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Strategic Intelligence for CFOs, Finance Directors, Controllers and Treasurers in Asia | ------------------------------------------------- Top of Form Remember me register forgot password Bottom of Form 2013, Apr 04 CFO innovation ASIA * Home * News * Features * White Papers * Careers * Events * Webinars * CFO of the Year Awards About Us RSS * All * Finance & Banking * Accounting * Management * Technology * Tax * Law & Compliance * Metrics * Professional Development Insurance: How to Protect Against Employee Fraud Home > Features > Insurance: How to Protect Against Employee Fraud Features Insurance: How to Protect Against Employee Fraud by Stella Tse and Gary Chua, Marsh, 14 December 2009 0 comments Share on email Email Share on facebook Facebook Print Share on linkedin Linkedin Digg Share on twitter Twitter topics: Risk Management tags: crime insurance fidelity guarantee fraud insurance The most dangerous enemy is sometimes the one from within. That, at least, is how it can be for companies that fall victim to employees who commit fraud to enrich themselves or do damage to the firm. Employee fraud can be the most difficult to uncover – people who work on the inside know how the systems work, and are able to cover their tracks in a way that outsiders do not. What’s more, in recent years, new global business models and sophisticated systems have increased the risk that security breaches will occur. At the same time, the economic downturn has led to greater levels of insecurity, employee dissatisfaction and motivation to commit crime. An ounce of prevention is worth a pound of cure: risk management and internal controls are the best way to avoid loss. But no security system can keep up with every potential breach. If your company is the victim of a crime, from inside or outside the organisation, the surest way to provide balance sheet protection is through having the right kind of insurance protection. While the risk landscape has evolved significantly, the insurance markets have kept pace with new and innovative solutions. Crime insurance can provide effective risk transfer. Signs of the times Recent cases from around the region show that employee fraud is not limited to any sector of the economy or size of organisation. Government owned entities or private companies, whether small, medium or large in size, are not immune. In the news in recent years: * The dean of a university medical school convinced patients to make payments totalling HK$4 million into the account of his wholly-owned private company. * A “shopping addict” was caught transferring between HK$100,000 to HK$200,000 several times each month from the account of her small commercial printing firm, stealing in total HK$6 million. * An estimated $7.9 million worth of watches and cash went missing from a luxury watch retailer in Singapore on December 26, 2008, a crime perpetrated by an employee. * A sales representative at a medical supply company in Singapore made cheques out in his own name for 35 shipments of products over two years, pocketing almost $2 million. * In Japan, an IT services company reported that a former employee had embezzled around $1 million by fraudulently selling personal computers that were stocked in the warehouse. He sold more than 300 computers in five years. * Other recent frauds include the creation of “ghost employees”, fictional names on the payroll who claim salaries, embezzlement of large sums by senior executives, fraudulent accounting, and other innumerable employee crimes. Employee crime brings with it more than just financial losses. In one recent case, a publicly listed corporation was forced to delay the publication of its financial report and subsequently restate its results from a profit to a loss, after embezzlement by one of its cashiers of a subsidiary office for some HK$24 million was discovered. When events such as this happen, the loss of confidence in the company is much greater than the financial loss, and a company’s share price can take a disproportionate hit. Forms of insurance coverage The good news is that companies that have appropriate insurance in place are covered should such an event take place. There are two major forms of coverage against employee fraud: the fidelity guarantee, which is specifically designed to cover the insured against internal acts of fraud and dishonesty; and crime insurance, which covers a company against both internal and external crimes. 123next ›last » ------------------------------------------------- Related articles * How to Protect Your Company in Risky Markets * ASEAN's Rise as the Next Economic Superpower * Cyber Insurance: Does Your Company Need One' * D&O Insurance: Protection From the Privatisation Blues * Risk Management Lessons From Asia's Year of Disasters Comment on this article ------------------------------------------------- Top of Form Your name: * E-mail: * The content of this field is kept private and will not be shown publicly. Homepage: Comment: * * Web page addresses and e-mail addresses turn into links automatically. * Allowed HTML tags: