The Value of Security

Security, or the lack of, can have a huge impact on organizations.  The Small Business Administration (SBA) has reported that 1/3 of businesses fail due to thefts or other security flaws.  One out of three fails due to crime!

Large companies are not immune either and likely have more areas of vulnerability.  Think of all the large banks, credit card companies and universities that have exposed hundreds of thousands of customers to identity theft by losing their private information.  Pan Am, once one of the top airlines in the world, went bankrupt in part due to the costs from one terror attack (Flight 103 over Lockerbie, Scotland). 

If the thought of failure doesn’t worry you, then perhaps some other associated risk will.  There are two more main ways that security risks will have a very direct cost.  One is premise liability and the other obvious one, is the actual losses due to theft or other criminal acts.

Premise liability can result from a variety of different circumstances, but poor or lax security is one.  For example, one hotel was recently sued for $4 million after ignoring crime problems until guests became the victims of an armed robbery.  In that case, management chose to ignore the problems and refused to hire or add security personnel due to the costs.  Four million dollars would have paid for a lot of security coverage and would not have had the negative publicity that a lawsuit had.

The average lawsuit from premise liability costs property owners over $600,000.  Imagine the impact of one loss like that on the bottom line.

The other concern is the direct impact on profit margin.  What is your company’s profit margin?  Some industries might eke out 1-2%; others 8-9%; some might even be higher.  Let’s say that your losses are 1% of gross revenue.  That amount has a direct impact on your profits and earnings.  If your business grosses $100 million, 1% loss due to lax security or other operational risks easily becomes $1 million of lost income; that is money that could have been used for expansion, advertising, new employees, capital equipment or better wages and salaries for employees. 

There are intangible benefits as well.  Employees worried about their safety at work can impact productivity and turnover.  Most employers do not tout on their list of benefits a safe workplace.  It is something of an expectation.  However, I’ve personally conducted surveys in the past in which almost 15% of employees had considered a new job due to concerns about crime and their personal safety.  That is more than one out of every 10 employees!  What is the cost of turnover in your organization?  The U.S. Dept of Labor has estimated that turnover costs 1/3 of the new hire’s annual salary.

A security program should achieve two things:

1.      Create a safe workplace for employees, customers, vendors and other visitors

2.     Increase profit margin by reducing losses

That is exactly what the Business Karate blog is about; tips to reduce losses and creating safer work environments.  Both accomplishments add up to increased profits and that is something that appeals to the C-suite at any organization.  

There are many specific steps to follow for a sound security or protection program and the details will vary from one business to another depending on their situation.  The one underlying question comes down to this – Is security an afterthought or nuisance, or is it a true business practice helping to advance your organization’s strategic goals?





              



Have you wondered how to deal with an aggressive employee or phone threats against a staff member?  Do you have the security system you should?  Are you worried about how your business would handle an emergency situation?  There are lots of worries as a leader in your organization.  Security risks do not have to be one of them. 

Get solutions to your questions.  Contact eric@businesskarate.com. 

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