Occupational Fraud – is Your Organisation at Risk?

The Chapman Consulting Group’s sister company, Risk Management Intelligence (RMI), supports organisations to make safer and more consistently effective hiring decisions. The company achieves this through the fast and accurate delivery of personnel screening, investigative referencing and talent assessment. The following article from RMI highlights the importance of initial and regular screening of candidates and employees to limit organisational exposure.

No senior manager or management team wants to think their employees are capable of occupational fraud, and conversely employees don’t want to feel that their organisation is constantly suspicious of potential fraudulent behaviour. The reality remains, though, that significant financial loss and reputational damage are the very real threats faced by organisations who fall victim to occupational fraud, and it happens more than you might think. According to the 2014 Global Fraud Survey conducted by Ernst & Young, more than one in ten executives surveyed reported their company as having experienced a significant fraud in the past two years. In addition, according to the Association of Certified Fraud Examiners (ACFE), the average loss in each case of occupational fraud across Asia Pacific is currently $240,000 USD. With this kind of potential loss at stake, it is clear that organisations should equip themselves to mitigate the risk.

Pinpointing the Risk

Recently employers across Asia Pacific have been increasing investment in background screening for new hires, both to improve candidate suitability and to reduce the risk of unwanted behaviours. What many companies don’t appreciate is that this type of screening could and should also extend to existing employees. This group often makes up a more significant part of the workforce than new employees, and may not have been recently screened, if they were screened at all. Evidence indicates that changes in an employee’s personal circumstances during their tenure can result in dramatic changes in workplace behaviour. The ACFE also reported that 33% of those who committed occupational fraud had personal financial difficulties, information that could have been identified through periodic re-screening.

Risk Management

Your organisation has decided that screening both new and current employees is a good idea, but time constraints and financial considerations may mean it is not viable to adopt a blanket approach to re-screening. One simple step that any organisation can take to manage risk in a time and cost effective way, is to categorise employee risk and identify where it is high. Consideration should be given to:

• Employees maintaining certifications, and those who require a license, or where regulation dictates re-screening. Annual screening will ensure that background records are maintained, and will equip employers with information that may act as an early warning sign;
• Employees with access to financial systems and sensitive information. Periodic screening may highlight risk factors that could lead to fraudulent activity;
• Employees moving between positions, whether moving to a new function or taking on increased responsibility. This is particularly relevant for people moving into leadership roles and financial positions; due diligence is vital to ensure an employee is fully fit for his/her new role.

To help manage these people risks, the right external screening provider can support with:

1. Establishing which positions are sensitive to exposure, including those that are industry and market specific;
2. Categorising the level of risk associated with each of these positions;
3. Creating a re-screening program appropriate to these positions, and to the overall needs of an organisation.

Trust is a fragile commodity and can make all the difference between an employee who is engaged and highly productive, and one who is disengaged and even potentially destructive. The objective approach of a third party screening provider helps to reduce the risks associated with the ongoing management of people, thereby increasing the trust in the company. While background checks won’t eliminate occupational fraud entirely, they will provide information to support safer employment decisions, which will result in a more trustworthy workforce and organisation.