Mitigating Risk in Financial Institutions

financial institution bond

Financial institutions are exposed to a variety of risks in the course of their business operations. External sources such as robbery and market conditions can be detrimental. However, one of the growing sources of losses in the financial sector is due to internal sources. This isn’t just limited to banks either. Investment firms, brokerages and trusts can also be exposed to various risks from the impropriety of employees.

Understanding Coverage Options

Without protection, the costs a company can incur due to these acts can be staggering. This is where a financial institution bond comes into play. It provides coverage of losses due to criminal acts that take place within the company. They are a type of fidelity bond and can take several forms depending on the institution they are designed to protect.

  • Embezzlement
  • Cyber fraud
  • Theft on premises
  • Employee dishonesty
  • Fraudulent trading
  • Forgery

There is also another form of insurance called a blanket bond that also covers many of the same criminal actions. The primary difference is that the act needs to be committed for the employee’s personal gain. In either case, it is important to understand that neither bond provides credit as the result of one of these unfortunate situations.

Every financial institution needs to protect itself from all possible risks. Carrying a fidelity bond is part of an overall insurance strategy.