Small Businesses Lose $200K to Fraud, Survey Reports
National News • August 12, 2008
U.S. organizations lose an estimated 7 percent of their annual revenues to fraud - but damages are more among small businesses, according to a new study.
The median loss suffered by organizations ...
Insurance Journal is not responsible for the content of the message below.
Subject: Fidelity Insurance - The Second Line of Defense
Posted On: August 18, 2008, 1:37 pm CDT
Posted By: Lynn M. Schubert
Comment:
Fidelity Insurance - The Second Line of Defense
I have read your article entitled, "Small Business Lose $200K to Fraud, Survey Reports" that was posted on August 12, 2008, on the Insurance Journal website at: http://www.insurancejournal.com/news/national/2008/08/12/92714.htm. The article accurately reflects the high exposure to fraud that small businesses face on a daily basis as reported in the 2008 Report to the Nation ("Report") by the Association of Certified Fraud Examiners. The article also provides useful advice regarding how to combat fraud. Unfortunately, the advice is not complete. A strong system of internal controls can reduce the opportunity for fraud significantly. However, no internal control system is 100% fool-proof. The criminal mind can be creative and if focused, can find ways to overcome internal controls. Thus, any prudent business should implement a second line of defense, insurance.
In particular, to protect the bottom line, it is imperative that a small business purchase fidelity insurance. Fidelity insurance, sometimes called a fidelity bond, protects the small business against loss incurred due to the dishonest acts of the employee. These types of acts are categorized in the Report as "Asset Misappropriation" and constitute the type of fraud that is encountered by businesses most frequently. In addition to coverage for employee dishonesty, a typical fidelity policy provides coverage for forgery and theft of money and securities.
Even with a strong internal control system, a smart business person will never fall into the trap of thinking, "it can never happen to me." The business will have a backstop of fidelity insurance in the same way that even the most fire resistant of buildings still requires fire insurance. We are surprised that the Insurance Journal left out the second half of a sound risk management plan - insurance.
Lynn M. Schubert, President
The Surety & Fidelity Association of America
Subject: Fidelity Insurance - The Second Line of Defense
I have read your article entitled, "Small Business Lose $200K to Fraud, Survey Reports" that was posted on August 12, 2008, on the Insurance Journal website at: http://www.insurancejournal.com/news/national/2008/08/12/92714.htm. The article accurately reflects the high exposure to fraud that small businesses face on a daily basis as reported in the 2008 Report to the Nation ("Report") by the Association of Certified Fraud Examiners. The article also provides useful advice regarding how to combat fraud. Unfortunately, the advice is not complete. A strong system of internal controls can reduce the opportunity for fraud significantly. However, no internal control system is 100% fool-proof. The criminal mind can be creative and if focused, can find ways to overcome internal controls. Thus, any prudent business should implement a second line of defense, insurance.
In particular, to protect the bottom line, it is imperative that a small business purchase fidelity insurance. Fidelity insurance, sometimes called a fidelity bond, protects the small business against loss incurred due to the dishonest acts of the employee. These types of acts are categorized in the Report as "Asset Misappropriation" and constitute the type of fraud that is encountered by businesses most frequently. In addition to coverage for employee dishonesty, a typical fidelity policy provides coverage for forgery and theft of money and securities.
Even with a strong internal control system, a smart business person will never fall into the trap of thinking, "it can never happen to me." The business will have a backstop of fidelity insurance in the same way that even the most fire resistant of buildings still requires fire insurance. We are surprised that the Insurance Journal left out the second half of a sound risk management plan - insurance.
Lynn M. Schubert, President
The Surety & Fidelity Association of America