The Network, Inc., a leading provider of integrated governance, risk and compliance (GRC) solutions, and BDO Consulting, a division of BDO USA, LLP, released their 2012 Corporate Governance and Compliance Hotline Benchmarking Report, an annual statistical study of compliance hotline-related activity for the past five years.

According to the benchmarking report’s findings, the cross-industry incident-reporting rate increased to 8.58 reports per 1,000 employees, following two years of decline. In addition, the Corporate Fraud Index for 2011, which measures the percentage of fraud-related incidents across all reports, rose to 21.1 percent, an all-time high since the Index was first reported in 2005. The report attributes these increases to the improvements organizations continue to make, primarily via their policies and training initiatives, toward identifying misconduct and strengthening their overall GRC programs.

The expanded 2012 benchmarking report includes findings on retaliation, reporting location and reporting method. Key findings of the 2012 Corporate Governance and Compliance Hotline Benchmarking Report include:

• Retaliation: A growing concern among the ethics & compliance community at large, retaliation was cited as a factor in approximately three percent of cross-industry reports, which cover a broad variety of ethics and governance-related issues.
• Web Reporting: In 2011, 13.9 percent of reports were submitted via the web, an increase from 10.3 percent in 2010.
• Anonymity: While the anonymity rate for the past two years has been evenly divided at 50 percent, the rate decreased two percentage points in 2011. However, only one out of five employees who chose to remain anonymous had previously notified management prior to filing the report.
• Industry Trends: The Transportation, Communication & Utilities industry continues to report the highest incident rate (a 9.2 percent increase from 2010); incident reporting rate for the Retail Trade industry, while experiencing an increase in 2011, has decreased more than 32 percent in the five-year period.
• Incident Categories: In 2011, the Employment Law Violation category experienced a slight overall increase as well as an increase in five of the nine industries outlined in the report; however, the leading incident category for all industries continues to be Personnel Management by a wide margin.
• Case Outcome Rate: In 2011, 67 percent of all incidents reported warranted an investigation (referred to the “actionability” of the report), and three out of five of those cases resulted in corrective action. Only 16 percent of cases did not warrant further investigation.
• Means of Awareness: While the poster continues to be the most popular means of hotline awareness, employees are becoming aware of their organization’s hotline programs through a variety of channels.
• Prior Management Notification: Approximately three out of four incidents – a three-year trend – were not reported to management prior to the employee utilizing the hotline.

According to Luis Ramos, chief executive officer of The Network,

The 2012 benchmarking report covers a significant five-year period and provides great insight into trending as well as to how new programs, the economy and legislation all work to impact results. While the global recession technically came to a close during this period, organizations are still suffering from a troublesome economic climate amidst high unemployment rates, both of which affect their ethical culture as well as the state of their compliance initiatives.

As the economy continues to improve, it is important that organizations continue to focus on various aspects of their compliance and ethics programs. This year’s benchmarking report provides organizations with a resource to compare their results to those of similar industries and determine what changes need to be made in their programs in order to further reduce fraud and promote change.

Beginning in 2007, the current five-year period reviewed for the 2012 Corporate Governance and Hotline Benchmarking Report reflects the largest repository of data to date. This report provides an analysis of 599,162 reports made during the review period. In 2011, 129,199 reports were collected from 1,128 organizations representing more than 15 million employees. The data is compiled from actual incidents reported by clients of The Network and was analyzed by BDO and The Network.

Reports are classified in the following industries: Construction; Finance, Insurance & Real Estate; Manufacturing; Mining; Public Administration; Retail Trade; Service Industries; Transportation, Communication & Utilities; and Wholesale Trade.

The Network, Inc. is a leading provider of integrated governance, risk and compliance (GRC) solutions that enable organizations to mitigate risk and promote organizational compliance. BDO Consulting provides litigation, investigation, business restructuring and risk advisory services to clients in the United States and internationally.

To contact James McRitchie directly, please email jm@corpgov.net