Employee fraud and misconduct are risks to all businesses. It is often difficult for companies to acknowledge the reality of these risks, but, according to the most recent Report to the Nations published by the Association of Certified Fraud Examiners, it is estimated that companies lose 5% of their annual revenues to fraud. When fraud or misconduct is uncovered or reported, companies must react quickly and effectively to:
- Stop the misconduct to reduce the costs and losses
- Mitigate and control reputational damage
- Protect employee morale by showing that misconduct is taken seriously
- Send a strong message of deterrence to other employees
- Benefit from potentially favorable treatment by law enforcement and regulators by demonstrating proactive investigation and remediation
The challenges faced by companies from employee misconduct vary greatly and have a range of ramifications. Fraud, embezzlement, and theft of assets have a direct and more quantifiable impact on company financial performance. Code of conduct violations, conflicts of interest, sexual harassment complaints, and discriminatory practices cause tremendous damage in less calculable ways. The company’s reaction to each of these challenges must be thoughtfully considered and evaluated. To effectively respond to employee misconduct, investigations must be uniquely tailored to the specific allegations and issues. In addition to carefully considering the most effective strategy and approach, a variety of tools may be utilized: interviews, forensic accounting, email review, data and document review, as well as leveraging on existing security and surveillance recording and capabilities.
This article was submitted by Amanda Krauss. Amanda is an Associate Managing Director of Axium Consulting LLC, an investigation consultancy. Amanda has graciously allowed us to publish this short article on employee fraud and misconduct. The statements and opinions expressed herein are the statements and opinions of the author. For more than a decade, Axium Consulting LLC has been a trusted and valued resource to companies responding to internal issues. Based in Chicago, Axium has personnel in Dayton ready to assist local companies faced with employee misconduct. For more information, please contact Amanda Malusky Krauss at 937-901-5456 or firstname.lastname@example.org.
If you have any questions or need assistance with drafting employment agreements, employee handbooks, codes of conduct or other employment matters, please contact me or one of our employment attorneys at 937-223-1130 or Jsenney@pselaw.com.