Orlando, Fla.
Since desperate times often prompt desperate measures, companies should be on the lookout for a spike in criminal acts by employees fearful of losing their jobs in a worsening economy, risk managers were warned here last week.
With millions laid off over the past six months and more personnel cutbacks looming at companies across the country, loss control measures need to be ramped up, according to Greg Bangs, vice president and product manager for crime, kidnap/ransom, extortion and workplace violence expense coverage at Chubb Group.
"When workers are out there thinking the axe is hovering over their heads, they might resort to stealing to pad their personal reserve fund," Mr. Bangs said during a panel on "Managing Unprecedented Risk In Unprecedented Times" here during the Risk and Insurance Management Society's annual conference.
Besides stealing to build up a nest egg in case they are the next to lose their jobs, employees also might be motivated to steal in an economic downturn so they're compensated for work that used to be performed by those already laid off, he added.
"This is what happens with some employees left behind after a layoff. Their resentment builds up to the point where they steal to make up for all the extra work they're doing, which makes this a double-whammy for employers," said Mr. Bangs.
"Some may rationalize it at first as just an unofficial 'loan,' but after awhile, if they can't pay back the money from wherever they took it, the scale of the theft can increase exponentially," he observed.
Part of the increase in theft claims during a recession might be the result of companies looking more closely at their books and uncovering prior frauds, Mr. Bangs explained.
"When companies are making money, everybody's happy and senior management doesn't always bother looking under the hood," he said. "But now that every penny counts, firms are taking a much closer look at how money is being spent. They may then stumble onto fraudulent activity that might've been taking place for years, starting in the boom times."
Mr. Bangs indicated that studies show "about 7 percent of company funds are being stolen, which works out to $994 billion walking out the door due to commercial crime and theft."
One way to expose such thievery and to avoid future crime losses, he advised, is to "follow the golden rule of internal control, which is to always give separate employees responsibility for authorizing transactions, collecting or paying cash, and maintaining records." That way, no one individual is in charge of the entire process, making it more difficult to embezzle company funds.
Mr. Bangs also urged all employers to insist that every employee take vacation time. "Frauds have a lot of balls in the air, and if they are away for a week or two, some of those balls are bound to fall, and whoever takes over their jobs might very well notice something amiss."
He suggested that risk managers establish a fraud hotline so employees can report suspicious behavior–even anonymously–and that thorough background checks be conducted on all new employees.
Cyber-attacks are another internal crime threat, as about 20 percent of cyber-frauds are perpetrated by employees, while another 32 percent are by business partners, according to Tracey Vispoli, a Chubb vice president and global financial fidelity manager.
"At a time when many are strapped for cash, there is a greater awareness of the financial value of proprietary information," she warned, noting that "stolen credit card data can be sold on the black market, particularly if the PIN numbers are breached."
One way to avoid such problems, she advised, is to keep a lid on how much information is retained. "Companies keep far too much data for far too long," she observed
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