Today's business pages are filled with news about fraud and embezzlement. Businesses with fewer than 100 employees were the targets of nearly 50 percent of the frauds. Small businesses or startups experience fraud losses at a rate 200 times that of the largest businesses, with more than 50 percent of frauds involving losses of less than $100,000, according to a 2002 survey from the Association of Certified Fraud Examiners. In fact, 75% of fraud is not detected or reported and costs the average business 0.5 percent to 2 percent of its gross revenue
A new study by the Harvard Business Review (HBR) shows that startups are uniquely susceptible to fraud. The HBR study pretended sales calls from associates to purchasers and sellers, and when participants were told that their counterpart was working for a startup, they tended to engage in more deception during the call. Two-thirds of the faux buyers and almost three in four sellers opted to deceive who they believed to be a startup, compared to just half who thought they were dealing with a mature firm or were given no information about their counterparts. So why would the sales associates endeavor to take advantage of the startup?
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