), the total number of reported fraud-related incidents, saw yet another quarterly increase – 17.6 percent – compared to the same quarter in 2010

“The sustained high fraud reporting rate over the past several quarters shows that organizations are continuing to focus on capturing incidence of fraud, albeit reactively,” said Luis Ramos, CEO of The Network. “This could be due to stronger corporate compliance programs and increased employee confidence regarding their company’s anonymous whistleblower reporting systems. It is reassuring to see that in the first quarter following the effective date of the Dodd-Frank whistleblower provisions, reports from whistleblowers have not diminished.”

While not specifically reported in the Fraud Index, “incidents involving some form of theft continue to be the most common type of fraud,” Ramos continued.

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

3Q 2011 FRI Graph

3Q 2005 = 10.3%
3Q 2006 = 12.5%
3Q 2007 = 13.3%
3Q 2008 = 18.6%
3Q 2009 = 20.2%
3Q 2010 = 18.8%
3Q 2011 = 21.1%

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

3Q2011_FRI

3Q 2005 = 2579
3Q 2006 = 3722
3Q 2007 = 4988
3Q 2008 = 5697
3Q 2009 = 6173
3Q 2010 = 5892
3Q 2011 = 6938

“Fraud is not necessarily more widespread today than it has been in the past,” said Glenn Pomerantz, partner at BDO Consulting and a Certified Fraud Examiner. “However, there is greater awareness of fraud and the risks it poses to companies, so employees have become much less tolerant of unethical behavior.”

Pomerantz continued: “The real measurement comes in how an organization leverages its proactive and reactive compliance tools – the employee hotline, risk assessment surveys, investigative procedures, communications, etc. – to deal with fraud and reduce its financial impact on the business.”

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, theft, accounting and audit irregularities, misuse of assets, conflicts of interest and FCPA violations.

For more information regarding the Quarterly Corporate Fraud Index, visit www.tnwinc.com or email corporatefraudindex@tnwinc.com.

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