Employee Crime is on the rise!
Employee theft has become a pressing concern for businesses across Australia—encompassing a range of illegal activities carried out by employees, including embezzlement, fraud, and stealing company property.
GSA has experienced an increase in claims and notifications where companies are reporting significant financial loss from employee fraud. Our market research indicates this is a consistent trend for Insurers, leading to the question of what factors are driving this workplace issue.
Below we explore the factors contributing to the rise of employee theft, its impact on business, and some of the preventive measures you can take to help mitigate this risk:
Causation
Several factors have contributed to the rise in employee theft in Australia:
- Economic Pressures: Economic downturns and financial instability can push employees to commit theft out of desperation or perceived necessity. The sustained cost-of-living crisis in particular has increased financial stress among workers.
- Technological Advancements: While technology has streamlined business operations, it has also provided employees with new avenues for committing theft, such as cyber fraud and data breaches (including Social Engineering)
- Workplace Culture: A toxic work environment, lack of employee engagement, and inadequate supervision can create conditions where theft is more likely to occur.
- Opportunity: Weak internal controls, lack of oversight, and poor management practices can present opportunities for dishonest employees to exploit.
Impact on Business
The ramifications of employee theft can have several material effects on businesses:
- Financial Loss: Direct financial losses from stolen assets, cash, or fraudulent activities can significantly impact a company's bottom line.
- Reputation Damage: Incidents of employee theft can tarnish a company's reputation, leading to a loss of trust among clients, customers, and/or investors.
- Decreased Employee Morale: Discovering theft within the ranks can lead to a decline in employee morale, fostering an environment of suspicion and mistrust.
- Legal Consequences: Businesses may face legal challenges, including lawsuits and fines, as a result of employee theft.
Mitigating Risk
Businesses can implement several preventive measures to reduce the risk of employee theft. These include:
- Strengthen Internal Controls: Implement robust internal controls to monitor and track financial transactions, inventory, and employee activities.
- Conduct Background Checks: Perform thorough background checks on potential employees to identify any history of dishonest behaviour.
- Promote a Positive Work Culture: Foster a positive and inclusive work environment where employees feel valued and respected, reducing the likelihood of theft.
- Regular Audits: Conduct regular audits and surprise inspections to detect and deter fraudulent activities.
- Employee Training: Educate employees about the consequences of theft and the importance of ethical behaviour through training programs and workshops.
Insurance coverage, under your Management Liability or Crime Policy, should be tailored to sit above your risk management program as a failsafe to protect your financial position.
If you feel your business could use additional support with your money risk management, please contact your GSA Broker, or Ryan Neary at Ryann@gsaib.com.au.
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