A deposit mysteriously disappeared so instructions were added to cash handling procedures and bank reconciliations. A cashier was caught stealing. She was fired and a replacement hired after checking their background a little more thoroughly. An act of vandalism occurred so cameras were installed. Slip and fall accidents were increasing, so floors are mopped more frequently and employees advised to be more careful walking on wet floors.
The above solutions are parts of a loss prevention program developed as a piecemeal reaction to issues in retail and restaurant environments. It happens out of necessity to protect company assets, profitability, and the health and safety of employees and customers. They may provide a short-term solution, or act as a band-aid to cover-up major underlying issues.
The 4 main sources of risk that a loss prevention plan should aim to address are:
1. External Crime
Whether business owners run operations in quiet neighborhoods, out of rented units in industrial buildings or even in a corner of a crowded shopping complex, many have the wrong impression that their businesses are “too small” to become a target for fraud or sabotage. This results in operators taking unnecessarily dangerous risks in day- to- day business operations without even realizing it and sometimes paying a heavy price for this complacency. External crime elements include theft, robbery, acts of vandalism and anarchy.
2. Internal Crime
Statistics have shown that in some industries up to 80% of losses from theft are actually perpetuated by employees. Improper processes with inadequate internal checks and balances, coupled with overly trusting and empowering employees with authority, can result in systemic abuse of blind spots in a company’s business operations. This is especially the case if delegation and supervision of work is not properly managed.
3. Negligence & Ignorance
A safety supervisor can choose to ignore safety procedures when conducting high pressure testing in a fabrication yard resulting in the deaths of technicians should the equipment fail unexpectedly. An inexperienced clerk in a freight forwarding company may process paperwork for the export of controlled cargo and by doing so, directly contravene export control regimes endorsed by the country he/she is working in. Business operators themselves can also be negligent in ensuring proper systems are in place to address any possible natural disasters or by failing to establish the necessary safety procedures in their companies. Cost cutting by hiring incompetent staff who demand low salaries but do not have the necessary knowledge or experience to perform a job function properly, can easily expose the company to risk from negligence and ignorance.
4. Poorly Designed Processes
Processes within business operations are not always well managed and this can lead to severe impact on business operations, such as when proper processes are not drawn up for the handing and taking over of duties post resignation. This can lead to a sudden loss of critical technical and intrinsic knowledge.
Any good loss prevention plan must be dynamic and comprehensive enough to cover all aspects of business operations, while always being able to respond to changing threats and new risks that may present themselves. A well-developed plan helps prevent damage to business continuity by ensuring that the business operation is reasonably secured against various kinds of threats.
Business operators must develop a strong loss prevention plan in order to ensure that business operations are secured against crime, protected from vulnerability and that employees/business operations in general are not exposed to undue risk during day to day activities.
Creating checks and balances through processes meant to protect business operations from risk can often add a layer of inconvenience to business operations.
Hence, a loss prevention plan must take productivity into account and strike a clean balance between business efficiency and vulnerability.
Policies and Procedures – Well written and comprehensive policies and procedures are the foundation of successful businesses. It provides the”way of work”, direction, and accountability for everyone in the organization.
Hiring – A productive and compliant workforce begins with a culture that has established clear expectations of performance that align with common goals and objectives. Hiring new workers is about finding the right fit for the right position. Pre-employment screening, personality assessments, testing proficiencies, and other tools to identify the right employee may be included in a comprehensive loss prevention program.
Training – After the right person is hired they need to be trained on basics such as time and attendance procedures and the essential skills needed to perform their job effectively and efficiently. They need to know policies and procedures, have access to a copy, and acknowledge in writing that they understand the company’s expectations of them.
Cash Management – If the employee handles cash and/or deposits, they should demonstrate accuracy in counting cash, proficiency in operating the cash register, and responsibility in fully meeting accountability expectations.
Point of Sale (POS) Procedures – Cashiers must follow correct transaction procedures in handling cash and cashless cards. Acceptable limits must be established in cash variances and cash components such as no sales, voids, refunds, price reductions, employee meals, and promotions. Managers and supervisors must understand how to utilize relevant reports from the POS system to identify training and theft issues. Proper disciplinary action can then be applied.
Food Prep and Handling – Proper training on prepping and handling food is extremely important in serving quality product. It also serves to reduce raw and completed waste and plays an important role in maintaining proper inventory control and effective food orders.
Merchandise Handling – Receiving merchandise, prepping it for transfer to the sales floor, and reconfiguring displays requires delicate handling. Accuracy in pricing and transmitting price reductions is extremely important.
Inventory Control – Proper analysis of product sales, stock rotation of first in – first out, and establishing inventory counts of key items are essential elements in effective inventory control procedures. Loss prevention measures include documenting merchandise taken out of stock, food waste, securing and controlling access to the back door, and training all employees on issues affecting poor food cost and inventory shrinkage.
Fraud and Robbery Prevention – External fraud and robbery are serious threats not only to the profitability of the company, but the health and safety of employees and customers. Employees trained to recognize suspicious behavior and transactions and respond appropriately can minimize fraud activity. They must also be trained in the procedures designed to prevent robberies and how to respond appropriately during and after to minimize the risk of being injured or killed.
Safety – There are many hazards that jeopardize the health and safety of employees and customers. Wet and greasy floors contribute to slip and fall accidents. Employees not wearing Personal Protection Equipment (PPE) are susceptible to serious burns, cuts, falls and other injuries that affect productivity and profitability. Improper training may contribute to fires, poisoning, electrical shocks, limbs caught in equipment, even death.
Audits – A systematic audit program is a critical component of a comprehensive program. It verifies that company policies, procedures, and processes are routinely followed and checks and balances are in place. When non-compliance to the rules is determined to be an issue, action plans for correction and follow-up keep activities focused on achieving goals and objectives and deter counterproductive behavior.
Progressive Discipline – Effective progressive discipline policies identify and address employee misconduct, poor performance, unacceptable behavior, and violations of policy. The seriousness or repetition of a behavior or violation will determine the level of discipline ranging from verbal warnings to termination. A consistent and fairly applied progressive discipline program enhances performance and productivity.
Security & Safety Equipment – All of the components of a comprehensive loss prevention program above can be applied with no or little cost. The program can be effectively supplemented with equipment that enhances profit protection and crime prevention. The financial investment will have excellent returns. Data mining and exception reporting software produce valuable information in employee productivity and performance. The software can be integrated with digital cameras to highlight suspicious activity and attach associated video. SMART safes protect funds, greatly reduce labor hours in counting cash and preparing deposits, and limit exposure to cash thefts and robbery. Floor cleaning machines provide greater cleaning power reducing the slipperiness of tile floors.
Addressing security and safety issues only when they surface is similar to the old Whac-A-Mole arcade game. As the mole appears it is hammered down, only for it to pop up somewhere else and again is hammered down. The game accelerates faster and faster until the player cannot catch up. A comprehensive loss prevention plan is the coordination of programs, techniques, training, and equipment to prevent profit draining and crime activity from occurring, and providing the proper reaction to mitigate them if they do occur. You’re ready for that little mole, if and when it appears. And when you whack it, it’s not likely to reappear saving you time and energy.
A loss prevention plan once implemented must be reviewed on a regular basis in order to maintain its effectiveness.