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Employee Dishonesty: The Cost of Fraud

employee_crimeEmployee dishonesty is one of the most severe problems facing businesses today. Fraud, perpetrated by trusted employees, accounts for a projected global loss of $3.7 trillion annually.

Occupational fraud is pervasive. Knowing the facts can help business organizations protect themselves.  In the 2014 Report to the Nations, the Association of Certified Fraud Examiners analyzed nearly 1,500 U.S. fraud cases resulting in excess of $3 billion in losses. Here is how the report breaks down the cost of fraud:

• Typical business organizations lose 5% of annual revenue to fraud

• Fraudulent activity occurs an average of 18 months before detection

• The median loss per case is $145,000; in a company of 250 employees this translates to an annual loss of $906,250

• 22% of occupational fraud cases cause losses of more than $1 million

• In 2012, one in forty employees was apprehended for stealing from their employer

• 87% of occupational fraudsters have never been charged or convicted of a fraud-related offense

• 77% of fraud cases occur by employees in: financial roles, sales, executive/upper management, or customer service

• In 58% of $1 million loss cases, business organizations do not recover any of the loss

• Banks and financial services are the most commonly victimized business organizations

• Small businesses with fewer than 100 employees bear a 28% higher median loss

• When collusion is involved, median losses increase substantially

– One perpetrator = $80,000
– Two = $200,000,
– Three = $355,000
– Four or more = $500,000

• 58% of victim organizations do not recover losses; only 14% make a full recovery

• Employee theft comprises 43% of business losses totaling $200 billion annually

Occupational fraud is pervasive. Knowing the facts can help business organizations protect themselves. Contact any of us at Propel Insurance to learn more.

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