Employee fraud- something illegal yet seems to crawl its way into areas of businesses, leaving them indebted. Whether you are an SME or a big company, you might have faced a situation where your staff stole company funds or channelled funds into their coffers, which you later discovered. This needs to be managed and mitigated as it is a critical concern for you and every other employer who wants to protect business assets and maintain a trustworthy work environment. Here are ten strategies to effectively manage and mitigate employee fraud as an employer.
Table of Contents
1. Establish Clear Policies
A clear policy means being detailed. Well-developed and comprehensive policies like anti-fraud policies should outline acceptable behaviours, reporting procedures, and consequences for fraudulent activities. Ensure all employees are trained on these policies during onboarding and through regular refresher courses. This will ensure that employees are well-oriented and have no excuse for breaching fraud policy.
2. Promote a Culture of Integrity
Company culture is one crucial factor in fostering an environment where honesty is valued. As the saying goes, do what the Romans do when you go to Rome. Develop a transparent company culture that instils ethical values in company staff. Once the environment nets elements of fraud, every other new joiner will align. But how can you create this value system? By encouraging open communication and transparency within the organisation and ensuring all its Leaders model ethical behaviour and demonstrate a zero-tolerance approach to fraud.
3. Implement Internal Controls
This point might seem obvious, but without internal controls and not just internal control, establishing strong internal controls, such as dual authorisation for financial transactions, regular reconciliations, and segregation of duties, the fraud rate wouldn’t be reduced. Doing these minimises the opportunity for fraud to occur and makes it easier to detect any irregularities.
4. Conduct Background Checks
Perform thorough background checks on all potential employees, especially for positions involving financial responsibilities. Background checks, such as police reports and information from the candidate’s references, can also allow employers to check whom they are dealing with. This can help identify red flags indicating a propensity for fraudulent behaviour.
5. Encourage Whistleblowing
Create a safe and anonymous reporting system for employees to report suspicious activities without fear of retaliation. Promote awareness of this system regularly to ensure all employees know how to report concerns. This system aligns with promoting a culture of integrity because people would not be encouraged to report suspicious fraud activities without a culture of integrity.
6. Monitor Employee Activities
Utilise technology and data analytics to monitor transactions and employee behaviours for any signs of fraudulent activity. Regular audits can help catch anomalies before they escalate.
7. Provide Fraud Awareness Training
Regularly train employees about the various types of fraud, how to recognise signs of fraud and the importance of reporting suspicious behaviour. This can empower employees to be vigilant and proactive.
8. Respond Swiftly to Incidents
This is important. Once fraud has been detected, immediate action must be taken. Conduct a thorough investigation and involve law enforcement if necessary. Transparency in handling incidents reinforces the company’s commitment to combating fraud, so be as transparent as possible. You could share information with the other employees on why the sacked employees no longer work with the company. This will also deter others from engaging in fraudulent activities within the company.
9. Review and Revise Policies Regularly
Culture is dynamic, as we say. It is essential to regularly assess and update anti-fraud policies and procedures to adapt to new threats and changes within the organisation. Continuous improvement is key when mitigating fraud. This will also allow employers to reduce the chances of falsely accusing employees.
10. Engage External Audit and Consulting Services
Bringing in external experts can provide an objective assessment of your company’s vulnerability to fraud and recommend best practices tailored to your specific situation. Moreover, auditors can detect signs of ongoing fraud by checking the various aspects of the company’s finances.
In conclusion, employee fraud can be mitigated by setting clear policies which explain fraudulent activities and their consequences. Also, it creates an environment of integrity that encourages employees to report suspicious activities. Significantly, setting internal controls will restrict fraudulent movements and propensity. Restricting fraudulent activities also starts by conducting background checks on job candidates and responding swiftly to fraud accusations.
