LOSS PREVENTION MANAGEMENT

By Robert A. Gardner, CPP

Experts estimate that nearly 80 percent of all small businesses fail in their first three years. In most cases, the cause is poor management.

One of the most neglected and poorly managed aspects of small business operation is security and loss prevention. Yet, according to U.S. Department of Commerce statistics, employee dishonesty alone causes 30 percent of all business failures. Add to that failures resulting from other crimes committed against company property, employees and customers and it's easy to see why the true rate may actually exceed 60 percent.

Most managers understand neither the risks they face, nor the principles of loss prevention management. As a result, they tend to avoid the subject. This neglect only compounds the problem.

There is a misconception that good security is too expensive. Small businesses often operate on the financial brink - particularly during the first few years - and the added expense for security may not seem justified. In reality, companies that can least afford it, usually need protection most. Security hardware and alarm systems can be expensive, but they're only a small part of a loss prevention program. Policies and procedures are the heart of any good security program and normally involve little or no added expense.

Loss prevention programs safeguard company assets. The first step in program planning involves identifying those assets. Inventory, equipment, supplies and cash are assets to be protected; so are people. Physical protection of employees and customers is crucial, but often overlooked.

Less tangible but equally important assets are employee morale and customer goodwill. Where theft is rampant or crime presents physical danger, both employee morale and customer relations can suffer. Irreparable damage occurs when customers or other members of the public are victimized by a company's employees.

The ultimate asset is the company itself and nowhere is it at greater risk than in the area of liability. Courts consistently hold businesses responsible for the security of employees, customers and the public. Injury or death as a result of inadequate security will most certainly result in a lawsuit and possible a judgment against the company. "Failure to protect" and "negligent hiring and retention" are two of the fastest growing areas of liability litigation.

Insurance is often viewed as an alternative to loss prevention. That has never been a good argument, but today it's absurd. The high cost or total unavailability of insurance - particularly liability insurance - makes loss prevention planning mandatory.

Every business requires some type of loss prevention program. The nature of the program will vary with individual needs but some conscious planning effort is always necessary.

Loss prevention is a critical management function.

Copyright © 1995 by Robert A. Gardner, CPP
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