Trust and loyalty are desirable traits in family structures and in business; however, these traits can also leave a family business vulnerable.
In fact, family businesses are especially vulnerable to fraud, according to the Association of Certified Fraud Examiners' (ACFE) 2016 Global Fraud Study. The study found that businesses with fewer than 100 employees, which are in many cases family-owned, experience fraud at a rate of 28.8%, compared to the 19.8% experienced by those with more than 10,000 employees.
In a family business, trust and security often have an inverse relationship, meaning as trust increases in a business, the quality of internal controls and security is minimized. Business relationships — particularly among family members — can become strained when individuals believe they are owed more money or authority than they receive.
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