Some of the most damaging cyber attacks can come from within the business, in ways such as occupational fraud, which many employers overlook when it comes to their cyber security. It's an employer's worst nightmare - an employee is dissatisfied with his or her job and decides to defraud or steal from the company.
Employees can cause enormous damage by committing these crimes. By recognizing signs of occupational fraud and implementing practices to prevent it, you can lead a happy and productive workforce.
Recognizing Occupational Fraud
It is often difficult to know when occupational fraud has occurred. Frauds last a median of 18 months before being detected, according to an Association of Certified Fraud Examiners (ACFE) study.
Occupational frauds are much more likely to be detected by a tip than by any other means. Because of this, many companies have set up employee tip lines to catch the person(s) responsible for committing occupational fraud.
While detecting occupational fraud may be a difficult task, there are a variety of warning signs that an employee might be defrauding your business, including the following:
- Invoices from fake vendors
- Missing property
- Fraudulent expense reports
- Forged cheques
- Employee lives beyond his or her means
- Unusually close association with a competitor
Preventing Occupational Fraud
If you run a small business, chances are you have a few employees who are in charge of several different areas of the organization. Split up the duties among a larger pool of employees to decrease the likelihood of fraud.
Perform a pre-employment screening on all potential employees. A resume might not tell the entire story about a prospective employee's past.
Let employees know there are policies on employee theft in place. Don't assume they are already aware of the policies and the consequences of fraud.
According to ACFE's study, more than 80 per cent of the frauds in the report came from employees in one of six departments: accounting, operations, sales, executive/upper management, customer service, and purchasing. Recognize these high-risk departments as potential sources of fraud and implement the proper policies to prevent it.
Establish an anonymous tip line that employees, clients, or vendors can use to report cases of occupational fraud.
Don't get complacent. Any employee can commit fraud at any time. While most fraud is committed for monetary gain, that doesn't mean an employee won't commit fraud if the opportunity is there.
Conduct random audits. Work with a CPA to set up and maintain effective internal financial controls to ensure you're not losing money as a result of fraud.
Proper Employee Management
One of the best ways to prevent occupational fraud at your company is to ensure all your employees are satisfied with their work and the company as a whole. Lead by example - if you and your high-level management team conduct business properly and ethically, your employees will likely do the same. Good ethics also carry over into the market, where your company will be looked on favorably, which can lead to higher revenue and greater goodwill from the community.
Reward employees for doing well. Let them know how important they are to the success of the business. Don't emphasize only the things that haven't been achieved - focus on the positive things employees have done, too.
Insuring Against Occupational Fraud
Recognizing and preventing occupational fraud can be a daunting task. Contact us today. We have the tools necessary to ensure you have the proper coverage to protect your company against losses from occupational fraud and maintain a productive workforce.