While the main goal for retailers is to generate as much revenue as possible, their efforts are often hindered by losses related to theft, damage or other factors. To address these challenges, many retailers have turned to incident management solutions and practices to help bolster security. These solutions can also serve as highly valuable business tools to provide risk assessment via the analysis of incidents that affect daily operations and sales.
Loss tracking is one of the most crucial components to risk tracking. Some highly successful grocery chains use integrated scanning tools to look for patterns, while other retailers use a manual process for recording and entering information into a database. In both cases, by tracking every item involved in a theft or loss incident via barcode or other identifying factor, organizations can quickly recognize trends.
Creating an LP Roadmap
The risk identification practices of nearly all risk assessment methodologies require organizations to complete a loss event profile to track which events lead to a dollar loss impact. More specifically, retailers must also look at single loss expectancy and annual loss expectancy. In order to determine these, organizations need to be recording and tracking:
- Type of event: theft, diversion, etc.
- Direct loss: value of specific items lost, stolen or damaged
- Indirect loss: associated loss values such as insurance deductible, replacement costs, man hour costs, etc.
- Recovery: specific items recovered during an event (found stolen item, judicial recovery, reimbursements, etc.)
- Net loss – the total loss for the event
As each event occurs, organizations can begin to apply incident management data to risk metrics. This is excellent information, but many also want to know more specifics beyond these numbers. Tracking specific items’ associated losses and locations, retailers – even large grocery store chains – can pinpoint their highest-frequency thefts and other losses per category, location and time.
Organizations can more easily accomplish this with incident management solutions. The most robust solutions allow users to track incident types, the timeframes in which incidents occur and the locations (at a fine-detail level) and to generate reports based on this data. This highly specific intelligence allows organizations to determine the security countermeasures they must implement related to specific items, locations and other factors to reduce incident frequency and loss expectancy. The end result of this loss-tracking is more effective loss prevention and risk management programs.
The bottom line is net profit or loss by any number of measurements. The main factors in using this data for security and loss prevention measures are what is being spent to prevent losses and how current losses compare with historical losses. Tracking this information, as well as tracking what you don’t necessarily know has been lost, can be challenging, but this is where incident management solutions shine. These solutions can tie in inventory and other systems to provide the necessary tracking for mitigating and preventing losses.
Actionable Intelligence Drives Business Decisions
A great example of this type of integrated system in practice is at the Nova Scotia Liquor Corporation (NSLC), which is responsible for all beverage alcohol sales within the province of Nova Scotia through its 105 stores and 58 agency stores operating in smaller communities. When William Cowper, Manager, Loss Prevention and Enforcement, came to NSLC in 2004 after 30-plus years with the Halifax Regional Police (HRP), one of the first things he identified was an opportunity to introduce a proper incident/case management system. Actionable intelligent data driven business decisions became a goal.
Paradigm shift and change improvement to legacy system functionality was something Cowper had experienced before. For a long time, HRP used what Cowper calls “dumb terminals” in its vehicles; the information officers entered during their shift had to be entered into computers at HRP headquarters. In 2000, Cowper was the project manager for HRP’s conversion to intelligent laptops in vehicles.
“Given all that I had learned, I recognized that security and loss prevention also had compliance requirements under the corporate umbrella, and the inefficiency of tracking losses was hindering our ability to do that,” Cowper says.
Like any other retailer, the NSLC tracks shrinkage when performing inventory counts. This information is collated into their incident management solution, and a group within the security department then looks at stores where there have been cash shortages and high shrink to determine patterns or trends related to stores, specific items and more.
Shrinkage accounts for a very small percentage of NSLC’s total losses; yet theft is a major concern for the organization due to the nature of the product stolen as well as the safety and security of customers and staff. According to Cowper, the most-stolen item in Canada is beverage alcohol, and the NSLC experiences approximately 1,800 to 2,000 reported thefts or attempted thefts per year, information captured in the NSLC incident management solution.
“Everyday, at least one of our stores is visited by a disorganized or organized crime opportunist. For young offenders in particular, this is something that occurs across all liquor jurisdictions in Canada,” he says.
To track these and other losses, the NSLC has a dedicated internal phone line for employees to report incidents. Calls are recorded, reviewed and validated by security personnel, who capture the initial information in its incident management system, which is also used as a repository for gathering and storing information and evidence, including images from the incident in question.
“We can remotely access video surveillance archives at the store level, search footage and see the suspects enter the store, see what aisles they browse, what product they select, how they conceal it and how they then walk through the store when they leave,” Cowper says. Cowper’s team creates a storyboard of the incident within their incident management system.
Using this data, Cowper and his team can quickly determine how much inventory was stolen and how much was recovered. These recoveries are then used as training tools to teach employees how to avert theft by recognizing certain behavioral traits. The information is also used to develop and implement loss prevention and risk management programs.
“I can easily quantify what our incident management solution has done for us and report that to the management team. It allows us to drill down on the relevant information,” Cowper says. “I’ve used it effectively in the board room, where I’ve been able to clearly identify factors like the top 10 items that are stolen, the times of day or week that are most vulnerable and even illustrate graphically how incidents are spread out over time. Then we strategize about loss prevention measures to mitigate risk.”
The highly detailed intelligence that incident management solutions make available to security personnel is vital to increasing organizations’ overall security and ability to reduce or prevent losses. Additionally, streamlined tracking and reporting functions make investigations much more efficient and effective, while providing the ability to quantify the value of security and loss prevention programs to the organization. Countermeasures will undoubtedly lead to preventing theft recovery of items, and the value of these can easily be determined and tracked against losses prior to the implementation of specific countermeasures. By generating reports that quantify incident prevention and item recovery, security directors are able to demonstrate that the savings from prevention and recovery are greater than what is lost through theft and other incidents. As a result, security can become a revenue generator, altering its image from cost center to profit center.
About the Author:
Brian McIlravey, CPP, is the Co-CEO of PPM 2000. Before joining PPM in 2001, Brian was a police officer with the Waterloo Regional Police Service in Ontario, Canada and a Senior Investigator in the Corporate Crime division of one of Canada’s largest private investigation firms. He is Board Certified in Security Management as a CPP (Certified Protection Professional) and an active member of the Toronto Chapter of ASIS International. Brian also serves on the executive of ASIS’s Information Security Technology Council.
