By David J. Sexton

Reality TV—it’s everywhere these days. Although this particular type of programming generally isn’t my cup of tea (with so much of it being contrived and representing anything but reality), I am nonetheless intrigued by a certain category of it that showcases an all-too-real threat to retail businesses.

I’m talking about those hidden camera shows in which the owner or manager of a business (often a restaurant or bar) can’t explain a marked deterioration of the bottom line and hires a video-surveillance expert to investigate. Sometimes the footage reveals simple cases of employee slacking or incompetence. Often, however, it exposes employees who’ve been pocketing product or cash, entering into fraudulent relationships with vendors, skimming and then falsifying receipts to cover up, using company assets for personal purposes, or otherwise profiting from crime against their employer.

The stark reality

Regardless of each particular show’s authenticity (let’s face it, some of them do appear staged), the problem of employee, or ‘internal,’ theft they address is very real, very serious, and growing, as some recent statistical findings in Canada attest.

The reactions from the retail business owners on these shows have common emotional threads like surprise, disbelief, and disappointment. “How could someone whom I hired, trained, and trusted—someone with whom I worked closely every day—do this to me and to our business?”

The statistics, however, contradict employers’ faith in their employees. In December 2011, the Certified General Accountants Association of Canada (CGA-Canada) released its report, ‘Does Canada Have a Problem with Occupational Fraud?’ The report included results from the association’s own survey of small- and medium-size enterprises (SMEs) and found the following:

“One quarter (26 per cent) of surveyed SMEs reported to have experienced at least one incident of occupational fraud in the past fiscal year; and about another four per cent of respondents were not sure whether or not occupational fraud had occurred in their companies. These proportions translate into an estimated 290,000 Canadian SMEs that were victims to occupational fraud in 2010 and another 50,000 that do not rule out this possibility.”

While many retailers and, in particular, jewellers, are focusing their loss-prevention efforts on outside threats, they may be paying too little attention to the threat from within. The Retail Council of Canada (RCC) underscores this point in its more recent report, ‘Securing the Bottom Line: Canadian Retail Security Survey 2012.’ The results show that while the proportion of external theft-related incidents victimizing retailers since the RCC’s previous survey of 2008 has shrunk, “internal theft has increased to 33.4 per cent of all reported incidents from only 19 per cent in 2008.” The report expounds: “With insight into retailers’ operations and systems, dishonest employees have the ability to do more harm than typical shoplifters.”