Are You Wasting Your Security and Loss Prevention Budget?
Allocating resources is a challenge for every company dealing with security in multiple brick-and-mortar locations. It’s not as simple as dividing the total corporate security budget evenly by the number of locations. Instead, the object is to allocate resources according to the actual level of risk at each of those locations.
The security budget has to cover a variety of resources. The most obvious areas are staffing and technology, and the ongoing training involved with both. The budget should also cover creating or acquiring asset protection materials and disseminating them appropriately.
Many companies start with a baseline level of security that is the same across the board, then add or change elements as things occur at particular sites. This is an acceptable approach, but it may only be effective for a period of time. As companies grow in size, the challenge of appropriate security budget allocation grows in complexity.
How do you go about developing effective asset protection strategies? How do you avoid wasting money by spending it where it isn’t needed?
Two Major Mistakes to Avoid When Allocating Loss Prevention Budgets
Start by recognizing the two biggest mistakes companies make in allocating security resources, so you can avoid them.
The first mistake is making decisions based on subjective emotions instead of objective data. Hunches and gut reactions, even when they’re based on years of experience, may not lead to the ideal deployment of resources. It’s not enough to think one location is safer than another; you need the data about loss and risk to back up that hunch.
The other mistake is closely related: making security budget allocations reactively, instead of proactively. When an incident occurs, the tendency may be to move resources to that site to prevent a recurrence. But was the incident a one-off or part of a larger pattern? You need detailed data about the area to be sure you’re not deploying more resources than necessary.
In addition, changes in staffing are often made as a hasty reaction to an event, or as a result of requests from the field. Unfortunately, such changes don’t always get the appropriate follow-up. It could be years before that decision is revisited to see if the measures were effective. If not, you may have spent a significant amount of money for increased security at a site that didn’t need it.
Avoid both of these mistakes by creating a data-driven budget that is based on an objective evaluation of the risks at each of your locations.
The Human Effect of Misallocating Security Resources
If resources are not allocated properly, you risk numerous serious negative consequences, most of which impact your bottom line.
To start, an incident could cause physical, emotional, or financial harm to your employees and customers, and also have ongoing repercussions for your company. One of the most obvious: If the incident was preventable, you might face a lawsuit for inadequate security.
Aside from harming people, you also risk damaging your brand. Customers make decisions based on safety perceptions. They will come – or stay away – based on how safe and secure they feel. And the answer isn’t necessarily to add more guards: Too much visible security can be off-putting to some and have an unwanted negative effect.
The Financial Effect of Misallocating Security Resources
There are two sides to calculating the bottom line: expenditures and revenue. Poor choices in allocating your loss prevention budget may have a negative effect on both. You can lose money by failing to spend it where it will prevent crime and loss, and waste money by spending it where it’s not needed.
Beyond the direct loss, a robbery or other incident may also indirectly lead to lost revenue for the company as a whole. Customers may stay away from that location. Plus, fairly or not, an entire chain sometimes takes a hit to its reputation because of something that happened at one location.
Decreased revenue isn’t the only damage done to the bottom line. Making a profit also depends on minimizing inessential expenditures. When you spend too much on resources that aren’t needed, such as increased security at a location that isn’t actually unsafe, you’re throwing money away.
In the corporate world, all decisions are subject to a cost-benefit analysis. Whether big or small, your loss prevention budget needs to be used in a way that optimizes resources and maximizes the company’s return on its investment in security resources.
The C-suite knows this. If you can’t justify the ROI of your expenditures to leadership, your budget could shrink in future years. This creates a downward spiral in which your resources are spread increasingly thin, and your job becomes increasingly difficult.
How to Optimize Your Loss-Prevention Budget
Use up-to-date, objective data, looking at each of your locations individually. External crime risk is different area to area and site to site. Data analysis isn’t a one-and-done deal. Best practice calls for you to reassess your risks annually, during the period when budgets are set. This shows due diligence, which is useful in any litigation that may arise after an incident.
And remember, not all loss comes from external factors. It’s crucial that you understand the nature of your losses. Different asset protection strategies are required to combat external and internal threats.
In companies operating beyond the mom-and-pop level, “It’s always been done this way” is not an effective basis for setting a corporate security budget. Switch to a data-driven approach that provides a quantifiable ROI that will impress your leadership team.