Hi, frnds I got this wonder but shocking piece of information & wanted to share it with you all..............
According to the Global Retail Theft Barometer (GRTB) 2009, India recorded a shrinkage of 3.2% of the total size of the country's retail industry (including the unorganised sector), amounting to about $2.6 billion. This is very high compared to other global markets like the US (1.6%), the UK (1.4%), and China (1.1%). In India, customer theft contributed around 44.7% of shrinkage losses, employee theft contributed 23.7%, as compared with 8.4% by suppliers/vendors, while administrative errors accounted for the rest.
In India, thefts are typically targeted on small and easily-concealed, expensive and branded items that have considerable popular appeal and are easily re–sellable such as electronic games, DVDs, iPods/MP3 players, clothing, cosmetics, perfumes and alcohol. The designer garments topped the list of things stolen in 2009.
Various categories of fraud constitute a major component of the shrinkage. Among the factors responsible for shrinkage losses, employees and vendors are critical factors that need to be managed by retailers. Employees may resort to direct theft, under invoicing in collusion with customers, stealing cash, etc., whereas vendors can under-deliver in terms of number, size or quality of items as against the bill invoice.
The growing motivation among employees to lead a luxurious life, high reliance on skilled resources, thereby leading to weaker internal controls, and overdependence on existing systems and processes give rise to increased risk of fraud in retail sector. While marketing fraud, inventory theft and return fraud (observed in product exchanges) are common instances of fraud in the sector, other frauds such as cash skimming and skim and fall also exist.
With potential risks and marked instances of fraud and theft, it is imperative for retail companies to:
a. Adopt robust internal controls backed by strong data analytics to mitigate key fraud risks and to raise red flags at early stages.
b. Devise a whistle blower policy allowing employees, customers and vendors to report malpractices directly to the management.
c. Determine policies pertaining to prevention, detection and investigation of frauds and to have action plans defined for conducting investigation if an incident occurs.
d. Set up dedicated team–internal/external–to handle stock checks at each of the stores periodically.
e. Collate an end-to-end study of material movement from source to destination, including counter checks and cross tallying.
With rising challenges in the sector, the key to success is staying competitive without compromising on the quality of services. Cost effectiveness is necessary to achieve this, and it is here where an effective fraud risk management will help companies to identify potential leakage points and opportunities to save.
So, whats your view on this....what other steps can be taken to prevent it....