Throughout the business world, many CEOs, business owners and upper-level management tend to place the priority for fraud in their organization way down the list. The main reason behind this is that they’re under the impression that their co-workers, employees and even senior management are all trustworthy individuals which only want what is best for the organization. The truth is that even companies with the best work environments can fall victim to occupational fraud. Craig Hannaford, the former head of the RCMP Commercial Crime Section and now a Senior private investigator with Haywood Hunt & Associates Inc., explains that “looking at the Fraud Triangle, even a company with the best work environment and the most trusted employees can still fall victim to fraud as long as there is just one susceptible person, a need and an opportunity. At this point fraud is likely to occur.
What is Occupational Fraud?
Occupational fraud can happen anywhere. It can even happen in a company with trusted employees because all it takes is a need, an opportunity, and someone susceptible to fall to fraud. Dealing with fraud is a common problem that plagues every business no matter how big or how small.
Do you know that according to fraud statistics by the Association of Certified Fraud Examiners, around 5% of a business’ income goes to fraudsters and/or thieves? That number may sound small but if we calculate how much that would be on a global scale, it means that businesses worldwide are losing as much as $3.7 billion a year!
More so 5% of revenue is not a small amount for smaller businesses. 5% can mean the difference between going under or barely surviving in today’s economic climate. Nobody can afford to be a victim of fraud.
What You Have to Know About Occupational Fraud
Occupational fraud happens whenever someone uses his or her occupation or position to intentionally misallocate or misuse a company’s assets and/or resources. This can be exemplified with corruption wherein an employee extorts bribes or accepts money in exchange for manipulating things. Another example is financial statement fraud wherein revenues and assets are either understated or overstated so that someone can pocket extras. And last but not the least, there is asset misappropriation wherein someone steals things or money from the company, an example of which is taking home office supplies.
Misappropriation of assets is the most common type of occupational fraud and accounts for around 85% of all cases of occupational fraud. However, the fraud that costs the most is financial statement fraud because it allows certain people to steal so much in just one attempt. An example would be an upper-level employee who steals millions. That is certainly a bigger fraud than some clerk pocketing permanent markers and taking home a few reams of paper.
Assessing and Stopping Occupational Fraud
Time is of the essence when it comes to stopping occupational fraud. The more time that fraudsters got to commit fraud, the bigger the losses will be for the business. One of the best ways to minimize the occurrence of occupational fraud is to be extremely careful with hiring. Fraud will have less likelihood to occur if disloyal and dishonest employees are kept out. Another crucial step to avoid fraud is to make sure to have the parameters and framework needed to identify it as soon as it occurs. You can achieve both of these actions with the help of comprehensive background screening and security checks with the help of professional private investigators who can do the corporate fraud investigations for you too.
