The coronavirus pandemic has had various effects on people throughout organizations. One growing problem is the increased risk of occupational fraud caused by social, emotional, and economic turmoil. There are several reasons why business people cheat and steal during a crisis like COVID-19, and a few ways businesses can mitigate their risk of fraud.
One of the primary drivers of occupational fraud during economic turmoil is personal financial loss (both actual and perceived). Business people feel the “need” to steal in order to avoid serious financial setbacks, such as not being able to pay their bills or stay in their homes. Another reason is that they may feel a reduced sense of loyalty and devotion to their employer. Employees who were recently laid off after years of continuous employment may become disgruntled and willing to turn their backs on their former coworkers and employers.
People often steal when they see a new opportunity. They notice that the company is becoming lax about auditing its employees. Many companies are now allowing (or requiring) more of their employees to work from home, so while making the transition online, they may have overlooked essential security measures. Due to the health crisis, many companies have faced significant layoffs of their staff and eliminations of many nonessential positions, including those with oversight or review and approval authority. Opportunistic fraudsters have found ways to take advantage of this new lack of oversight without getting caught.
Some employees rationalize their decisions to commit fraud by blaming the company for failing to alleviate their financial burdens. They claim that they are on the verge of losing their homes, cars, or other needs if they fail to make up for the financial shortfall. Other employees blame the company for being careless, lacking oversight, and essentially “allowing” them to steal. They claim the company failed to implement sufficient security measures, such as auditing or security camera installations, to prevent theft from occurring in the first place.
Efforts to Mitigate the Risks
Businesses often utilize the services of forensic accountants to identify signs of occupational fraud or misappropriation of assets. Forensic accountants are trained to investigate acts of fraud and help mitigate the risk of business losses due to employee misconduct. They can also assist in criminal investigations, serving as expert witnesses, that lead to prosecutions. Most importantly, forensic accountants suggest ideas on how a company and its employees should prevent and reduce the risks of fraud in the future.
Like forensic scientists who investigate murders, forensic accountants investigate finance-related crimes. The recent COVID-19 pandemic has increased the rates of white-collar crimes caused by people who want to take advantage of vulnerable businesses and individuals. The assistance of forensic accountants is needed perhaps now more than ever to help companies recover losses and mitigate future risks.