business management: How to Reduce the Risk of Going High-Tech

Patti Verbanas

As the waste industry grows more reliant on computer systems and electronic correspondence, its vulnerability to white-collar crime increases.

Corporations lose $40 billion annually due to crimes such as embezzlement, vendor fraud and stolen property, according to U.S. Chamber of Commerce estimates. However, if you haven't updated your commercial fidelity coverage recently, you might be in for a nasty surprise when trying to file an employee dishonesty claim.

"The corporate definition of [what constitutes] an 'employee' has changed greatly over the years," says Eric Rivera, regional account director for Sedgwick Financial Risk Specialists, New York. "Companies outsource, lease employees and hire retired employees as consultants. These employment situations don't always fit into a standard surety association policy."

To ensure that all your current employees are covered, you should update your policy and create new manuscript language if necessary, Rivera says.

However, even if you keep close tabs on your policy, proving fidelity claims can be difficult and costly. "I've seen clients spend a quarter of a million dollars establishing their loss," notes Glen Bailey, a vice president at Johnson & Higgins South, Atlanta.

Some technology, such as wire transfers, make it a breeze for industrious employees to embezzle funds.

"As we become more of an electronic society, I'm starting to see more losses," Rivera says, noting that 60 to 70 percent of losses come under the "employee dishonesty" segment of the commercial fidelity policy.

The stakes grow higher if your system relies on software that was engineered by a less-then-scrupulous company employee or outside contractor.

The key to preventing such losses is security. The temptation for dishonesty is increased when employees are given carte blanche to peruse software systems' various levels and screens. On paper, this sounds risky, but some might view this accessibility as a practical business procedure.

For example, in the name of customer service, some companies allow "all their employees - from the customer service reps to the president - to access detailed customer information," reports Victoria Matthews of Mobile Computing, Mississauga, Ontario.

However, across-the-board access might not be the wisest move. "You should control not only access to the programs, but also access to different [screen] levels," says Wayne Zwolinski of SuperSource, Phoenix.

"White collar crime is severe and growing," notes Rivera, who suggests that companies with a loss history hire a consultant to review their internal controls and help them implement new procedures, if necessary.

"However," he stresses, "new procedures will not stop losses. Any system can be circumvented, especially by the employee who helped create it."

Awards Resource Management Companies, Naperville, Ill., was awarded the aluminum Company of America's Presidential Award for outstanding quality in recognition of the company's ability to provide contaminant-free aluminum can shipments.

The U.S. Chamber of Commerce, Mass Mutual and Nation's Business magazine has honored Global Recycling Technologies Inc., Stoughton, Mass., as a 1998 "Blue Chip" company.

Call for Papers TAPPI, Atlanta, has issued a call for papers for the 1999 International Environmental Conference, April 18-21 in Nashville. For more information, contact Mark Johnson at (817) 732-8164. Fax: (817) 377-8615.