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How to defend your tech company against fraud in an era of mass layoffs

How to defend your tech company against fraud in an era of mass layoffs

Synopsis
3 Minute Read

Mass layoffs have been causing ripples through the tech industry in 2023 and increasing the risk of fraud — including IP theft — within the sector. IP includes the operational or proprietary software and private data essential to success, and many organizations don’t have sufficient controls in place to prevent theft.

To protect your IP assets, take the steps to set up policies and procedures, conduct a risk assessment, build a culture of security within your organization, and contract a digital forensics team to protect your IP.

Partner, National Leader – Digital Forensics

Mass layoffs have caused ripples throughout the tech industry in 2023. Large companies have released thousands of employees over the past several months and the impact may have far-reaching consequences — including some you may not expect.

The risk of fraud rises when three factors intersect: financial pressure, rationalization, and opportunity. The layoffs have created an environment of economic uncertainty or financial pressure for many in the tech sector. Additionally, a lack of direct oversight created by vacant management positions and the shift towards a remote workforce increases the opportunity for fraud to occur.

While you may think of financial theft when you think of fraud, it can also include the theft of intellectual property (IP) assets. A recent study by Code42 shows there is a 37 percent risk of companies losing valuable IP assets when employees leave a business.

Organizations in the tech industry are at an increased risk of this type of theft — many work with IP every day and have do not have sufficient controls in place to protect these valuable assets. Additionally, many companies operate in a bring-your-own-device environment where employees can access sensitive information from anywhere at any time from personal devices, increasing the risk of IP theft.

Fraud is most often perpetrated by someone in a position of trust — and employees in the tech industry are trusted to work with valuable IP assets such as software code, algorithms, and private data. It is also common for developers to feel a sense of ownership over code and concepts they created. While renouncing ownership over any code or concepts developed as an employee of the business is often included in employment agreements, all that time and effort can make it easy to rationalize taking it with them when they leave.

Let’s discuss what information is at risk and the steps your organization can take to protect itself.

What information is at risk?

Operational or proprietary software and private data are the two types of IP assets most vulnerable to be targeted for theft.

Operational and proprietary software include the code, formula, and algorithms that are integral to the success of your tech company. These assets provide unique value to your customers and give you a competitive edge in the marketplace — and if it is stolen, the perpetrator can reuse it for their own advantage or potentially bring it to one of your competitors.

Private data includes customer lists, business plans, and trade secrets, that enable your company to be successful in the tech industry. If the theft of these assets is successful, the consequences include a loss of profits or market share if a competitor uses your trade secrets to their advantage.

Additionally, your company may face legal liabilities and reputational damage if an employee steals private data containing personally identifiable information about your customers.

What steps can my organization take to protect itself?

It is best to take proactive steps to prevent IP theft before it occurs to protect your organization from financial losses, reputational damages, or legal liabilities. Follow these best practices to protect your company’s IP assets:

Policies and procedures

By design, tech companies are agile organizations at the forefront of trends and innovation. However, many do not have robust policies or procedures in place to prevent intellectual property theft. Policies and procedures can be an effective deterrent against theft by educating employees about IP theft and its consequences.

Create a set of policies and procedures that clearly establish how to handle confidential information within your company, outline the controls in place to keep intellectual property secure, and establish protocols around how suspected or actual intellectual property theft will be handled by your organization.

Conduct a risk assessment

A risk assessment can help identify the potential vulnerabilities and establish controls to reduce threats. Consider restricting access to information systems where your most valuable IP assets are stored and monitor employee access to those systems. Additional security mechanisms such as two-factor authentication can also help safeguard your IP assets.

Security and controls are an ongoing process. After you have conducted a risk assessment and established controls to protect your IP assets, regularly test those controls to identify new vulnerabilities or potential weaknesses.

Build a culture of security

Everybody in your company should be invested in protecting its IP assets. Provide training to educate employees about how to safeguard sensitive information from threats and consider setting up a whistleblower hotline where employees can report suspicious activity.

It is essential to be transparent with your employees about how you are monitoring their actions. Transparency builds trust by dispelling secrecy, which can encourage employees to get involved in protecting your IP assets and come forward with any concerns.

Contract a digital forensics team

A digital forensics team can help you take the right steps to protect your IP assets through data captures of systems used by those with access to highly valuable IP, or by reviewing the devices of an employee during an exit interview.

If you suspect IP theft has occurred, digital forensics investigators can provide a comprehensive forensic analysis and report their findings. Investigators can also preserve digital evidence in a way that prevents alteration for legal proceedings.

Let the evidence tell the story

Depending on your individual needs, our Digital Forensics team will preserve, analyze, and report on digital evidence to standards required for criminal or civil proceedings.

Protect your organization from IP theft

Don’t wait to take the steps to prevent IP theft. A proactive approach to fraud prevention benefits your business, your team members, and external stakeholders who may have a personal or financial stake in your business.

Digital forensics can also support your organization through regularly scheduled data captures, providing a quick overview of device activity, or through a full forensic investigation.

Contact us

For more information about how MNP can help, contact a member of our Digital Forensics team.

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