Fraud is a popular topic for tv dramas, movies and books. The likes of Suits, Wolf of Wallstreet and even Office Space are great companions for a Friday night with Netflix; but if you are a business owner fraud should be more than just a passing interest. Frauds against businesses are often perpetrated by the business’s employees, managers and officers. In 2017 this type of fraud cost an estimated $7 billion in total losses. Asset misappropriation by employees represents nearly 90% of those losses.
Being proactive in your response to the threat of fraud is the most cost-effective way to protect your business. Establishing a healthy and honest corporate culture helps deter would-be fraudsters. Here are five things to consider:
- Culture is a trickle-down economy. Top managers are responsible for setting the business tone and reinforcing it through example. It is important that leaders within your firm understand the tone you want for your business, can communicate it clearly and lead by example.
- The right hire makes all the difference. Employees with a high personal code of ethics bolster your corporate culture of honesty. Some studies suggest that only 30% of people are honest all the time. To find that hidden gem, include as a requirement to the application process that all applicants certify that their application and resume is accurate. Invest in training your staff on how to conduct thoughtful interviews, verify information on resumes and consider paying for background checks.
- Communication on repeat is key. Even if you’ve stacked your leadership and ranks with honest people, they need to hear you say it. Identify the appropriate values for your company, provide fraud awareness training and tell employees what the consequences will be if they perpetrate a fraud. Communication is best through multiple and repeated avenues. A business should provide a written code of conduct, display posters, create videos, schedule reminder meetings and formulate a consistent fraud training plan.
- Creating a warm, fuzzy feeling can protect you. Employees who feel good about their work place are less likely to perpetrate a fraud. As would-be fraudsters consider a rationality for stealing or skimming they are influenced by feelings from lack of recognition, work place inequalities, low pay, lack of clear expectations and unreasonable expectations. By minimizing negative perceptions you are also minimizing opportunity for rationalizing a crime.
- Your reaction to fraud sends a message to employees. When fraud does occur many businesses would prefer to sweep it under the rug and handle it quietly. These crimes often involve a person that is well-known and liked within the business and who is likely to be experiencing financial or family difficulties. It is difficult to make an example of someone in this situation but leniency sends a message to the rest of your company that consequences could be minimal and that you don’t truly value their honesty and integrity.