Staff Theft in Small Companies

The results of a survey was just released which verified what many of us in the fraud industry already knew; staff theft is a big problem.

The Chubb Private Company Risk Survey polled executives at 451 for-profit U.S. companies, almost all of which had annual revenue of less than $25 million.

“Just over half of private small company executives expect employees to steal something of value within the next year, nearly double the rate who have actually experienced such loss in the last five years”, a new survey found on Tuesday.

Some 54 percent of those surveyed said they expected employees to steal company funds, equipment, inventory or merchandise over the next year. Just 30 percent have actually experienced such theft in the last five years.

Employee theft was seen as the second-most financially damaging event a company could experience, according to the survey. The most damaging event, the executives said, was an employment practices liability lawsuit. (Via Reuters:Reporting by Ben Berkowitz; Editing by Lisa Von Ahn)

Protect and educate yourself.

Call Rick Maltz at (443) 745-8478 today for a free consultation.

Why a Certified Fraud Examiner?

The Certified Fraud Examiner (CFE) credential denotes proven expertise in fraud prevention, detection and deterrence. CFEs are trained to identify the warning signs and red flags that indicate evidence of fraud and fraud risk. CFEs around the world help protect the global economy by uncovering fraud and implementing processes to prevent fraud from occurring in the first place.

Setting High Standards for the Anti-Fraud Profession

To become a CFE, an individual must pass a rigorous test on the four major disciplines that comprise the fraud examination body of knowledge:

• Fraud Prevention and Deterrence
• Fraudulent Financial Transactions
• Fraud Investigation
• Legal Elements of Fraud

Prospective CFEs must also meet high professional, educational and ethical standards, as well as continuing professional education requirements.

Certified Fraud Examiners Are Leading the Fight

Cynthia Cooper, the CFE who discovered the WorldCom fraud, has shared her inspiring story with professionals and students worldwide, through her book and personal appearances.

Harry Markopolos, the CFE who repeatedly attempted to alert the SEC to the Madoff fraud, testified before Congress on how to improve government regulation and oversight of the capital markets.

Scores of CFEs have written books to share their insight and expertise.

“Sad as it may seem, fraud will always take place wherever there is opportunity. The feeding frenzy of fraud will not abate unless fraud prevention is embraced and instituted at all levels of a company, especially in the executive suite,” explains Martin Beigelman, CFE, Director of Financial Integrity for Microsoft Corporation in his book, Executive Roadmap to Fraud Prevention and Internal Controls: Creating a Culture of Compliance.

Why Use a Certified Fraud Examiner?

“Occupational fraud is a serious threat to every society and the efficient functioning of every economy.”  What [ACFE members] are doing in a very real sense is critical to our national economy and its effective functioning,” U.S. Senator George Mitchell (ret.). According to research conducted by the Association of Certified Fraud Examiners (ACFE), U.S. organizations lose an estimated 7 percent of annual revenues to fraud. Based on the projected U.S. Gross Domestic Product for 2008, this percentage indicates a staggering estimate of losses around $994 billion among organizations, despite increased emphasis on anti-fraud controls and recent legislation to combat fraud.

Fraud is clearly an issue that has a direct impact on a macro economic scale, as well as, a personal level.  Bonuses, salary increases and benefits are all affected by fraud as a affected companies need to generate 10 dollars in revenue to make up for every dollar lost to fraud based on a 10% profit margin.  This recovery burden is particularly high for small business with fewer than 100 employees, as they face a median loss of $200,000 per fraud scheme as reported by the 2008 ACFE report to the nation. To recover from this loss, the revenue required on a 10% profit margin is $2 million dollars.

Certified Fraud Examiners are experts specialized in the prevention and detection of fraud in its many forms.  CFEs provide the guidance, tools, and knowhow to help organizations structure and implement fraud prevention programs to effectively manage the risk of fraud as well as conducting investigations of allegations of fraud. Behind them is the ACFE with 20 years as the world’s premier provider of anti-fraud training and education and with 50,000 members in 125 countries. CFEs are required to participate in an continuing professional education program and obtain 20 hours of training a year.  The CFE certification and access ACFE to member resources help CFEs stay on the cutting edge of fighting fraud in an ever changing industry.

Workplace Health

Employees are often considered as a company’s biggest asset. Employees are essentially the ones running the company from top to bottom. By implementing good workplace health practices, companies show their concern to their employees’ safety as well as their health.

A company can gain more than healthier employees when they have a safe workplace and practice being health conscious. Employees that are healthier and are more sure of their working environment are deemed to do more work. Companies will be given examples of common workplace health practices, that they can emulate, in this article.

Workplace health might be affected by some psychological issues inside the workplace. Under these include work-related stress, emotional, verbal or even sexual harassment, burnout and even violence in the workplace. Poor performance of an employee may result if these issues are not immediately tackled by the responsible people.

There might be times that an employee’s stress level is above his or her threshold, and this may greatly interfere with his or her physical and emotional health. Even though it is normal to cut down on budget and workforce during a recession, it should still be important that the stress level of the employees still working in the company are monitored. Fatigue, losing interest to work, constant headaches, social withdrawals, trouble concentrating and employees are becoming irritable or depressed, these are common signs that workplace health is deteriorating.

The following are some suggestions that will help combat stress and have a good workplace health program to relieve employees’ stress in the office.

• A monthly dining out

• company outing or camping trip

• a bowling tournament

These are just some simple ways to help keep a lid on stress. Taking away the seriousness of work can be the key to cut down stress.

In a big company, it is easy to overlook some of the causes of psychological problems and most common of these are emotional and verbal harassment. Employees may not immediately exhibit any negative effects of these harassments, but they usually keep this inside for a long time. These two types of harassments can be easily repeated and result to employees’ psychological problems, making it more important to implement zero-tolerance on harassment in policies discussing workplace health.

An individual who works extremely hard while neglecting his or her own needs, such as letting go of hobbies and sacrificing time with family and friends, can burnout. The person gets more withdrawn and extremely depressed, or exhibits erratic behavior that are seen by his or her co-workers. Helping employees form a support group for them should be considered in the workplace health program.

Any form of harassment, whether emotional, verbal or sexual can be solved by simply adhering to a zero-tolerance policy. Employees who have the opportunity to socialize and have fun in the workplace have less tendencies of being burnout and stressed. To sum up, companies also benefit from implementing these policies, by achieving low turnover rates and higher workplace health cost savings, and the employees work more efficiently.

Workplace Bullying

The Workplace Bullying Institute defines workplace bullying as mistreatment severe enough to compromise a targeted worker’s health, jeopardize her or his job and career, and strain relationships with friends and family. It is a laser-focused, systematic campaign of interpersonal destruction. It has nothing to do with work itself. It is driven by the bully’s personal agenda and actually prevents work from getting done. It begins with one person singling out the target. Before long, the bully easily and swiftly recruits others to gang up on the target, which increases the sense of isolation.

Bullying in the workplace is rife and like childhood bullying can involve name-calling, physical aggression and threats. Unlike childhood bullying the skills of the adult can involve far more manipulative and damaging strategies to the point where psychological and physical health can be affected.

The problem of workplace bullying has been recognized by many organizations and trades unions to the point where policy initiatives have been introduced by some companies in an effort to stem the serious consequences to productivity and the health of the workforce.

Workplace bullying may be getting worse with the recession. In good times, abused workers simply walk out, said Gary Namie, a social psychologist and founder of the Washington-based Workplace Bullying Institute. But with high unemployment, many employees feel they must stay put.

It’s not hard to identify a bully if you’re getting complaints of screaming, tantrums, public humiliation, sabotage, and verbal abuse. But watch for the more subtle signs of a problem, as well: the person who always takes credit for things others obviously contributed to, or who dominates meetings with sarcasm, interruptions, or insults. Keep an eye out for people who are afraid to speak up, or signs of obvious tension in certain groups.

According to a 2007 survey conducted by Zogby International, almost half of U.S. workers report that they have experienced or witnessed some kind of bullying on the job – insults, threats, screaming, or ostracism.  Often it is the least skilled who attack the best and brightest workers because of the perceived threat they imagine. When the perpetrator has the power to deprive her or his target of a livelihood and the economic and health security the job represents, bullying is an abuse of authority.

When employers are told about the bullying in their organizations, nearly half (44%) do nothing while 18% actually worsen the situation by retaliating against the one who reported it. T o most employers, bullies are merely exercising their employer-granted managerial prerogative to handle people without regard to the consequences of that often brutal handling. Some bullies bully because executives tell them to. Most bully because it is part of the corporate culture. They will not stop until their executive or owner makes them stop.

It has been estimated that workplace bullying costs American business $180M in lost time and productivity each year.  The Workplace Bullying Institute estimates between turnover and lost productivity, a bully could cost a Fortune 500 company an estimated $24,000,000.

According to Catherine Mattice, in a white paper for NoWorkPlaceBullies.com, there are more costs to bullying than most companies realize.  Along with loss of productivity and distraction from duties, other costs include time spent counseling both victim and bully, time lost by co-workers gossiping about the bully and the behavior, time spent reorganizing departments and teams, lost customers who were victimized by the bully or simply heard the gossip, and management burnout when bullies were not fired.

Mattice, who provides training, consulting and support in effective organizational communication processes and workplace bullying, says these costs and many more must be taken into consideration when tallying the total damage that can be done by a single bully in the workplace.  She cites reduced turnover and higher productivity as just two of the results that can revitalize a workplace that rids itself of bullying.

These numbers show that tolerating this unprofessional boorish behavior results in a very high financial cost for a company.

Workplace Violence

Workplace violence can be any act of physical violence, threats of physical violence, harassment, intimidation, or other threatening, disruptive behavior that occurs at the work site. Workplace violence can affect or involve employees, visitors, contractors, and other non-Federal employees.

According to OSHA (Occupational Safety & Health Administration), violence in the workplace is a serious safety and health issue. Its most extreme form, homicide, is the fourth-leading cause of fatal occupational injury in the United States.  According to the Bureau of Labor Statistics Census of Fatal Occupational Injuries (CFOI), there were 564 workplace homicides in 2005 in the United States, out of a total of 5,734 fatal work injuries.

An average of 1.7 million people were victims of violent crime while working or on duty in the United States, according to a report published by the Bureau of Justice Statistics (BJS), each year from 1993 through 1999. An estimated 1.3 million (75%) of these incidents were simple assaults while an additional 19% were aggravated assaults. Of the occupations examined, police officers, corrections officers, and taxi drivers were victimized at the highest rates.

Contrary to media reports, danger often comes, not from within but, from outside your company as-well. From hospital staff members dealing with aggressive patients and family members, to realtors showing homes to individuals for the first time, to corporate executives traveling in foreign countries, lawyers being attacked after an unfavorable court decision, teachers being assaulted by students and parents, or just walking to your car after work, violence in today’s world is spilling over into the workplace.

Catalysts that trigger incidents of workplace violence vary greatly and employees are not always involved. But when a staff member is to blame, the person’s behavior is often in reaction to disciplinary action or a termination.

Unlike youthful robbers, workplace killers are usually older, over 35, and have significant tenure on the job. Almost all are male. Many have been described as “loners” who have been chronically disgruntled and have had problems with authority. The killer profile suggests that they never accept blame for their mistakes and had a tendency to transfer responsibility to others. The profile indicates that they don’t accept change well and are overly suspicious and sometimes even paranoid of co-workers. Many workplace killers believed that they were being intentionally held back from promotion by their incompetent supervisors.

In almost every case following a shooting spree, investigators were able to identify multiple “red flags” that indicated that the worker was angry, frustrated, and blamed their victims for their troubles. Some flags seen in other workplace killers have been a pattern of dehumanizing or objectifying others through comments, rude remarks, and harassment. These blaming behaviors are a way of assigning blame to others for one’s own shortcomings.

Often the conduct increases in frequency and intensity and includes seemingly empty verbal threats. Employers should watch for changes in behavior, attendance, productivity, personal hygiene, and social isolation. Killing sprees usually are the culmination of many years of unresolved personal problems and mismanaged stresses. Problems with alcohol and drugs, financial worries, and marriage and family pressures often aggravated their problems while coping with this fast-paced society.

Workplace Violence Prevention

Workplace violence experts believe that disgruntled employees need to have an outlet to vent frustrations and a pipeline to submit grievances to upper levels of management. They argue that if such an outlet existed then violence triggers would be more than likely be defused. A problem that we now recognize is that supervisors are often ill equipped to handle such emotional needs of those they oversee.

In addition to having knowledge about fair employment practices, discrimination, and drug abuse, now business managers and supervisors need training on how to deal with these potential violence triggers. Problematic employees will still have to be terminated and disciplined, but now more than ever they need to be treated fairly and with dignity.

Workplace violence will not be a simple problem to solve because it is so complex and often involves external pressures unrelated to the job. A simple knee-jerk reaction won’t resolve this problem nor will doing nothing. Metal detectors and armed guards at all building entrances are too extreme of a solution in most cases to be socially acceptable. More gun control legislation won’t solve this problem very soon either. It is recommended that companies adopt a zero tolerance against employee-to-employee violence in the workplace. Key mangers should be trained to detect the early warning signs and how to handle them. A system needs to be in place where complaints are received and investigated. A clearly defined and articulated workplace violence policy is important, along with a fair and even-handed discipline procedure for those would don’t follow the rules.

Like many other problems we face today, awareness and workplace violence education is the key to understanding along with better communication. Meanwhile, corporate America will be addressing workplace violence in various ways. Some are taking extreme physical security measures and shoring up their company policies and procedures. Others are taking the attitude that it won’t happen here and will do nothing. Our society is rapidly evolving and hopefully we will move past this current crisis.