Employee theft is a top concern among U.S.-based organizations. It’s not something most business owners want to think about, but employees often steal products and goods with little-to-no regard for the impact it has on the companies. When a company is faced with a high rate of shrinkage (loss of product between point of manufacture and point of sale), it’s forced to raise the prices for consumers, which subsequently results in fewer sales and lower overall revenue. But just how much of an impact does employee theft really have?
The international business insurance firm Hiscox has released its annual report on employee theft. Dubbed the 2015 Hiscox Embezzlement Watchlist: A Snapshot of Employee Theft in the US, it paints a grim picture of the problem of employee theft. For the report, Hiscox analyzed federal cases involving employee theft from the year prior (2014), in which it found the average financial loss from employee theft for U.S. organizations with fewer than 500 employees was a jaw-dropping $280,000 per year.
One might assume that only banks, investment companies and other financial institutions are at risk for costly employee theft, but this isn’t the case. The Hiscox report found that all industries and sectors suffered from employee theft, attesting to this widespread problem. The median loss for U.S. financial organizations due to employee theft was $271,000 annually, while retail organizations topped the chart at $607,012, followed closely by healthcare organizations at $446,000.
“Although risk mitigation strategies such as background checks will add a layer of protection, no organization can completely insulate itself from employee theft. Organizations can, however, take proactive measures to minimize the likelihood of theft and the impact of losses,” said Doug Karpp, National Underwriting Leader for Crime & Fidelity at Hiscox. “Even basic controls may have prevented many of the criminal actions seen in our study by creating a ‘perception of detection,’ which is the most powerful deterrent to employee wrongdoing.”
Here are some tips to prevent employee theft:
Conduct comprehensive background checks on both existing employees as well as job applicants.
Store excess merchandise in locked cages rather than keeping it out in the open.
Utilize a professional background check company to conduct comprehensive reference verifications.
Install video surveillance cameras throughout your workplace, including areas that are restricted to employees only.
Conduct regular inventory checks to determine exactly which products are missing and how many.
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