This blog post is part of our continuing series of articles on how business owners and managers can protect themselves from a multitude of risks in the workplace by employing investigative and due diligence strategies.
Companies today have many different obstacles and challenges that they have to overcome. While their focus must be on servicing their customers, matching the competition, marketing effectively, and dealing with their day-to-day operations, it’s also a must that businesses identify where they may be vulnerable to criminal activity, liability, or other threats to their viability.
The first step is simply to understand what kind of internal threats a business might face. Common threats include the following.
1) Employee Theft
Every year, millions of dollars are lost to employee dishonesty. A fairly recent example occurred in 2013 here in Long Island when a bookkeeper for an oil company plead guilty to stealing nearly $500,000 from her employer. Employee theft might take the form of through embezzlement, fraudulent billing schemes, theft of inventory or trade secrets, or even something as seemingly benign as stealing company supplies. Regardless of the methods used, employee theft is a very real problem and one which can destroy the reputation and even continued existence of a company.
2) Corruption
Corruption in a business setting can take many forms. It includes:
- conflicts of interest (steering company contracts to vendors associated with the employee);
- bribery (paying money to government officials in order to get them to perform some kind of official act, such as access to certain markets or avoid regulatory issues);
- extortion (obtaining property through threats or actual force and/or fear);
- kickbacks (receiving payments for steering company contracts to certain vendors);
- illegal gratuities (paying money to a government official after the official has provided some service to the company).
3) Compliance
From sexual harassment to failure to disclose certain information, employees who cause the business to slip into areas of noncompliance are setting it up for major legal repercussions that can be difficult or impossible to recover from.
Those are just some examples of the most common criminal or fraud-related threats that affect businesses internally. So just what can you do to help prevent these issues from occurring? There are a few steps worth remembering.
- Know the warning signs. Learn how to identify a potential problem. It could include excessive contact with one certain vendor, sloppy record-keeping, or an employee who seems to be living a lavish lifestyle that their salary can’t support.
- Run regular audits that give you a look at employee spending and other areas of the business. This can help you identify potential areas that might be at risk.
- Use data monitoring tools and software that track the on-line or on-network activities of employees at work, in order to get a clear picture of who is doing what.
- Review vendor relationships periodically. Look at contracts and orders to ensure that an employee isn’t using one single vendor excessively.
- Use background checks to ensure that you hire the right employees for any position and that you verify their history and credentials.
- Investigate if you observe red flags of misconduct. Professional investigators and fraud examiners are trained to spot fraud and related problems and can provide a thorough, objective investigation of the situation as well as helping to solve the problem.
Keeping these points in mind – and keeping alert for any possible red flags of misconduct – can help ensure the financial and physical safety of your business, as well as deter any possible future issues.
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