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Fighting crime with statistics and loss reporting.

Robert M. Figlio, Ph.D., is president of CAP Index, a King of Prussia, PA-Fased company that provides crime in formation to businesses. Ira S. Somerson, CPP, is president of Loss Management Consultants, a security consulting firm in Plymouth Meeting, PA.

Corporate investment in crime prevention has grown dramatically in the past 20 years. However, throwing money at the problem does not necessarily increase security. Traditionally, the reaction to a security risk has been to increase security officers' hours, investigate suspicious activity, apply esoteric technology and anything else to give the appearance that these problems are being properly managed. Consequently, the security services industry has burgeoned.

Today, rationalizations continue to be made for budgetary allocations for security products and services. However, this approach is not based on any substantial, in-depth management analysis. Indeed, a close look at the problem shows that there would be significant financial gain if the role of security management were recast. It is becoming increasingly apparent that all managers, not just safety managers, should view security as more than a technical or law enforcement discipline. Although technology and law enforcement will continue to be effective, senior managers cannot afford to ignore this problem and their role in anticipating, responding to and controlling crime.

Why Senior Managers?

Why must senior management become involved in security? For one, budget restrictions have forced security directors to downsize staff and reduce expenses in the face of increasing security violations. As a result, security directors are encouraging division managers to assume some responsibility in meeting security objectives. In addition, there has been a dramatic increase in civil litigation against businesses because of crime-related injury to employees, clients and customers. Millions of dollars in punitive damages have been awarded in cases where firms appear inadequately informed about the risks of crime and do not adequately protect persons on company property.

Likewise, a lack of employee integrity has inspired the development of ethics programs to raise awareness at all levels of the corporate hierarchy to the magnitude of the problem. Techniques being employed to raise crime awareness include the use of company credos, ombudsmen and ethics training. Furthermore, today's climate of mergers and acquisitions subjects a company to many risks, including fraud, loss of proprietary information and the need to evaluate the costs of protecting new assets.

If the business community is to step boldly into this new perspective, security managers must operate as consultants and planners rather than traditional line managers. Managers must understand that proactive security management practices are the daily responsibility of all personnel. The security director should serve as the facilitator and technical adviser, but implementing the security program should be a shared responsibility of all division managers. Security managers should also routinely collect and analyze data to substantiate their activities. The data must provide the basis to accurately predict potential risks and decide where and how resources will be allocated.

Eliminating Knee-jerk Reactions

There are signs that senior managers are beginning to accept leadership roles in security management. The development of ethics programs and the retention of security directors with strong business management skills are indications that this trend should and will continue. Nonetheless, corporate security policy is often created in response to a serious criminal incident. Consequently, the policy is poorly thought out because decisions follow from knee-jerk reactions rather than rational consideration. If a company that was free of violent crime for years suddenly experiences one serious incident, management may then only begin to feel that expensive security practices should be implemented, despite the fact that this particular response may be inappropriate.

Senior management inexperienced in crime prevention may fail to comprehend the complexities of security management. In reality, criminal problems in business are no different from other management issues and should be addressed similarly. That is not to say that instincts should be disregarded, but rather that this response needs to be put into perspective. Two intelligence gathering methods can be used to achieve this. The first is loss reporting and monitoring of all breaches of security throughout a company. The second is vulnerability analysis through a statistical study which determines the likelihood of criminal activity and its impact in the business environment.

Loss reporting requires collecting and analyzing all security-related incidents in a company, and then entering the information into a data base. Data should be identified by type and cost of asset involved, nature of incident, location of incident, time of day, day of week and the security defenses available. Once enough information exists in the data base, the impact that security lapses have on business activity will become apparent. Certainly, inherent risks such as fire and natural disasters will occur despite statistical predictions, but unjustified spending on security can be curtailed through the reduction of ill-informed, emotional reactions.

Predicting Crime

Although it is essential to assess the security history of each facility, risk managers should also employ more traditional methods of vulnerability analysis involving quantitative and qualitative surveys. The more accurately potential crime can be predicted, the greater the chance that a security and risk management program will cost-effectively meet actual needs. To that end, statistical analysis of criminal vulnerability must be integrated with site-specific information regarding the characteristics of the physical environment, including other businesses in the area, traffic flow patterns and school and housing facilities. In addition, look into criminal activity reported by site managers and the security measures in place at the site.

Information about specific locations managed by the corporation will determine the effectiveness of various defensive strategies relative to different degrees of intrinsic criminal vulnerability, neighborhoods and site-specific physical and operational characteristics. This interplay among vulnerability and location characteristics will over time produce an effective, defensive strategic plan for intervention and crime control. Such an integration of perspectives will be cost-beneficial to the corporation and the overall environment in which the business operates.

This ongoing analysis process not only enables managers to distribute resources more efficiently and effectively, but addresses the need to determine with the greatest degree of accuracy the likelihood of criminal activity in any given environment. The information can be used to defend a company and its managers against charges of negligence in civil litigation cases. It can also be used to determine the degree of the security measure, which should be directly proportionate to the foreseeability of crime.

The analysis is also important when a company is considering the purchase of a new site or an existing property. Take into account that it can be too expensive or physically impossible to make corrections after the fact. Consider too that crimes may occur before any defensive actions can be taken in the new location. In addition, it is possible that certain company facilities experience the major proportion of the total crimes. Identifying these properties allows managers to determine strategies and allocate resources where they are needed most.

Until now, vulnerability analysis has not always been conducted at each corporate facility because managers viewed the process as being beyond the capability of security staffs and their relatively small budgets. Although some risk management or real estate departments conduct studies, the objectives and scope of these investigations are too limited to provide enough data to initiate security programs. However, recent extensive criminological research, along with improvements in computer technology, has made the analysis relatively inexpensive, extremely quick and surprisingly accurate.

Econometric forecasting techniques have made possible highly accurate crime projections for small areas such as city blocks, census tracts and zip codes. Indeed, well-established relationships exist among a neighborhood's demographics, its physical condition and crime. This approach is cost-beneficial and scientifically valid for most, if not all, companies.

In addition, the forecast method complements the assessment approach used by companies to determine the market potential of property it is looking to acquire. In many instances, crime projections for local areas based on this methodology are more reliable than local police statistics. The data used in this process are drawn from the U.S. Census Bureau, the FBI, national crime surveys, local police data bases and security statistics indigenous to a particular location.

Loss reporting and statistical vulnerability analysis are not by any means complete solutions to crime in the business community. They do, however, represent an alternative to developing short-sighted strategies for dealing with corporate crimes. They also supply managers with ammunition to make informed decisions and to deploy safety programs that keep the corporate, as well as the human, aspect in mind. RM
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Title Annotation:corporate security management
Author:Figlio, Robert M.; Somerson, Ira S.
Publication:Risk Management
Date:Nov 1, 1990
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