The Destructive Cost of Workplace Fraud

Once upon a time a dear friend told me about the issues he was having in his apparel manufacturing plant where certain employees were in business for themselves.  This meant their raking off inventory, dresses, blouses, and such, and selling the stolen merchandise to anyone who would pay cash.   Upon doing researcher, my friend found is otherwise unaccounted merchandise in the flea markets in downtown Los Angeles and with different off price venues.   The stealing or shrinkage, as it was politely called,  was costing his company a fair amount of money.

My friend said that one of the key factors involving in-house employee theft were the morale issues.  Other employees, honest employees, are most often aware of the employee thievery going on.  They find it disheartening.   Morale drops and with the decline of morale worker production drops accordingly.   According to my friend, once a private security agency is called in, there is often no need to subject the suspected thieves to the lie detector tests.  The mere act of  turning on the lie detector apparatus, compels most of the suspects to confess all, singing like canaries.   The reasoning, my friend guessed, is that they would not have to admit to previous or ancillary indiscretions that may be asked during the briefing session.

According to an article in the Montreal Gazette, workplace fraud is costing Canada's small and medium enterprise a hefty $3.2 Billion a year.    And that is with the understanding that 75% of the crimes go unreported, so there is a potential addition of close to another Billion Dollars to that figure.   Extrapolate that into a much larger and, consequentially, worse behaved American economy and the numbers start to mount into some really serious money.  In Canada, some 290 thousand small and medium sized businesses were victimized by workplace fraud, last year.  Figure what that translates to in American companies subjected to the same types of crimes.   In the article, it was predicted that the incidences of workplace fraud would rise as the economy slowed.

In Canada, workplace fraud costs somewhere between five and ten percent of the nation's gross domestic product (GDP).  Ten percent of the bankrupt businesses cite workplace fraud as one of the reasons that caused them to fail.   In Canada, workplace fraud costs somewhere between five and ten percent of the nation's gross domestic product (GDP).  Ten percent of the bankrupt businesses cite workplace fraud as one of the reasons that caused them to fail.  Ironically, most of the companies interviewed believed their risk of being subjected to workplace fraud were low.  Statistics proved otherwise.  Most, however, did not have a response strategy or program in effect.

The article also indicated that companies should review their policies carefully and tailor security to fit the needs of each individual business.  The article also suggested that companies conduct pre-employment background checks on  all employees and issue a zero tolerance policy that all employees are mandated to sign.  Detection and prevention measures against workplace fraud should be viewed as an investment and not a cost.  In all, you will save more than you spend.

 

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