In retail, in particular, studies show that approximately 48 percent of inventory shrinkage is due to employee theft, at a value of $15 billion a year.

Greed and opportunity, decreased employee loyalty, and increased resentment toward management, as well as a slow economy, are all contributing factors.

Employee theft and fraud can take many forms. In addition to theft of inventory, it can include submitting fake invoices, diverting payments, or issuing fraudulent checks. Human nature being what it is, incidents of serious employee theft or fraud will occur at some point in any organization, large or small. Like other crises and problems, internal theft or fraud is as unexpected as it is unwelcome. Investigation and follow-up actions are oftentimes poorly handled, compounding the harm suffered by the company.

Although any theft or fraud presents its own unique fact pattern and concerns, planning can help ensure that the matter is properly addressed, minimizing the disruption to the business and maximizing the chances of a full recovery.

What Will You Say When They Ask What Happened?
If you are concerned about the costs associated with employee theft and fraud, you should be asking yourself the following questions:

• Has my company recently assessed our exposure to employee theft and fraud? Do we know what areas of the company might be most vulnerable to employee theft and fraud?
• Do I have adequate controls and/or safeguards in place to manage employee theft and fraud? Are they being adhered to?
• Is my company prepared to address incidents? Do we have a protocol in place for managing a crisis?
• Who in my company has been designated to review cases of employee theft and fraud? Is the person or persons adequately qualified to assess all aspects of such an incident? Are additional resources required?
• Are my company's internal audit, legal compliance, and risk management functions effectively used to mitigate the risk of employee theft and fraud?
• Do I know how past incidents have been addressed and do additional actions need to be taken?
• Does my company have outside counsel in place to deal with such incidents?
• What is my company doing to screen new employees?
• Do I know the level of proof needed for full recovery from my insurance company?
• Do I know which external authorities might need to be notified?
• Am I aware of the circumstances under which Sarbanes-Oxley might apply?