Employee Fraud: Why are Human Factors so Important in Risk Management?

When any fraud, including employee fraud, is discovered, it’s usually by surprise. That’s because most of us aren’t used to looking for criminal behaviour inside our organisation. We trust our employees and co-workers, and we keep our focus on succeeding as a team and accomplishing our goals for the business. Nobody wants to think that someone might be subverting the rules for their gain.

Unfortunately, though, fraud does happen. The statistics tell us that, on average, organisations lose about 5 per cent of their total revenues to fraud, and the median loss in frauds committed by owners/executives is $600,000. If that’s not bad enough, the average fraud lasts 18 months before being discovered – if it is discovered at all (ACFE, 2020). 

Employee fraud is a combination of complex events, and many organisations include “human factors” in generic terms in the causation path of failure. Because for many organisations, it is hard to specifically identify human factors and understand how to manage them. At CRI Group™, we have 32 years of experience in the causes of potential deviations, the unwanted scenario that organisations may face, and the controls necessary to prevent or mitigate incidents. Our analysts uncover the truth every day; here are the most common human factors that lead to employee fraud:

• Pressures to Perform
• Staff Reductions
• Departmental Cuts
• Business Survival
• Overworked Audit Staff
• Increased External Vulnerability Due to Weak IT Controls
• Reduced Regulatory Oversight

Human factors in risk management

Understanding the impact of human behaviour on your primary process is key. When we address human factors related to health and safety, we aim to optimise human performance and reduce human failures. Organisations need to take a proportionate approach to human factors in risk assessment based on their hazard and risk profile. Several large companies have recognised the value of adopting some kind of a risk model. 

Applying human factors tools and techniques in your risk assessment is detrimental to the safety of your workforce too. This human factor risk management process should consider work ethic, culture, and stakeholder expectations as organisational culture is affected by these concepts and links management processes to corporate sustainability.

Benefits of implementing human factors in risk management

• Reduce turnover and training costs
• Gain a competitive edge through the hiring of better people
• Increase productivity – help your employees be more productive knowing that everyone employed by your company has been screened
• Set your company apart and win more business
• Reduce employee-related problems
• Protect company reputation/brand & customer relations
•  Comply with mandates created by state or federal law for certain industries
• Increase retention
• Reduce negligent hiring claims
• Avoid violence in the workplace (threats of violence and actual violence)
• Reduce theft and espionage
• Avoid lawsuits and the costs associated with the defence
• Avoid loss of goodwill

Mitigate employee risk

Organisations spend years and thousands, even millions, to brand their products and services – it only takes one bad hire to cause a loss of capital and reputation. Employee Background Checks can aid in reducing the risk of hiring an employee who does not live up to their supposed skill set and could cause irrevocable damage. It can cause a business to fail, especially if the employee holds malice toward the organisation. EmploySmart™ is CRI Group’s own solution aiming to expose vulnerabilities and threats within your organisation. Our EmploySmart™ is a risk management measure that can significantly reduce business and financial crime, fraud and malpractice within your workplace.

Our EmploySmart™ solutions are also certified by the British Standard Institute BSI for the scope of BS 7858:2019 Screening of individuals working in a secure environment, Code of practice (the only BS 7858 certified background screening services provider in the UAE and across the Middle East); and BS 102000:2018 Code of practice for the provision of investigative services.

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Other Solutions…

CRI Group™ has experts who have conducted fraud investigations worldwide for organisations of all sizes and industries. Our investigators work on-site at your company bringing a boots-on-the-ground approach to uncovering all the case facts. When you’ve uncovered fraud, that’s the time to let the experts take over. You owe it to yourself and the future of your business to make sure every investigation is done professionally and effectively. 

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CRI Group’s unique identity and vision evolved from our fundamental desire to support our clients and their candidates, thus creating the DueDiligence360™. Identifying key risk issues clearly and concisely helps enhance your knowledge and understanding of the customer, supplier, and third-party risk, helping you avoid those involved with financial crime. The DueDiligence360™ reports help organisations comply with anti-money laundering, anti-bribery, and anti-corruption regulations. This service also proves beneficial ahead of a merger, acquisition, or joint venture. It can be used for a third-party risk assessment, onboarding decision-making, and identifying beneficial ownership structures.