Business owners buy insurance to protect their firms from a variety of risks, but they may be overlooking one critical risk. “Business owners spend a significant amount of time and resources protecting their businesses from a variety of risks, whether it’s liability for their products or services or severe weather,” Helen R. Savaiano, president of management […]
Business owners buy insurance to protect their firms from a variety of risks, but they may be overlooking one critical risk.
“Business owners spend a significant amount of time and resources protecting their businesses from a variety of risks, whether it’s liability for their products or services or severe weather,” Helen R. Savaiano, president of management liability at The Hanover Insurance Group, Inc. (NYSE: THG), said in a news release.
“But what can sometimes be overlooked are the risks presented by unscrupulous employees, and unfortunately those types of losses happen more often than business owners think.”
The Hanover, a Worcester, Mass.–based insurer that has a Syracuse regional office in Salina, identified the following four common crime schemes in business, based on a study of insurance claims:
1. Billing and vendor schemes — Employees set up false vendor accounts and bill a company for non-existent parts or services.
2. Check-tampering schemes — Workers use company checks to pay themselves or reissue the firm’s old outstanding checks and make themselves the payee.
3. Payroll schemes — Employees manipulate the amount on the check, or create duplicates of the check to cash more than once.
4. Expense-reimbursement schemes — Staff members submit additional expenses that never occurred or were not of a business nature and are then reimbursed for those bogus expenses.
Many business owners don’t realize they could have been protected from fraud committed by their own employees until it’s too late, according to Jeffrey Gordon, vice president of fidelity and crime at The Hanover. While insurance protection is available through some carriers for this and other crimes, not all business owners secure coverage.
“We always advise owners to work with a knowledgeable independent insurance agent to ensure they have the right coverages, like fidelity and crime coverage, and place that coverage with a carrier who has expertise, so they can meet the specific needs of their business,” Gordon said in the release.
The Hanover recommends business owners consider the following best practices to avoid being victimized by employee theft:
- Perform thorough background checks (in accordance with the law) of all potential hires; don’t take shortcuts.
- Make sure there is clear accountability for every position in the organization and no position has broad enough power to authorize payments without the consent of another individual. Seek to set up a system of checks and balances.
- Set up a tip line for the organization, guaranteeing anonymity, in order to allow for the reporting of any suspicious activity or suspicious business practices.
- Encourage all employees who handle accounting and payment functions to take vacation time, with another person handling their work in their absence.
- Communicate often and clearly about the company’s policy on employee conduct.
- Don’t allow discrepancies to be attributed simply to the cost of doing business. Be sure to conduct a thorough investigation of discrepancies.
For more information on protecting your business from employee theft: visit http://bit.ly/1kU3Cz8
The Hanover Insurance Group is the holding company for several property and casualty insurance companies. It says it ranks as one of the 25 biggest property and casualty insurers in the U.S.