If you’re going by the news headlines, you’d be forgiven for thinking that workplace fraud only happens in the form of large scale embezzlements, perpetrated by men in expensive suits and their assistants. But sadly, that’s a very Hollywood way of looking at things. In reality, there are many different forms of workplace fraud, and high level embezzlement is just one of them. As a business owner, it’s your job to understand how and why workplace fraud can take place, and what you can do to prevent it.
The What And Why Of Workplace Fraud
Here’s a scary statistic for you – worldwide, organisations loose around 5% of their annual revenues to fraud, according to the Association of Certified Fraud Examiners (ACFE). Another study, this time conducted by Kroll, reported that in 2013 72% of companies had been hit by fraud, and it was led by at least one person within their organisation. This is in fact the leading source of fraud for most organisations, and that’s what’s concerning. Data loss and fraud aren’t always coming from the big bad hackers, but from your own trusted employees.
But why do employees commit fraud against their own employers? Well, a recent Wise Workplace post shone a glaring spotlight on 3 major reasons that internal fraud takes place:
- Workplace Dissatisfaction: Employees who aren’t content in their jobs are one of the top reasons employees end up committing workplace fraud. If a employee isn’t happy with their job, or is going through a nasty dispute with a co-worker or management, they may will turn around and steal from their employers as ‘payback’.
- Financial Hardship: Employees who are habitually living beyond their means represent a major red flag for fraud against their employer. Financial problems can be a difficult thing for people to handle, and for many, they resort to extreme actions to resolve it. This can range from simply spending too much, through to dealing with an addiction or personal issues. The ACFE’s report showed that 43.8% of fraudsters exhibited this trait.
- Opportunity: And of course, there is the fact that not everyone in the world is honest and trustworthy, as much as we would like them to be. The third prominent reason behind workplace fraud is simply in the ease of opportunity, If employees have trouble free access to information they can exploit, then they are much more likely to commit fraud. This is backed up by the fact that the ACFE report showed that 82% of fraudsters were first timers.
How Can I Protect My Business?
So how can you protect your business from internal fraud? Well, you can start by addressing the 3 primary causes we’ve listed above, and cut off the desire to commit fraud at the source.
- Workplace Dissatisfaction Solutions: Dissatisfaction can be handled from 2 fronts. First, make sure you are telling your employees both old and new, that workplace fraud will not be tolerated, and ensure you have procedures in place to handle any suspected activity. But you also need to create a safe and happy environment for your employees, so they will be less motivated to commit fraud in the first place. This includes conducting regular and productive performance reviews, taking employee feedback on board, and generally nurturing a culture where your employees would have no reason to be unhappy.
- Financial Hardship Solutions: Since this is a very personal issues for employees, it can be difficult for businesses to tackle head on. Instead, you should focus on providing training for the board, management and all senior staff to recognise the behaviour that accompanies financial problems, and how to handle it when they spot it. You can also put a tips line in place, so that other employees can report concerns anonymously, without fear of retribution.
- Opportunity Solutions: This one, thankfully, is easy to deal with. Simply make sure that your employees don’t have easy access to such delicate information unless it is their job to do so. If it is their job, then you should ensure you put safeguards and monitoring in place of the use of that data. In addition, you should implement a proper document destruction policy, so that disgruntled employees don’t have the chance to take discarded information, for example from a recycling bin. Secure shredding consoles and partnering with a trusted shredding company go a long way to protecting your business from opportunistic fraud.
At Greenaway, we work with businesses across the country to support their business security, and eliminate the possibility of opportunistic fraud. With our help, your data destruction requirements can all be handled by one, experienced provider. For more information, just get in touch with the team today.