The economic downturn has fueled a dramatic increase in fraud, particularly in-house fraud. Many studies indicate that employee fraud has increased significantly—nearly doubling—in the past three years. In fact, the Kroll Global Fraud Report found that the average company lost $8.2 million to fraud over the past three years. These losses are sobering.
However, third quarter 2009 has become a light at the end of the tunnel for many organizations. Released by The Network Inc. and BDO Consulting, the Quarterly Corporate Fraud Index indicated that fraud incident reporting accounted for 20.2 percent of all compliance hotline-related activity in third quarter 2009, and this percentage is slightly down from the first and second quarters of 2009, when fraud-related reports accounted for 20.6 and 20.7 percent respectively.
In context, fraud incident reporting surged from 13.3 percent in third quarter 2007 to 18.6 percent in third quarter 2008. Similar to the rebounding stock market and rise in consumer spending, the leveling of fraud reporting marks progress.
Yet, fraud reporting only tells part of the story. A leveling in the percentage of fraud reports could be the sign of a rebounding economy, a strong compliance program, or, in contrast, mean that employees are not aware of or comfortable with anonymous whistleblower hotlines.
Regardless of where the fraud incident reporting percentages fall, executives, board members and audit committees need to continue to protect themselves from fraud. According to a recent Corporate Board Member and PricewaterhouseCoopers report, 88 percent of directors ranked multiple whistleblower incidents as a top red flag in 2009. To mitigate risk from whistleblower incidents, directors and executives can better prevent and detect fraud in the workplace, which builds a stronger ethical foundation that will pay off for your company as the economy recovers.
via A Light at the End of the Corporate Tunnel? – Boardmember.com.
