Employee theft and fraud drain billions from U.S. businesses each year. From stealing inventory to selling secrets, insider threats cause substantial financial harm and other damages. Understanding the true cost of employee theft and its wide-ranging impacts is crucial for companies aiming to protect their assets and bottom line.
The Cost of Employee Theft
According to estimates, employee theft causes U.S. businesses to lose over $50 billion annually. A typical organization loses 5% of its revenue to fraud by employees.
Outright theft of cash, inventory, data, or other assets inflicts direct costs. But there are many additional indirect costs:
- Lost productivity as time and focus shifts to investigating cases and implementing loss prevention measures
- Hiring and training costs to replace terminated thieves
- Diminished staff morale and distrust generated by dishonest coworkers
- Reputational harm and lost business after public cases of embezzlement, data breaches, or IP theft
- Legal, insurance, and settlement costs if victims decide to sue
- Higher expenses for insurance, security, auditing, and other preventative tools
In serious cases, the massive losses inflicted by employee crime can critically impact operations or even force companies out of business entirely.
Beyond Dollars: The Wider Impact
While the financial costs of employee theft are severe, the damages frequently extend far beyond just dollars lost. Workers who engage in more serious forms of fraud or embezzlement often exhibit other behavioral issues or personal problems. In fact, many occupational thieves begin stealing to finance addictions, debt, or mental health disorders.
Caught thieves face reputation damage, relationship turmoil, legal consequences, and other life impacts. And their actions erode workplace trust, sow fear of false accusations, and disrupt operations. The stigma of employee theft can motivate increased surveillance by management, harming work culture and engagement.
For companies that experience particularly large or public cases of insider crime, the reputational damage and loss of customer/public trust provide another major blow. And if proprietary secrets are compromised, the advantage of that intellectual property is permanently destroyed.
Limiting Employee Theft
While no business can completely eliminate insider theft, proper planning can greatly reduce risks and minimize potential losses.
It starts with rigorous screening and hiring practices to keep out dishonest applicants. Policies should clearly prohibit theft and fraud while setting access controls on sensitive systems and assets. Awareness training reminds employees to remain vigilant about securing belongings and reporting red flags.
Ongoing monitoring through inventory audits, surveillance systems, and data analytics enables early detection and intervention. Supportive management practices focused on positive culture and engagement discourage motive among otherwise honest employees.
Earning a loss prevention degree can provide individuals with specialized expertise to lead prevention efforts. Loss prevention professionals can help deter theft, conduct investigations, implement protective technologies, and manage comprehensive programs tailored to a company’s risks.
Left unchecked, employee theft inflicts tremendous monetary and non-monetary costs that undermine companies in many ways. A multi-pronged strategy is needed to protect assets and bottom lines. With vigilance and preventative action, businesses can control insider threats and their destructive consequences.