The business risk of gambling

March 2010 Security Services & Risk Management

Gambling addiction not only damages individuals and families, but can put employers at risk.

A recent headline in a health publication: “Why it is scary to lose money” indicates that people are afraid to lose money because the brain’s fear centre controls the response to a gamble. What it does not discuss is how afraid are people to lose the company’s money and not their own.

Barings, founded in 1762, was the oldest merchant bank in Britain before its collapse in 1995. The 233-year-old bank was brought down single-handedly by one employee, Nick Leeson – a derivatives trader. After landing the bank with a debt of S$1,4 billion, Leeson fled for Malaysia. By the time of the collapse, the bank’s accumulated losses amounted to S$2,2 billion. Leeson was sentenced to six-and-a-half years jail in Singapore for two charges of fraud and forgery. He survived, not only the jail sentence, but colon cancer and now lives happily in Ireland with a new wife and three children. Scary thought to think one single employee can be the collapse of your entire organisation.

While 95% of the population gamble in some way and do not need treatment for this, 1% of gamblers are considered to be compulsive gamblers and have an inability to control their gambling, with consequent significant damage to themselves and others. Employers need to be aware of any employees where gambling could be a risk. One of the definitions of gambling says that it is the act of playing for stakes in the hope of winning. It does not state that the individual needs to use their own assets for the purpose of gambling. We know that only 15% of employees are honest while 45% are dishonest and we need to encourage the balance to side with the honest employees and report the wrongdoing of employees in order to protect the organisation.

Ethics encouragement

One of the ways of doing this would be to encourage employee reporting via a telephone hotline or anonymous e-mail. Both have benefits but we tend to find that labourers access a telephone hotline more readily and the office employee would prefer to use the anonymous e-mail. It is essential that the internal marketing of such a service is done regularly and reaches the target audience.

Employee education needs to be done to encourage employees on what to report and how people’s actions and behaviour affect an organisation and themselves individually. One client used an example of how the losses that they experienced affected the individual employee’s salaries and resulted in no bonus being paid at the end of the year. Their internal marketing brought this home to the employees in various forms and paid off in the following financial year. A totally new culture was built in the organisation and employees realised more about what was right and wrong and what was acceptable and what was not. There was an increase in staff turnover but the right people were to leave the organisation.

Indications of a gambler

* Is preoccupied with gambling

* Needs to gamble with increasing amounts of money in order to achieve the desired excitement or escape.

* Gambles longer than planned.

* Has repeated unsuccessful efforts to control, cut back or stop gambling.

* Is restless or irritable when attempting to cut down or stop gambling.

* Gambles as a way of escaping from problems or of relieving feelings of helplessness, guilt, anxiety or depression or to escape physical pain.

* Lies to conceal the extent of involvement with gambling. May include lying by omission.

Possible solutions

* Put a monitoring system in for websites encouraging or allowing gambling to take place.

* Be aware of constant calls confirming an employee’s salary. Such calls may come from loan sharks or regular financial institutions.

* Encourage financial education for employees. Make sure they have access to a basic budget and understand how to complete it.

For more information contact The Orange, +27 (0)82 600 8225, jenny@orangebusinessboost.co.za, www.orangebusinessboost.co.za



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