Business owners and managers employ a number of strategies to protect their enterprises from external threats, but what happens when those risks come from within, from their very own employees?
It does happen, to a degree many might find surprising. According to the (American) National Federation of Independent Business, employee theft is a serious concern. The federation says that an employee is 15 times more likely than a non-employee to steal from an employer, and employees account for 44% of all losses from theft.
Additionally, data from the American Department of Commerce suggests that as much as a third of business failures can be tied to employee theft or fraud.
“Employees who steal typically have worked at a business for several years before starting to steal and continue for an average of three years before they get caught. That’s a lot of time to generate losses for the business,” writes Daniel Kehrer for Score.
Employee “misdeeds,” he continues, can present themselves in a number of ways, including “larceny (outright theft), skimming (diverting business funds), fraudulent disbursements (billing schemes, inflated expense reports, check tampering), embezzlement of raw materials or inventory, and stealing business opportunities (misappropriation of customer lists or other trade secrets).”
Establish Trust with Employees by Building Rapport, and Watch for ‘Key Indicators’
Knowing your employees is an essential component of preventing theft and fraud from within. Be alert to “key indicators” including a sudden desire to work late, lifestyle habits not supported by salary, “and evidence of compulsive gambling, persistent borrowing or bad check writing.”
“NFIB recommends that small business employers perform background checks on potential hires. Checking references is one important step. But for employees entrusted with handling your money or financial records, a background check is better.”
The data shows that the most common thefts by employees are time (getting paid for time not worked), money, office supplies, information and merchandise that can be sold. Employees can go undetected for years, and as much as 75% of employee theft never gets noticed. That adds up to hefty losses over time.
The good news is that there are strategies employees can use to reduce the risk of employee-related theft, including ensuring the hiring process includes background checks. If an employee is to handle money or financial affairs, that check should include one for a criminal record.
Other measures to prevent or minimize theft by employees include close supervision, opening avenues for employees to report suspected fraud, and installing computer safety measures, continues Kehrer.
“Understand your computer systems and software, and how they might be used to divert money or inventory. Restrict access to computer terminals and records. Periodically change entry codes and check regularly to ensure that security procedures are in effect.”
Workplace Investigations are Mandated in Certain Circumstances
Of course, securing the services of experts in preventing theft and fraud by employees is one of the more effective and proactive steps an employer can take, that and ensuring workplace investigations are handled properly.
Often the issue is not that the employer has neglected to conduct a workplace investigation at all, rather it is simply that the investigation was flawed, inadequate or biased.
Some investigations are necessary, as in cases of theft, workplace violence and sexual assault. When they are mandated, employers have a statutory obligation to conduct a full and transparent investigation. That’s where the experts, such as those at ISN, can assist.
“Workplace investigations are complex, sensitive and extremely confidential matters requiring unique skills to ensure they are brought to a successful conclusion and in accordance with local laws. ISN investigators are experienced in all areas of workplace investigations such as investigative processes, interviewing, documentation and evidence gathering and when required, court or tribunal testimony.”