Posted on May 17, 2014

Commercial Property Insurance Guards Against Business Crime

While many business owners believe that only large corporations need protection from business crime, this couldn?t be farther from the truth. In fact, fraud and theft happen just as frequently in small to mid-sized businesses, and the effects are even greater than with a larger business. Big companies have large enough assets to absorb some illegal employee activity; however, just one dishonest employee can bring financial ruin to smaller employers.

But there is help out there to protect companies from fraud, theft, forgery and embezzlement. Commercial property insurance coverage such as that found with crime insurance provides vital protection to employers when their employees act dishonestly and/or illegally. There are many ways that employees go about taking money from their employers. Through outright theft, destruction, credit card fraud, skimming, tampering with checks and expense reimbursements, companies can experience significant loss of money in a short amount of time.

Studies by the Association of Certified Fraud Examiners found that the average business in the United States loses revenues of up to six percent because of employee fraud resulting in overall losses to American businesses to the tune of almost $400 billion each year.

Common computer technology in the workplace has also contributed to the ease of employees finding ways to bilk funds from their employers. So while technology has streamlined operations for companies, it has also paved the way for new types of employee cyber crime. With easy access to banking information, inventory and financial records, business owners can be the target of employees seeking to reap benefits for themselves.

Most employers learn of business crime in the workplace from employees who report suspicious activity. There are warning flags that companies can look for to prevent continued losses. Some indications of potential fraud include:

  • Employees with management override privileges

  • Those who achieve goals despite changing conditions

  • Non routine transactions & journal entries in financial records

  • Employees unable to provide documentation of transactions or approval

  • Employees living above their means

  • Those who do not take vacation time

The typical profile for employees that act dishonestly are those in management positions with access to data and override ability as well as bookkeepers, who can hide their activities in the financial records. Many dishonest employees act in the way they do for a variety of reasons, but commonly, they steal because of financial pressure, the opportunity without detection and ability to justify or rationalize their behavior.

Management can help to limit business crime by paying close attention to data so that unusual activities can be detected quickly. Usually, employees start small, but when they realize they are detected, their criminal activity grows.

When employees get caught for committing dishonest and fraudulent acts at work, they may be fired and receive jail time; however, business owners do not usually recuperate their losses. Having crime insurance pays companies for these losses so that they can recover and continue operations successfully.

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