Employee theft is on the rise. How can employers protect their businesses from employee theft?
Employee or occupational theft isn’t limited to stealing the occasional stapler anymore. Businesses are suffering from payroll & billing schemes, embezzlement, data thefts, wage/hour fraud – and it’s costing them big.
The U.S. Chamber of Commerce says that American businesses are losing $40 billion annually. A recent study estimates that a typical organization loses 5 percent of its revenue to employee theft/fraud each year with the median loss caused by a single case of occupational fraud being $145,000.
Big Corporations Take Big Hits
Smaller organizations are usually hit the hardest as they tend to have fewer security measures in place. Organizations with fewer than 100 employees experience a 28 percent higher median fraud loss than their giant corporate counterparts, but when fraudster employees hit large companies, the price tag of employee theft can be dramatic.
Take for example the case of a disgruntled former worker at Morgan Stanley who opened the company up to significant financial damages as a result of data theft for profit. A financial advisor fired for allegedly stealing the account information of approximately 350,000 of its wealth management clients may have posted some of the stolen information online with the hopes of selling it. The company discovered the data breach during a routine Internet sweep conducted in December. Morgan Stanley shares fell 3.1 percent after the news of the breach broke.
Identifying the ‘Usual Suspects’ for Employee Theft
This latest incident at Morgan Stanley is likely to influence more companies to monitor their employees with software that tracks behavioral patterns in employees that might indicate the feeling of financial pressure that might occur well after initial background checks done before hiring.
But employee fraudsters tend to send up “red flags” that savvy managers may use to identify potential theft and fraud early.
The number one indicator for employee theft? Employees who live beyond their means (43.8 percent) are more likely to take to a life of corporate crime, and those who experience genuine financial difficulties (33 percent) may feel more tempted to pocket the petty cash.
Employees in certain departments are more likely to commit company theft or fraud than other departments.
How Employers Can Protect Themselves
The 2014 Global Fraud Study found that the presence of a theft prevention plan at work reduces an employer’s losses as well as shortens the duration of any fraudulent activity. Employers of all sizes should implement a theft prevention plan. For a prevention plan to work, it is imperative for employers to:
- Establish clear guidelines for the behavior of their employees
- Require managers to research and verify all information supplied by applicants
- Implement employee job duty rotations
- Internal audits and evaluations
- Establish clear disciplinary actions that will be taken for unethical behavior
- Train employees on fraud awareness and your prevention plan a regular basis
- Have a system in place that will allow for employees to report suspected fraud anonymously
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