Expensive problems for retailers

According to Mike Tallent, director of Pricewaterhouse Coopers, no company is immune to theft and fraud committed by employees. As one of their recent surveys shows, 60 per cent of trading companies have been victims of fraud or theft by employees. Risk is proportionate to the size of the business, which means global companies playing a dominant role in the market are the most vulnerable. Preparing fictitious financial reports is the most common form of fraud in the retail and wholesale business. Stealing inventory is also common. As a result of complex structures and organisation, the risk of fraud is higher for large trading enterprises. Losses might result from unsupervised promotional activities like for example, when favourable shelf placement is rewarded by favours to the competent officers, or when purchasers accept less than optimal prices in return for some personal gain. However, the most frequent form of crime effecting trading businesses is still theft by both employees and customers, either independently or in collaboration. The risk increases, if small items are moved in large numbers within the supply chain where theft is not easy to detect. According to an independent survey conducted in 24 European countries, an estimated loss of EUR 29 billion occurs each year as a result of theft or administrative mistakes, which accounts for 1,24 per cent of the total turnover of the companies affected. Hungarian data is exceptionally bad. The rate of loss is equal to 1,37 per cent of turnover. Theft by customers is to blame for 48,8 per cent of losses, while theft by employees accounted for 30,7 per cent and this rate is growing. Some counter-measures have already been introduced, like electronic labels to allow monitoring of products, but thieves always find a way to neutralise counter-measures. Mike Tallent recommends that companies should asses the risk of theft and fraud in advance. It is essential to have a program to counter theft and fraud, which includes risk assessment covering all areas of operation, identification of weak points and constant testing of control mechanisms. Checking of activities should be continuous and plans should be ready for situations when misconduct is detected. Means of reporting misconduct without personal consequences should also be established and employees caught stealing should be fired immediately. Electronic Point of Sale (EPoS) technology can be used to detect theft. Comparison of data from cash registers can show which cashiers produce figures that are significantly different from the average. This might be a sign of some misconduct. Theft usually does not decline in proportion to any decline in turnover, which means trading companies need to treat this problem as a top priority.