Last year, total fraud for businesses and consumers reached an astounding $56 billion dollars. Employee theft, identity scams, and other forms of fraud result in tremendous losses each year — and yet, there are still businesses that don’t have the proper means to protect themselves.
While it’s nearly impossible to eliminate all risk of fraud, businesses can put measures in place that deter bad actors or prevent significant losses.
What’s the best way to protect your business? Setting up a fraud hotline.
Risks Associated with Not Having a Fraud Hotline
Business owners have a responsibility to take care of their customers, their employees, and their profits. Fraud hotlines help protect all three at once!
In fact, NOT having a fraud hotline can be hugely detrimental to a business in the long run. Here are just a few of the risks involved:
According to a report by the Association of Certified Fraud Examiners (ACFE), the median loss a business suffers from fraud is $125,000. However, it is important to note that this figure includes data from several small businesses; about 21% of the businesses studied reported losses over $1 million.
Fraud losses can have lasting — and sometimes permanent — impacts on a business. The ACFE reports that 54% of businesses victimized by fraud never recover any of the funds. Even in a large organization, a loss of $125,000 can hurt business growth or even daily operations.
Penalties and Lawsuits
In 2020, the Federal Trade Commission received 2.2 million reports of consumer fraud. In some of those cases, fraud was revealed to be coming from the company itself — and that means the organization could be held liable.
If your business doesn’t have a fraud hotline, there is a risk of fraud happening right under your nose. This can result in lawsuits, fines, and other penalties that can wreak havoc on a company.
A Bad Reputation
Finally, fraud can damage a business’s reputation with the public.
Consumers want to know that their personal information, credit card numbers, and other data are safe when they patronize a business. If a company suffers a data breach, employee theft, or other forms of fraud, the public may not feel safe visiting them anymore.
Positives to having a Fraud Hotline
Most business owners establish a fraud hotline because they want to avoid the risks we’ve just discussed. However, they are usually pleasantly surprised to discover that hotlines come with a host of additional benefits! Let’s discuss the ways that a hotline can benefit your business in the long run.
As the name suggests, the clearest benefit of having a fraud hotline is fraud prevention. Simply having a hotline set up for your business can be an effective way to deter potential bad actors within your workforce.
Establishing a fraud hotline shows your employees that you won’t tolerate any misconduct (and that you’re more likely to find out about it). This helps build a more ethical corporate culture that will benefit your business for years to come.
Easier Detection and Investigation
Let’s say that one of your employees STILL thinks he or she can get away with committing some form of fraud. It’s possible that they might succeed, and that they’ll continue stealing from your business for months (the ACFE claims that most fraud goes on for 14 months before it’s discovered).
If you have a fraud hotline, your employees will be able to alert you to instances of fraud before the fraudster can do any real damage. Even if it does take several months to find out about the fraud, a hotline can help you investigate the claim more easily. This means you’re more likely to successfully find the culprit and recover your losses!
Protect Your Employees
Fraud hotlines are a great way to find out about illegal and fraudulent activity happening in your business, but the hotline can help you deal with all manner of misconduct.
Hotlines give your employees a place to anonymously and safely report harassment, workplace violence, or a variety of other issues that can poison your corporate culture. This will make your employees feel more comfortable when they go into the office, which will result in happier, more productive employees.
Protect Your Business
Finally, a fraud hotline is a great way for businesses to do their due diligence in preventing illegal activity. If you have a hotline in place, you are demonstrating that your business wants to stop fraudulent activity before it starts. This can help you avoid compliance-related penalties, which saves your business money overall.
If you want to keep fraudsters from hurting your business, call a third party vendor to set up your fraud hotline today. Trust us, your employees, your customers, and your business will thank you.