The 2018 Hiscox Embezzlement Study: An Insider's View of Employee Theft
November 27, 2018
Much of what we think we know of embezzlement comes from the movies. We think of Wall Street fraudsters or con men who beat casinos at their own game. But real-life embezzlement, or employee theft, happens to businesses of all sizes all the time. It may not be as spectacular as it is in the movies, but it causes real damage to real companies.
The 2018 Hiscox Embezzlement Study™: An Insider’s View of Employee Theft shows how companies can be victimized, and how much it costs them. We surveyed chief financial officers, controllers and accountants who had seen the consequences of embezzlement firsthand at the companies they worked for.
Download the report to learn how you can prevent, detect, and mitigate employee theft.
The High Costs from Employee Theft
The average case of employee theft was perpetrated by three people in the same organization, with at least one who was at the manager level or above. Most cases went on for more than a year before they were discovered. The average loss was $357,650, of which just 39% was ever recovered by the company, including settlements, restitution or insurance.
In addition to the stolen funds, companies that were victimized by an embezzler faced other costs. Many had to lay off employees because of the theft. They had to increase the amount of money they spent on auditing and on security measures. Many lost customers and vendors or had trouble attracting new ones.
Many business owners think employee theft can’t happen to them. They trust their employees and treat them well – they’re like a second family. The sad truth is that embezzlement does happen – to companies of every size, in every industry.
The Warning Signs of an Embezzler
Embezzlers get away with their crimes by flying under the radar. But watching closely for the warning signs may help you nip fraud in the bud. Beware of employees who seem overly curious about company processes – especially those that are outside their scope of responsibility. Embezzlers are often extravagant, living a lifestyle that’s out of proportion to their salary, and they may take risks, both in and out of the office. They may come in early, leave late, and not take vacations, which may look like dedication but is actually an attempt to not get caught.
As with any crime, three things have to come together for the thief: means, motive and opportunity. An employee who has knowledge of company accounting practices, a desire to steal fueled by desperation or entitlement, and access to money or credit can easily concoct a scheme that may go undetected for years.
How to protect your company: A three-step process
Protect your company from embezzlement by following these three steps:
Prevent theft before it happens. Create a system in which statements, checks and invoices are reviewed by more than one person. Have bank statements delivered to the owner’s home rather than the business. Perform background checks, as allowed by law, on everyone, but especially those who will handle money.
Detect theft early. Watch for one person or a small group that comes in early, stays late and doesn’t’ take vacation. Beware of employees who live a lifestyle that’s out of proportion to their salary. Don’t assume that a long-time employee is immune from the greed that drives employee theft.
Mitigate the impact of a theft on your bottom line. Press charges if you catch someone stealing from you. This sends a message to your other employees that you take this seriously, and prevents the embezzler from plying their trade at another company. Insure your company against theft with a crime and fidelity insurance policy.
The more you know about employee theft, the better you will be able to protect your company. Download the complete 2018 Hiscox Embezzlement Study™: An Insider’s View of Employee Theft here.