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Business risks: Internal stealing

By Okechukwu Onwuka
I KNOW someone, an IT guy, who worked for a small company where he felt he was underappreciated. For the past year, he was stealing from them left and right. He’d tweak something on a laptop or other expensive piece of electronic equipment, and then show/tell his boss it wasn’t working. Boss would tell him to order a new one and scrap the old one.

The new one came in, he re-tweaked the old one so it worked again, and took the new one home to be sold or used by him personally, passing off the old one as new. The company’s division closed this month and they never did catch on to his thefts. I firmly believe companies need to better police their employees and policies as this sort of thing goes on all the time. Viewer comment on ABC News Article by Michelle Goodman, Stealing a slice of the company pie

IT is common knowledge that Nigerian businesses face daunting
challenges posed by non-existent power supply and poor infrastructure. As discussed last week, poor work attitude and skills among employees also contribute to the obstacles entrepreneurs must overcome to stand a chance of breaking through.

There is another risk that is common place; Stealing! It has many forms but the consequences remain the same: unaccounted and unplanned business losses. A number of businesses have closed down as a result of uncontrolled stealing in the work place. Stealing is sometimes covered under some fancy names such as “smartness”, “helping yourself”, “body no be firewood,” “na where person dey work, e dey chop” and several others. Let’s look at some of the many ways these risks manifest and plague business owners.

Diesel theft: Almost all businesses run back-up power systems using electric generators. Although these systems are supposed to be back-ups, they represent the main source of power for many companies in Nigeria of today.

The burden is heavy on operating costs but the effects of stealing and malpractices associated with the supply and use of the diesel is far more destructive. From suppliers who falsify their meters to company receiving officers who connive with delivery men to under-deliver and sell the difference to external buyers, deception is heavy.

At other times, the very security officers charged with guarding the fuel storage are the same people who devise means of illegally siphoning the products for personal gain. These acts end up catapulting the effective cost per litre of diesel utilization from regular N95/litre to over N300/litre. How can any business realistically accommodate these huge losses?

Maintenance fraud: In companies where a member of staff is in charge of maintenance of critical equipment, significant losses can occur from a number of sharp practices. People have been known to condemn key and expensive parts as defective only to re-use the same parts in a future date for the same company or sell them to outside users. Some employees receive regular pay from contractors who collude with them to inflate contracts for maintenance jobs way beyond prevailing rates. Drivers of company vehicles collude with mechanics to the loss of the boss or company.

Some compromised maintenance staff of companies sustain an illegal market of ‘fairly used’ spares. The exposure to this kind of risk is high for many businesses as it is not possible to run a business without delegating.
Invoice fraud: This is more common with workers in accounting and procurement functions.

For those who buy from our markets, you’ll observe that after making purchases, the seller usually asks you ‘how much you want written on the invoice?’ Often, when we put property into the market for sale, agents usually want a mark-up put on top of the regular price before informing their clients. They also plan to charge agency fees on the sale price in addition to the ‘packing’. If you investigate, the amount that many corporate institutions pay for property as reflected in their books is usually quite different from the amount the property owner receives.

In large organizations, such
discrepancies are not easy
to detect. Although auditing is designed to uncover such frauds, audits have the weakness of being compromised by under-the-table payments if the perpetrator is a senior officer of the company. Audits also don’t take place daily. If a business owner is not a numbers person, the ability to scrutinize accounting records effectively is not easy.

Inventory theft: Supermarkets, packaging companies, manufacturers, distributors and similar industries pay a high price through employee stealing if inventory control and management is poor. The more the number of items in an inventory system, the higher the risk of theft. The cost of establishing a proper inventory security system including surveillance is one way to minimize the risk. However, the cost should be weighed against the business’ capacity and stage of development.

Way forward: Every business owner must recognize that paying workers good wages along with benefits are never enough reasons to eliminate the risk of theft, fraud or similar unethical practices. The associated losses are never easy to estimate and as such make sustainable planning and profitability difficult if not impossible. Comprehensive Business risk assessments with focus on internal theft/stealing will be the most cost-effective way to identify solutions that are fit-for-purpose in your specific business environment. No two business environments are exactly the same.

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