Employee Theft: Protecting Your Business
“Honesty pays, but it doesn’t seem to pay enough to suit some people.” This quote by F.M. Hubbard perfectly sums up the root cause of the issue we will be dissecting today: Employee Dishonesty and the potential consequences for your business if you’re not properly covered. No matter how large or small a business is, they are at risk. It is crucial for businesses to understand their vulnerability and put effective measures in place to help prevent such a potentially devastating fraud event from occurring.
According to the Statistic Brain Research Institute, the amount stolen from businesses in the United States each year totals $50 billion. Additionally, the percentage of employees who have stolen at least one time from their employer sits at a staggering 75 percent. The average amount of time office fraud goes on before being discovered is 2 years. And even more alarming, they found that 33 percent of businesses that file for bankruptcy went under as a direct result of employee theft. According to the Association of Certified Fraud Examiners, an estimated 7 percent of a business’ gross revenue is lost to internal theft.
How do you know if you are at risk? Consider the following scenarios:
- Of your company employees who have or have had direct access to its funds/assets, do any of them also deal directly with vendors?
- Do employees who reconcile the monthly bank statements also either sign checks or handle deposits?
- Is only one employee responsible for signing all outgoing wire transfers, letters of credit, or checks?
- Can the public easily access your company’s premises or computer systems due to limited security?
- Is it possible that your company’s non-employees who serve your company’s ERISA plan are not bonded for theft and forgery coverage, as required by ERISA?
If you answered yes to any of these, you are at increased risk for fraud. It is crucial to not only be aware of your vulnerability, but to also put proactive and concrete measures in place to help prevent what can become a crime that devastates your business.
This is where fidelity bonds come into play. Although many traditional policy packages include protection against crime, there are typically gaps in coverage that may not cover computer fraud, funds transfer fraud, money order and counterfeit currency fraud, and credit card fraud. By purchasing additional crime coverage, you can acquire optional insurance for company clients, which would provide protection in the event one of your employees steals from a client; optional sublimit of coverage is available for expenses associated with investigation and establishing a covered loss; legal expenses provided outside the limit of liability – the defense of the customer; and worldwide coverage ensures that no matter where the fraud occurred, it’s covered by the policy.
It is critical that companies are aware of these risks and the stark reality that these crimes occur every day, on a widespread basis, and can have catastrophic effects on their business and whether it succeeds. If you have any questions or would like any additional information, feel free to reach me at firstname.lastname@example.org.