It turns out that mid size companies in the professional services and financial industries, and small businesses overall, are particularly vulnerable to white collar crime in the U.S., Hiscox determined in a new study.
The international specialist insurer found that 17 percent of employee theft in organizations with fewer than 500 employees takes place in the financial services industry the most of any industry examined in the study. What’s more, the median loss for professional services due to employee theft surpassed $615,000, which was also a top loss among industries included in the study.
Small businesses face heavy risks in terms of white collar crime. Hiscox found that firms with fewer than 150 employees were 10 times more likely to be hit by fraud than businesses with 250 to 500 employees.
Doug Karpp, Crime & Fidelity product head at Hiscox, noted that employee theft can harm in ways that go well beyond financial.
“The ripple effect of employee theft threatens the trust employers place in their teams and damages morale,” Karpp said in prepared remarks.
Hiscox’s 2016 Embezzlement Study looked at employee theft cases active in the U.S. federal court system in 2015, particularly those that hit companies with fewer than 500 employees.
Here are some of the study’s other major findings:
- U.S. companies with up to 500 employees faced a median loss of $341,710 per year due to employee theft.
- Over 80 percent of thefts took place at companies with under 150 employees, and just under 50 percent had under 25 employees.
- Funds theft is the most common fraud scheme in both small businesses and large organizations in nearly every industry.
- A typical embezzler was the median age of 49, and women were part of more than 56 percent of cases.
- Bookkeepers were involved in 11 percent of all cases involving employee theft.
- Employees in senior organizational roles pursued 25 percent of all employee theft schemes in the study.
- Senior level executives who pursued theft at their companies left a median loss of $966,000.
Hiscox said that the combination of pressure (due to debt or other expenses), opportunity and ability can combine to push people into committing fraud at their companies. To reduce fraud risk, Hiscox recommends never giving one person end-to-end responsibility for accounting or accounts payable. Hiscox also said companies should pay attention to employee lifestyles, conduct lawful background checks, educate employees and promote a culture of trustworthiness and integrity.