Feeling the pinch: more and more firms are being defrauded by their staff--and the biggest offenders tend to be managers, Danielle Cohen explains what to do if you suspect that a senior-level colleague has got a hand in the till.
| Author | Cohen, Danielle |
| Position | Ethics |
The world may on the brink of recession, but not all losses sustained by companies can be attributed to the sluggish global economy, of course. A surprising proportion are coming from where employers least expect it: their own people.
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KPMG estimates that fraud by employees has accounted for 11 per cent of all cases in 2008, compared with 2.5 per cent last year. Members and students contacting CIMA's ethics helpline have been reporting a range of cases (see panel).
As the downturn takes hold, it's likely that more employees will turn to fraud, fiddling expenses and selling on company property. CIMA professionals, with their responsibility to uphold ethical standards in their organisations, will find themselves increasingly challenged. Because they're responsible for management information that can reveal fraud, and because they often work closely with senior managers, they are often the ones who unearth such scams. In smaller firms the pressure is compounded by the fact that they are often the only finance professional there, so they're likely to be dealing with the problem alone.
There are certain steps that organisations can take to prevent unethical practices. Codes of ethics and the training to back them up can help, as can proper whistle-blowing policies, grievance procedures and disciplinary processes. Bearing in mind that 70 per cent of people would commit fraud if they knew they'd get away with it, according to a study by the University of Leicester, these kinds of systems are crucial in discouraging dishonesty among employees.
Official UK sources say that the biggest frauds are committed by senior employees and company owners, so what should you do if you realise that someone in the management team is stealing from the company? It's often hard to know how proactive to be about investigating what might seem like minor indiscretions--after all, you're not expected to police the entire organisation. But, when you bear in mind the potential effects on all the business's stakeholders, it's clear that such actions cannot be tolerated, no matter how small.
CIMA's advice for members or students encountering any kind of internal fraud is to consider the potential consequences of the situation. What might it mean for investors, employees or customers if you act? And what if you ignore it?
Also think about how serious or deep-rooted you believe the problem to be: the way you would deal with a one-off indiscretion might...
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