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Business Management  |  4 min read

The Importance of Company Culture in Regards to Fraud Prevention

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David M Kirby

Businesses work best when a dedicated staff is led with passion, dedication, and a belief in your company’s purpose and culture. Employee engagement is a hot-button issue in the business world—and for an important reason. Company culture often dictates how invested your employees are in the company, and in turn, how loyal they will stay. If your company has been defrauded, it might be time to take a hard look and determine if your company culture is the culprit.

It’s not a good feeling as a business owner or supervisor when you discover that an employee has defrauded your company. You can help avoid this dilemma by cultivating and valuing specific traits within your organization. The majority of disasters your company could face are man-made. The typical business loses 5 percent of their annual revenue due to internal theft and fraud. Globally, this accounts for approximately $3.7 trillion in losses. Public opinion and employee morale can also suffer as a result of internal theft and fraud.

Your company will evolve over time, and your leadership plays an important role in cultivating the best core values and beliefs. There is an important trait that you should adopt to create a culture that rejects the kind of toxicity that can lead to fraudulent employee activity: honesty.

Honesty is the cornerstone of every great company culture. When you are open and honest in your dealings with your employees, you can prevent distrust from taking root. Demonstrate deliberate honesty by being forthcoming with your processes and plans. No one likes feeling unimportant or out of the loop. Proving that you have nothing to hide is a great first step that encourages your employees to be similarly forthcoming. Part of this is delivering honest feedback and updates to your employees. When they understand your expectations of their (and your) performance, it sets a standard of open communication that can save you both future grief.

Your employees are the first line of fraud prevention, and this is why mutual trust is vital. The most frequently used method of reporting fraud is via anonymous anti-fraud whistleblower hotlines. In 2013, 60 percent of all internal fraud tips were submitted anonymously. Providing these options allows employees to divulge information from a safe environment, yet the prevalence of this method highlights a trend. Fear of retaliation is often cited as the reason for this anonymity. That fear and secrecy speak directly to the value a culture of trust and openness can provide. An employee that trusts you and believes in the company culture can feel safe in coming to you or a supervisor directly, rather than anonymously.

Internal fraudsters are most frequently creatures of opportunity and are fundamentally different than external hackers. It’s nearly impossible to predict whether any particular individual will commit fraud. The fraud statistics demonstrate that “most occupational fraudsters—roughly 87 percent—are first-time offenders with clean employment histories.” Never ask or permit your employees to participate in unethical activities. If your employee is willing to cut corners and bend the rules to your benefit, you set a precedent that paves the way toward bending the rules for their own purposes.

Encouraging honest behaviors is tantamount to creating an inclusive and rewarding culture that your employees will be proud to belong to. Your employees are shareholders in your vision, and fraud hurts their stake in the company. Foster a company culture that values honesty and integrity, and both your employees and bottom line will thank you.

This article was written by David M Kirby from Business2Community and was legally licensed through the NewsCred publisher network.

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