The average business loss due to fraud is estimated at 5% of gross revenue. What can you do about it?
According to the Association of Certified Fraud Examiners, more than 40% of fraudulent acts are identified by employees. This has led many firms to set up a system where employees can report fraud to a third party in the form of a hotline or administrator.
The problem is that employees are often hesitant to report wrongdoing to external third parties. Here's how to overcome this reluctance.
When your third-party administrator or hotline is established:
Make sure any third-party system, such as a hotline, is perceived by employees to be part of your company.
Stress that your firm prefers and supports this method of reporting.
If you use a hotline, do not call it a "hotline" because it implies something to be used only in emergencies. Instead, use terms such as Open Line or Help Line.
Let employees report fraud anonymously to prevent fear of retaliation or being too involved with the wrongdoing.
- Periodically ask employees if they are aware of potential fraud; quarterly or annually is fine.
- Remind them that it is everyone's responsibility to report wrongdoing because losses due to fraud can cost jobs by threatening the firm's financial health.
- Institute policies for following up on reports of fraud to make absolutely sure that such reports are not ignored or brushed aside.
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