Steps to Reduce the Risk of Employee Theft at Your Business| Property & Casualty

Steps to Reduce the Risk of Employee Theft at Your Business| Property & Casualty

Costing U.S. employers over $50 billion annually, the Federal Bureau of Investigation (FBI) reports occupational fraud is the fastest growing crime. Employee theft causes bankruptcy, financial loss, litigation and many other problems. Many leaders are passive in fraud prevention and only respond to theft when external sources (e.g., employee tip, police investigation) bring it to their attention. 

The most common forms of employee-related crimes include:

  1. Merchandise theft, involving products being stolen for personal use or profit
  2. Supply theft, occurring when employees take work supplies without approval 
  3. Monetary theft, ranging from an employee physically stealing cash to extorting company funds
  4. Data theft, stealing valuable company information

Read on to learn more about the prevalence of this risk and how to protect your organization.

Why Employee Theft Is Overlooked

Every organization should take employee fraud seriously. A recent survey conducted by the Association of Certified Fraud Examiners (ACFE) estimates employee theft costs employers $3.7 trillion annually and that 58% of businesses fail to recover losses from an employee fraud case. 

Even businesses where employees seem to be a tight-knit team can be exposed to considerable risks. Further, your long-term employees are a larger exposure than you might realize. In fact, the ACFE found that long-term employees are more likely to steal from a business than new hires. Additionally, only 5% of employees who commit fraud have a previous conviction. This means background checks and employee work history do not protect against theft.

While you may hesitate to label employees as a significant exposure, you cannot afford to ignore such a substantial risk. 

Covering Common Exposures

Even a single instance of employee theft could be disastrous. Your business must take a proactive approach and implement preventive strategies. Businesses have the greatest risk when: 

  • Internal controls are inadequate
  • Internal reviews are inconsistent
  • Employees can easily override existing internal controls

Fortunately, several simple strategies can effectively discourage thieves and substantially reduce your business’ risk and losses. These include:

Employee Support Programs

Financial and emotional stress are found to be the most significant factors influencing employee theft. During these types of difficulties, employees are more susceptible to rationalizing their behavior. Support programs can help employees identify alternative resources for periods of hardship.

Management Review

While employees need some level of trust to perform their jobs, a simple system of checks and balances can help detect and deter fraudulent behavior. Don’t mistakenly provide employees with sole control to areas of your business. Simply reviewing your organization’s day-to-day activities can help identify exposures. Regularly follow simple policies such as:

  • Require major financial tasks to be divided among multiple employees
  • Quarterly review payroll
  • Retain and store accurate sales, inventory checks, financial reports and bank statement records

Unannounced Audits

Random audits can uncover employee fraud or inefficient work practices. Employ at least two individuals to perform these inspections but be sure not to unduly target any employee. Annually hire an outside auditing firm to provide an unbiased evaluation of your finances. 

Proactive Data Monitoring & Analysis

Do not ignore suspicious activity. Many fraud cases can be caught early by identifying and analyzing suspicious actions. According to the ACFE, businesses that utilize proactive data reviewing reduce their employee theft losses by nearly 60%. You can easily establish data monitoring for certain red flags (e.g., a large financial transfer, unexplained inventory absence) that can be immediately reviewed.

Additionally, a risk advisory specialist can evaluate your anti-fraud procedures to help find ways to strengthen fraud protection. They can assist with occupational fraud and employee dishonesty investigations and provide a fraud risk assessment.  

Employee Reporting System

Create an official program for employees to anonymously report suspicious behavior. Employees may be aware of wrongdoing but remain silent to protect their identity. Provide several ways of notification, including text, email or phone. Employee reporting can help discover thefts early and minimize your losses. Additionally, employees will be less likely to steal if others can easily report their behaviors. 

Zero Tolerance

Employees need to be aware of the repercussions of theft. Do not offer warnings or second chances. Your staff must know that if caught stealing or committing fraud, their employment will be terminated immediately. Make sure to clearly state your policy in writing and have employees sign their acknowledgement that stealing is not tolerated. 

Adequate Employee Dishonesty & Commercial Crime Insurance

This policy can provide coverage for losses or damages from employee theft, such as: 

  • Money or securities
  • Property
  • Forgery
  • Fraud
  • Embezzlement

We’re Here to Help

It can be difficult to discover an employee has stolen from you. However, you don’t have to face employee theft on your own. Our risk mitigation strategies can help you to quickly react and decisively contain employee fraud. Along with additional resources to protect your organization from theft, we offer employee theft insurance to protect your investment. If you have questions about employee theft or how to prevent this unfortunate and costly occurrence, connect with a member of our team

Steps to Reduce the Risk of Employee Theft at Your Business| Property & Casualty overlooked, employee theft can be costly for your business. Here are common exposures and steps to help reduce the occurrence of employee theft.2022-07-15T17:00:00-05:00Often overlooked, employee theft can be costly for your business. Here are common exposures and steps to help reduce the occurrence of employee theft.Risk MitigationProperty & Casualty InsuranceYes