In the retail industry, also commonly referred to as internal theft, occurs when individuals steal from the company where they are currently employed. While other types of retail theft often garner more attention, employee theft typically causes the most damage to retailers on an annual basis, carrying the greatest financial loss and a substantial impact on the business.
In most situations, retail customers only have access to merchandise on the selling floor—which is protected by the sales team, loss prevention personnel, and various anti-theft systems and controls. Employees, however, have greater access to more systems, more products and more areas of the store than customers. They have access to merchandise in the stockrooms, receiving, or shipping areas where CCTV surveillance, EAS tags and other anti-theft devices may be less effective.
According to data from the U.S. Chamber of Commerce, 75 percent of employees have admitted stealing from their employers at least once, and 38 percent admit to stealing from employers at least twice. The FBI refers to employee theft as the fastest growing crime in the U.S., costing businesses about seven percent of their expected margins. The problem becomes so dire for some businesses hit with employee theft that about 33 percent are pushed into bankruptcy due to losses from theft or fraud.
Reports collated by Statistic Brain indicate that more than 28 percent of business losses ranged from $100,000 to $499,000, and 25 percent of losses exceeded $1 million. These figures are disturbing because they demonstrate that business losses due to employee theft are not trivial. The median value of cash or goods stolen was placed at $75,000.
In 2014 alone, more than 1.2 million shoplifters and wayward employees were caught in the act, according to a study conducted by Jack L. Hayes, a loss prevention and inventory shrinkage control consulting firm. More significantly, these numbers were generated from 25 big retailers, suggesting that the problem is more widespread and the losses more substantial if small to medium retailers were included in the mix. According to several studies, losses from employee theft outpaced losses from shoplifting.
Employee Theft Methods
Employee theft may be difficult to detect because the perpetrator is an insider familiar with the system. Additionally, these employees have access to the keys of the kingdom because of their positions and their reputation as dependable team players. These are a few of the methods commonly used to steal from the company.
Most employees are honest and hard-working people with honorable intentions. However, when employee theft issues occur, it can lead to significant concerns that can impact the store in many ways, reaching far beyond the financial losses caused to the company. It impacts retail sales. It impacts retail shrink. It impacts the company brand and reputation. It also impacts all the hard-working associates who give their best each day.
Like banks and jewelry stores, cultivators deal in a high-value product and a cash-heavy business that can appeal to thieves. This makes it imperative to choose the right security system for your business, both in terms of meeting essential state requirements and getting the most value for your investment.
CHOOSING A SYSTEM
1. A monitoring system has a dual role: security & compliance
Unlike in most industries, security systems for the cannabis industry must do more than protect against crime.
If you run a convenience store and your cameras go down for a time, the risk is private and limited to your own desire to capture illegal acts on camera. If you are a grower, however, the stakes are much higher.
Every state’s regulations spell out compliance requirements for security systems, some even down to the camera resolution required, so, at a minimum, reading and meeting these requirements is a must. Your insurance company may also have compliance requirements.
2. Find a security company that has experience with regulated systems
You don't want to pay a lot for an expensive system that's not tailored to your state's specific requirements. Inquire about the firm's experience installing systems for heavily regulated industries and familiarity with state requirements.
3. Make sure they understand local requirements
To comply with security requirements, local rules are just as important as state rules. In Colorado, for instance, the state requires off-site storage of 30 days of recorded video, while some cities require much more, according to Tony Gallo, Managing Partner of Dallas-based cannabis consulting firm Sapphire Risk Advisory Group.
4. Go 'beyond compliance'
Doing the minimum to get a green light from the state regulators is not a good idea. “What the state needs to get your doors open is probably not what you want in real life in the all-cash cannabis business,” Gallo says. “Just because the state says you’re good to go does not mean you should stop there, because people can still steal from you.”
5. Inside jobs are more likely
Realize that external dangers are actually not the biggest threats to your grow operation — internal/employee theft is. Despite this, the lion’s share of security assets invested in are meant to prevent people from breaking in, says Gallo, who spent 17 years as director of loss prevention and safety for a major company providing security for more than 1,300 high-risk businesses.
6. Create an environment that fosters honesty
To minimize employee-theft risks, “establish … set policies, procedures and guidelines that will spot losses and be able to … identify who did it and how it’s being done,” Gallo says.
For example: Where are your employees processing and tending buds? Do you have cameras and a visible video monitor posted there? Do employees know that recordings are being checked regularly?
Think Twice Before Arming Employees
It may surprise some that the advice Sapphire Risk Advisory Group’s Tony Gallo offers the cannabis industry — and other high-risk businesses — is that employees not be armed. He is blunt on this issue. “Could you kill somebody?” he asks. “Last year, two pawn brokers were killed because they actually pulled their guns, had the guns on the robber, but could not pull the trigger. So the robber shot them.”Even if you do fire, the outcome is often not good. “Do you want to get into a gun battle? What if you miss? What if someone else gets ahold of the gun?” he says.
In Gallo’s experience working with high-risk businesses, the risks outweigh the benefits of having armed employees.
“What do robbers want? They want the cash and the cannabis. Give them the cash and the cannabis, and go home and have dinner with your family,” he says.