August 21, 2014

Summer Schedules: 9 Ways to Prevent Employee Theft

With summer well under way (many employees are away on vacation and offices often close early on Fridays), the workplace can be strangely quiet – and unfortunately, more vulnerable to employee theft.

Employee theft is more common than you may think.

The Association of Certified Fraud Examiners (ACFE)’s Report to the Nation 2014 Global Fraud Study shows that companies typically lose 5% of their revenues to occupational fraud. The median occupational fraud loss is approximately $145,000 with more than 20% of the cases (in the study) losing over $1 million. 

Small businesses actually take the biggest financial hit. The smallest organizations in the ACFE study suffered disproportionately – with a median loss of $154,000.

In all workplaces, over three-quarters of employee fraud incidents occur in one of seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing, and finance.  

In retail specifically, one in every 40 employees was apprehended for theft from their employer in 2012, according to Hayes International consultants.

During the summer when a workplace is being managed by a skeleton staff and there is less supervision in general, experts say there is all the more reason to have safeguards in place to ensure sensitive information is protected.

Here are 9 ways to reduce the risk of employee theft during the summer... and all year. 

  1. Create a culture of security with a comprehensive information security policy. A security committee headed by a CISO (Chief Information Security Officer) is recommended. 
  2. Implement a fraud hotline. According to the ACFE, more than 40% of all employee fraud is detected by a tip – from mostly other employees.
  3. Flag ‘red flag’ behaviors. Fraudsters display common behaviors including living beyond one’s means, financial problems, an unusually close relationship with a vendor or customer, and control issues with work projects.
  4. Be vigilant about physical safeguards. Ensure that only authorized individuals have access to sensitive information. Physical safeguards should be utilized such as locks, motion detectors, etc. All visitors must sign in and be accompanied by an employee at all times. Partner with reliable third-party companies for regular services such as document destruction.
  5. Create BYOD and other out-of-office policies and procedures. Install computer protection such as firewalls, anti-virus software, data encryption and password protection. Before a vacation, employees who want to take work with them should load (onto their devices) only the documents that are required to do the job. 
  6. Leave a clean desk. Employees must lock down all computers and equipment and leave their area clean and locked. A Clean Desk Policy provides useful guidelines. 
  7. Provide regular employee training. Most occupational fraudsters are first-time offenders, according to ACFE. Background checks and confidentiality agreements are important when hiring; and then on-going communication and training about information security.
  8. Encourage communication with the IT department. If anything comes up during holidays, employees should be able to contact IT easily for assistance.  
  9. Implement secure document destruction in and out of the office. All sensitive documents must be securely shredded by a shredding services expert and then sent for recycling. Hard drive destruction services should also be provided.

For more information, here is an infographic that details The Hard Facts on Occupational Fraud.