Preventive measures and best practices can help an organization defend against occupational crime. And a crime insurance policy may be the only source of recovery in the event of a loss. Christopher J. Giovino of Dempsey Partners L.L.C. discusses some ways organizations can defend themselves, recover losses, and bring perpetrators to justice.

With occupational crime and fraud on the rise, more employers are falling victim to embezzlement and other types of employee theft. While such crimes can involve anyone from an hourly worker to a senior executive, those with access to an organization's finances often turn out to be the perpetrators.

Significantly, the size of the organization doesn't matter. Every type of enterprise, from a main street stationery store to a global corporation is at risk of employee fraud and theft. Unfortunately, charitable organizations and nonprofits are frequent targets.

Here are steps to help employers minimize the risk of occupational crime:

Know when your organization is at greatest risk. For some businesses, certain times of year mark heightened vulnerabilities. Those are typically when transactions are at a high volume or cash is flowing freely. Relief organizations are at greater risk when responding to disasters. An atmosphere of exigency can cause breakdowns in oversight and controls.

Establish an anti-crime policy and communicate it throughout your organization. If you have an employee handbook, check to see if you already have such a policy and review its wording. Make sure it's clear with respect to expected behavior and integrity of all employees, and responsibilities for reporting incidents if wrongdoing is suspected.

Assess protocols for approving expenditures. Check your firm's financial controls, including all expense review and approval procedures, and determine how carefully and thoroughly they are enforced. Consider what approvals are required and at what financial level double signatures should be mandated.

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Reinforce the value the firm places on integrity. Whenever employees receive promotions, salary increases or bonuses, emphasize that the award is based on performance and integrity. Make integrity a key discussion point whenever senior leadership addresses employees, and cascade that messaging throughout the organization.

Set up an anonymous telephone “tip line” and promote it frequently. This is the first line of defense for all organizations and the most effective tool for identifying criminal activity and perpetrators.

Conduct background checks on all prospective employees, especially those with any level of financial responsibility or access. Roughly 13% of crimes are caused by repeat offenders.

Create a “SWAT team” to assemble and implement a plan to reduce the organization's exposure to occupational crime. SWAT team members may include executives responsible for risk management, internal audit, CFO, a board member with relevant experience, counsel, communications, human resources, information technology or operations.

If your organization has an audit committee, meet with them. Review your activities for addressing internal crime. Engage a point person on the committee — perhaps your general counsel — to help spearhead your internal crime prevention efforts and related investigations. Rotate that person periodically to keep the entire committee involved and to reduce risks of complicity at the highest levels. Involve your auditors; they may know best practices for your industry.

Build crime modules into your organization's crisis management and business continuity plans. An internal crime or fraud incident not only can damage employee morale and impede productivity, but can be devastating for an organization's reputation. Charitable organizations may see donations dramatically reduced. So it's critical to have a well-constructed response and communications plan to address internal fraud events. If necessary, engage an outside crisis management firm to make sure your plan addresses all aspects of the response, including employee communication, and external communication with customers, suppliers, contributors, regulators, other key constituencies, and the news media.

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Review your insurance. A crime insurance policy is often the best — and many times the only — source of recovery. Be familiar with the policy limits, terms and conditions, including “proof of loss” and reporting requirements. Check if your policy provides “professional fee” coverage, which can pay the cost of an outside investigation firm if one is retained.

Even with robust preventive measures in place, few organizations can completely eliminate their potential risks. If your organization suspects embezzlement or other internal crime, you'll need to conduct an internal investigation, involve your SWAT team and notify your insurer. If you've had pre-event meetings with law enforcement, you should know when to engage them.

When you identify the perpetrators, work with your legal counsel to determine how to bring them to justice. It's extremely important to involve the appropriate judicial authorities in any prosecution. There may be jurisdictional issues, so you need to understand the nature and potential scope of the crime before seeking to prosecute the matter. Your legal counsel may not be familiar with these situations and you may have to get help from an investigative firm or criminal law firm.

With internal crime on the rise, appropriate prevention and pre-loss planning activities can help organizations reduce their chances of being victimized and minimize the consequences of an event.

Christopher J. Giovino is the Wilton, Conn.-based partner in charge of the forensic analysis practice at Dempsey Partners L.L.C. Mr. Giovino can be reached at chrisgiovino@dempseypartners.com or 203-762-5052.