Survey: Most Firms Anticipate Employee Theft

Survey: Most Firms Anticipate Employee Theft

The poll, sponsored by the Warren, N.J.-based Chubb Group of Insurance Companies, found that executives at 60 percent of the companies surveyed anticipate that employees may steal funds or equipment from the company, while 34 percent said employees may steal funds from a client.

Chubb's 2004 Private Company Risk Survey revealed that 39 percent of private companies reported that an employee stole company funds, equipment, inventory or merchandise during the past few years. Nine percent of the companies surveyed reported that an employee stole funds from a client.

Lisa McGee, a vice president of Chubb & Son and Private Company Customer Group manager for Chubb Specialty Insurance, said, "Employee crime is one of the biggest and costliest problems facing private businesses today. As a provider of crime insurance, Chubb has seen how the theft of funds or equipment can have a devastating financial impact on a company, especially a small private firm."

Nearly a third of the executives surveyed said employee theft has the potential to inflict financial or other serious damage to their firms. Prior studies support this claim.

Chubb noted that the Association of Certified Fraud Examiners' 2002 Report to the Nation reported that the average organization loses six percent of its total annual revenues to fraud and abuse committed by its employees. Small businesses are the most vulnerable. According to the ACFE report, the average scheme in a small business causes $127,500 in losses. The average scheme in the largest companies costs $97,000.

The Chubb survey also found many private companies appear to be responding to the growing threat of employee crime.

Thirty-six percent of the companies surveyed said they plan to conduct a risk assessment of executive protection-related exposures, including crime, this year. Sixty-eight percent of the companies conduct employee background checks. Still, despite the fact that more than a third of the companies reported employee thefts in recent years, less than one-fourth said they purchase crime insurance.

"If private company executives are looking for ways to reduce crime, employee background checks are a good place to start," Ms. McGee said. "But background checks should be coupled with an exhaustive program of internal controls to help reduce employee theft and fraud."

Private company executives were also asked about their experiences with workplace violence and kidnapping, ransom demands and extortion.

Executives at nine percent of the companies reported that an employee was harmed in a violent incident in the workplace or while conducting business. The percentage nearly doubles (16 percent) for larger companies with annual revenues over $1 billion.

More than two in five executives surveyed said they anticipate that an employee will be harmed in a violent incident in the workplace this year.

While only three percent of the companies reported that an employee or family member was kidnapped in the past few years, five percent said someone had tried to extort money from the company by threatening to harm its products, facilities or employees.

Twenty-three percent of the executives said they think their company may be the target of an extortion attempt this year.

Chubb said Impulse Research Corp., a market research firm in Los Angeles, conducted the survey. The firm interviewed the chief executive, financial and other top officers at 300 privately held companies.