Risk Insider: Greg Bangs

When Employees Go Rogue: 5 Strategies to Catch a Thief

By: | December 12, 2017 • 3 min read

Gregory W. Bangs is senior vice president, crime regional leader for North America at AXA XL, a division of AXA XL. Over the last 30 years, he’s been underwriting insurance and developing new products in the U.S., UK, Hong Kong and France. He can be reached at [email protected]

According to Statistic Brain, employee theft costs U.S. businesses about $50 billion a year, with approximately 7 percent of annual revenues lost to theft and fraud. Those are eye-opening stats to say the least.

Businesses of all sizes can be victims of embezzlement, although small businesses tend to run a higher risk. No one has to click far in the realm of online news sources to find examples:

  • A former Alabama stockbroker was recently accused of embezzling more than $200,000 from a regional bank.
  • An employee embezzled over $186,000 from a hospital’s nonprofit foundation.
  • A bookkeeper stole $272,000 from a California-based farming operation and to cover it up filed fraudulent tax returns and failed to file required employment tax returns, which all resulted in a $1.5 million tax lien on the operation.
  • The founder and chief financial officer of a Charlotte, North Carolina-based construction firm was accused of embezzling $100,000 withheld for state taxes since the firm was founded in 2010.
  • A former Bank of America executive and her husband were indicted for allegedly funneling $2.7 million illegally from the company in a five-year scheme involving various Boston- and Atlanta-area nonprofits.

The most cost-effective way to deal with fraud is to prevent it. Sharpening corporate controls and process, as well as enlisting employees’ watchful eyes, are key prevention measures. And having the right insurance doesn’t hurt either. To be proactive, here are five steps to consider:

1 – Establish Checks and Balances. Thirty percent of embezzlement activity happens because the right internal controls aren’t in place. Risk proof your operational procedures, accounting related activities, access to sensitive company information, and limit role responsibilities so different employees handle different aspects of a functional area.

2 – Institute cyber controls. Establish a computer/mobile device policy and malware software protection; set up individual logins; secure intellectual property; institute check and payment safeguards for your company, customers and donors; and make sure you have administration rights to all accounts.

3 – Know and invest in your employees, old and new. Prescreen and conduct reference and credit checks, particularly on those handling money. Since 28 percent of those who commit insider fraud are considered a trusted employee, note red flags in individuals’ work or lifestyles. Educate employees, vendors and donors about company ethics and code of conduct, penalties for violations, and policies and procedures for reporting concerns.

4 – Monitor activities. Since the buck stops with you, set the right tone. Be sure your business or your nonprofit’s board and executive level employees have oversight over all transactions. Have bank, credit statements and cancelled checks mailed directly to your home, where you can review and reconcile them regularly.

5 – Cover your assets. Be sure you have crime insurance coverage. Know what it provides for and requires of you should the unthinkable happen. And review it regularly to keep pace with your entity’s needs.

Suspect embezzlement activity? Consult counsel and an investigations/forensic accounting firm. Develop a strategy to safeguard your brand and manage relationships with your staff, stakeholders, and the media if yours is a high profile business or an organization that relies on investor, donor and volunteer support.

Then take the necessary action to convict. Protecting a business against commercial crimes requires showing that you mean business. Not acting can be detrimental, sending a signal that employees who dip into an organization’s bank account may just walk away with a slap on the wrist.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]