With rising premiums and more stringent insurance underwriting criteria we are all very much aware of minimising our risk by implementing strict risk management procedures. Although we are very conscious of the fire and burglary aspects which are relatively easy to correct with locks, alarms and extinguishers – one of the other great risks to the livelihood of our business is
the incidious crime of employee theft.

For those interested in researching this subject we encourage you to read a copyrighted article “Employee Theft – The Profit Killer” by John Case which can be viewed on http://www.employeetheft.com
John Case is President of John Case
& Associates, a US based security management consulting firm that provides management with proven and cost effective strategies to prevent theft, drug abuse and violence in the
workplace.

Statistics show that nearly 1/3 of all bankruptcies are caused by employee theft and it takes approximately $20 in sales to offset every $1 lost to theft. On top of this, valuable accounting
records are often deleted or damaged in order to camoflage the theft.
No employer likes to believe that the staff they have personally selected and trust could be responsible for theft and this tends to blind them to the indications that theft or so called ‘shrinkage’ is taking place from within. As cited by John Case “since there are as many signs of theft as there are ways to steal, the list of warning signs is endless”. Case states that minimally the following steps should be taken:

• Conduct a survey or audit of your business. Identify possible existing theft and potential opportunities or risks to
potential theft. Immediately develop a plan to eliminate or reduce your exposure to these risks.

• Educate the supervisory and general employee population as to the impact employee theft has on them and how they, not just management, are the key to solving the problem.

• Develop a Loss Prevention Program that ensures an ongoing effort to prevent and detect dishonest activity.

Cover for theft by a servant is generally a specific exclusion and must be purchased as an extension – for an additional premium. In the past 12 months I have personally handled two
significant claims relating to theft by employees and the loss in terms of cash is in the tens of thousands of dollars.
On top of that there is the extensive amount of time lost in terms of
recreating accounting records, dealing with the police, messy employment termination processes and trying to track down the various ways in which the funds have been siphoned out of the company.

In addition, the tax man doesn’t want to know about your problems. They want accurate accounting records submitted on time every time.

In both cases the checks and balances in the accounting department had been allowed to slip. It is important that accounting functions have strict demarcation to avoid staff being able to simply write out and sign cheques made payabl to themselves. Simple procedures can eliminate both the tempation to staff and the threat of potential loss. These procedures can be as simple as requiring 2 signatures for each cheque or having one staff member write out the cheques and someone else sign them.