Total Loss Prevention Program: An Inevitable Necessity
By Capt. (Retd.) S B Tyagi, Chief Manager (Security), GAIL (India) Limited, India
There is no indication that the 21st Century will be any less turbulent then the previous one! Whilst the nature of crime and conflict has changed, and will continue to change, security remains a principle concern of governments and business organizations.
Experts estimate that "nearly 80 percent of all small businesses fail in their first three years. In most cases, the cause is poor management".
"One of the most neglected and poorly managed aspects of small business operation is security and loss prevention. Yet, employee dishonesty alone causes 30 percent of all business failures. Add to that failures resulting from other crimes committed against company property, employees and customers and it's easy to see why the true rate may actually exceed 60 percent."
(AS’ Country Report)
Studies show that -
Roughly 25 percent of a typical workforce are prone to dishonesty and will actively seek out ways to steal.
Another 25 percent are extremely honest and would seldom steal.
The remaining 50 percent are basically honest, but given opportunity and an apparent lack of concern by management, they may steal.
Management's attitude toward loss prevention is the key to maintaining their honesty.
(*Robert A. Gardner, CPP)
Management's Attitude:
There is a misconception that good security is too expensive. Small businesses often operate on the financial brink - particularly during the first few years - and the added expense for security may not seem justified. In reality, companies that can least afford it, usually need protection most. Security hardware and alarm systems can be expensive, but they're only a small part of a loss prevention program. Policies and procedures are the heart of any good security program and normally involve little or no added expense.
Management's Policies:
Security hardware and alarm systems can be expensive, but they're only part of a loss prevention program. Policies and procedures are the heart of any good security program and they normally involve little or no added expense. Management's most effective tool is a written loss prevention policy which:
Spells out loss prevention procedures to be followed by company personnel and;
Clearly describes the conduct expected of employees.
Advantages of TLPP:
Every aspect of business involving protection of personnel, property or assets should be addressed. Examples of key areas could include: employee selection, employee conduct, customer relations, inventory control, cash handling, return policies, trash disposal, access controls and physical security...etc.
Loss prevention programs safeguard company assets. The first step in program planning involves identifying those assets. Inventory, equipment, supplies and cash are assets to be protected; so are people. Physical protection of employees and customers is crucial, but often overlooked.
Less tangible but equally important assets are employee morale and customer goodwill. Where theft is rampant or crime presents physical danger, both employee morale and customer relations can suffer. Irreparable damage occurs when customers or other members of the public are victimized by a company's employees.
The ultimate asset is the company itself and nowhere is it at greater risk than in the area of liability. Courts consistently hold businesses responsible for the security of employees, customers and the public. Injury or death as a result of inadequate security will most certainly result in a lawsuit and possible a judgment against the company. "Failure to protect" and "negligent hiring and retention" are two of the most serious concerns of any progressive business.
Loss Prevention is a critical management function:
Most managers understand neither the risks they face, nor the principles of loss prevention management. As a result, they tend to avoid the subject. This neglect only compounds the problem. Loss prevention programs safeguard company assets. The first step in program planning involves identifying those assets. Inventory, equipment, supplies and cash are assets to be protected; so are people. Physical protection of employees and customers is crucial, but often overlooked.
Scope of Total Loss Prevention Program:
The scope of Total Loss Prevention, or TLP encompasses the whole gamut of services, from concept design and implementation, including the following -
Risk and Vulnerability Assessment
Comprehensive, custom evaluation of security situation with the goal of identifying deficiencies, limiting losses, and minimizing interruptions to your business.
Check properties’ vulnerability with penetration audit to find areas of weakness in building security that could lead to loss.
Interview key employees and members of management team to identify possible issues and concerns to identify the areas and issues that may lead to loss, lawsuits, and recommend appropriate solutions.
Equipment Specifications -
Provide honest, unbiased opinions of what is needed. committed to staying on top of the latest technology in the security industry. do this by attending all major trade shows each year, participating in ongoing training and education seminars, meeting frequently with numerous manufacturers’ representatives, and by keeping an updated extensive in-house research library.
Security Systems Planning and Design
Consider full range of security system design services that are ready to be implemented into existing structures or during any phase of construction or renovation.
Expertise must encompass areas such as business and enterprise, education, healthcare, industrial, retail, entertainment complexes, and distribution facilities.
Creative, cost-effective designs to provide for a competitive bidding process of all types of security systems such as intrusion detection, closed circuit television, access control systems, locks, etc.
Vendor Engagement
Select the best security vendor or integrator for your business or evaluate the bids you have already received from vendors.
Specifications and Request for Proposal for the vendors to bid on and assist with contract negotiations, oversight, and inspection to ensure favorable and honest pricing.
Get unbiased, professional advice.
Investigations and Litigation Support
When necessary, highly trained investigators work both overtly and covertly to provide clear, concise reports with documentation for all investigation requirements.
Assist organization and its attorneys in preparing for liability cases and provide expert witness and forensic testimony in cases involving security and premise liability issues. This area is one of the fastest growing specialties among attorneys and multi-million dollar judgments in European countries are not uncommon.
Audits and Training
Improving hiring practices is an excellent way to start down the road to increased profits.
Develop programs, policies, and procedures to ensure that you and your business have effective security procedures in place.
Review & assess existing security measures and test their effectiveness. Subsequent audits will provide overall performance assessment and highlight vulnerability. It will also propose solutions ranging from introducing new technology to the adoption of new practice or need for ‘in-house’ security updates.
Provide awareness-training programs for employees on theft and shoplifting prevention.
Pragmatic Modular Approach
Physical security of Facilities, Assets & Personnel - to include validation of policies and procedures, assessment of security force adherence to international standards, review of physical deterrents, covert operations to test perimeter security and evacuation mock-drills.
Administration Security - to include review of internal controls and procedures covering assets, cash stocks and consumables, employee vetting, mail screening, information and computer security.
Crisis & Disaster Planning - to include review of arrangements for business continuity and practical trials and desktop exercise to evaluate the effectiveness of current crisis management procedures.
Emergency Response capabilities - to include examination and testing of procedures to deal with a variety of emergency scenarios such as fire, flood, strikes, medical evacuation, civil unrest etc.
Mystery Shopper Audits
Frequently there is need for recurring checks to verify that the organization’s policies and procedures are being followed.
Anonymous auditors patronize the business as regular customers to verify that policies and procedures are followed. Cleanliness, customer service, and other related issues may also be rated according to standards set by.
Investigations & due diligence
Globalization provides access to new territories and opportunities to work with new business partners. With these opportunities there will inevitably be risks. In the broadest sense there will be a need to assess the political and economic stability in these new areas, and at the other end of the scale it will be essential to have confidence in new partners, vendors and relatively untried institutions. While off the-shelf assessments abound tailor surveys and investigations more precisely. As a result, identify and diminish the risks associated with:
Entry into a new territory
Acquisitions, joint ventures or strategic alliances
An important supplier contract
Investment in a major project
Forensic Accounting Investigations
Certified Public or Chartered Accountants, with additional qualifications in forensic accounting and their professionalism is enhanced by business acumen and in-depth sector experience.
When an organization is required to investigate a suspected fraud or corrupt deal, or is simply looking to strengthen internal controls, a forensic accounting investigation is a cost and time effective way to achieve the objective.
Vetting & Background Investigations
As organizations strive to reduce management overheads, and reporting lines subsequently flatten, more responsibility and authority is inevitably devolved to a few key executives. In our competitive world the loyalty, performance arid integrity of these people is vital to the success of any organization.
Most clients have in place effective selection processes tasked to ensure that the best candidate is chosen. Regrettably deceptions are attempted in respect of qualifications, experience and in some cases hiding criminal records. Most business fraud is committed by serving employees.
Conduct routine recruitment vetting and employee background investigations that are considered by many employers to be a prudent and worthwhile investment.
Unauthorized Product Investigations
An enormous range of consumer items are subject to counterfeit. The spectrum is wide ranging from CDs to cigarettes, from whisky to watches and from trainers to toothpaste - and the loss of revenue, and the degradation of brand image are significant. The enforcement of Intellectual Property Rights is a major issue. But counterfeit goods do not appear by magic. Resources need to be assembled, production lines created and operated, the goods marketed and eventually distributed. A significant footprint remains, and this leaves 8: the option to investigate.
Health, safety & environment
A safe, secure and environmentally sound work place is good for business and a primary objective of all organizations. Best practice HS&E systems and procedures can reduce incidents and mitigate against costs incurred in compensation, increased insurance premiums, production disruption, equipment damage and downtime, lowered morale, negative public relations, and in investigating and reporting.
Ensuring Health, Safety & Environmental - Best Practice
Identify and solve existing or potential HS&E problems and by incorporating the twin principles of loss Prevention and Occupational Safety & Health, directed to the optimum solution.
The Primary Health, Safety, and Environmental Protection Objective is to Reduce Risk and HS&E incidents by:
Establishing effective HS&E systems for managing operations
Ensuring all contractors apply Company compatible HS&E standards
Providing competent HS&E support to line management
Familiarizing I training all personnel in safety and emergency procedures to ensure the competency of employees to perform tasks safely.
Meeting environmental requirements arising from legislation etc.
Installing and maintaining an effective environmental control program
Maintaining effective HS&E performance by monitoring, investigating, reporting, and recording all incidents and by initiating appropriate corrective action.
Provide an all encompassing, cost-effective range of HS&E services including:
Analysis of incidents to determine trends and problem areas
Evaluation and ongoing monitoring of HS&E management programs
Audit of facilities, operations and personnel
Provision of HSE awareness programs
Environmental assessment
Installation and operation of effective environmental controls
Insurance is no alternative:
Insurance is often viewed as an alternative to loss prevention. That has never been a good argument, but today it's absurd. The high cost or total unavailability of insurance - particularly liability insurance - makes loss prevention planning mandatory. Even when losses are insured, the business still loses. Coverage is normally limited to cash value of tangible items. Downtime, loss of customer goodwill and of future profits are may not be covered by standard policies. And, rate increases are almost certain to follow any claim.
TLPP is must:
What is most important is that policies and procedures are well thought out and truly reflect the needs of the business. Too often, loss prevention measures are implemented as a hurried reaction to a bad experience. These are frequently emotional rather than logical decisions. Little or no research is done. Little effort is made to distinguish between real and perceived problems. No consideration is given to alternatives. The end result is a collection of independently operating procedures which, in some cases, may actually make matters worse. The benefits of a thoughtfully designed and coordinated system are lost. The patchwork approach to problem solving works no better in loss prevention than it does in the rest of the business world.
The business itself is the ultimate asset and nowhere is it at greater risk than in the area of civil liability. "Failure to protect" and "negligent hiring and retention" are two rapidly growing areas of concern. Business related injury, death or property loss suffered by anyone is almost certain to result in a lawsuit.
Legal arguments will invoke the theory that the defendant - the business - knew, or should have known, that a danger existed and did nothing to eliminate it. Where injuries are caused by an employee, the plaintiff will try to show that the business negligently hired and retained a dangerous person. The Courts consistently hold businesses responsible for the security and safety of employees and visitors. This includes a duty to anticipate and prevent security problems. Businesses that don't conduct risk assessment surveys and don't perform background checks on employees are prime targets for litigation.
Every business needs a loss prevention program. The nature and extent will vary with individual requirements but some type of program is always necessary.
LOSS PREVENTION TECHNIQUES
Shrinkage:
Loss prevention in the retail industry is concerned with the disappearance of merchandise and currency. Most retail establishments take a physical inventory annually, while some do it semiannually. When the count is completed, the difference between the actual inventory on hand and what it should be according to purchase and sales records is called shrinkage.
The causes of shrinkage are recognized as employee theft, shoplifting, and paperwork error. Other reasons for business losses, such as robbery, burglary, and vandalism, are separate problems. Shoplifting and internal theft are actually untold numbers of separate incidents of larceny adding up to great losses which are not listed in crime reports, except for the relatively few cases where arrests are made.
Even though shoplifting is more often publicized than employee theft, security experts are of the opinion that the in-house thief is responsible for at least 50% of the shrinkage.
Internal theft:
The retail industry attracts many unskilled people who work for minimum wages. Whatever the motivation, a fair percentage of workers succumb to temptation and steal. Many of these employees can be persuaded or prevented from stealing. Positive programs of employee relations built around fair compensation, proper surroundings, and employer-sponsored activities can improve morale and concern for the success of a company. The only way to reach some employees is through a highly visible security program and a rigid company policy of prosecuting any employee caught stealing.
Prevention of theft requires simple but sophisticated systems for handling merchandise and currency, which not only deter but which leave a trail of documents when any stealing takes place. One important step that industry can take to prevent or reduce internal theft is to avoid hiring the potential thief or problem employee to the outset.
Pre-employment screening:
When applying for a new job most people are requested to provide some details about their education and work experience. It is at this state, before an individual is hired, that industry must make the effort to determine whether or not the applicant may pose future problems, including dishonesty. Pre-Employment Investigations are very important and highly recommended.
Criminal Records:
Such background information is usually not available to employers. Most police departments can be requested to provide ‘character verification’ but response in affirmative can not be guaranteed. In any case such information is provided only to the government offices or public sector undertakings. In spite of the best precautions taken to keep these information confidential, such data very often does "leak out". Many Private Investigators having access to such information may supply this information.
Former employers:
It is standard procedure to make inquiry from previous employers regarding the job applicant. Since it is rare to get other than positive responses, the reliability of such information is to be suspected and weighed as a factor with other sources.
Background checks:
A background check may be done in-house or through an outside agency. However, since the job applicant is not required to supply very much personal information these days, it may be necessary to seek other sources. There are extensive accumulations of private information about individuals who have credit cards, bank accounts, hospital records, former employment, or paid taxes.
Obtaining such data may present problems with accuracy and invasions of privacy. Many firms consider it foolish and useless to pursue these sources, relying instead on the frankness of personal references supplied by the candidate, which is not a very good way to run any business.
Credit card standing:
Financial information about any individual is ordinarily not supposed to be disseminated except in connection with credit applications. Since the credit standing of anyone is a good indicator of stability and other traits, there is no doubt that such information is often sought as part of the screening process by most of the MNCs.
Prevention of merchandise theft:
The extent of employee theft can only be approximated since inventory shrinkage reflects the losses from all causes. There are so many ways that merchandise can be stolen by employees that the imagination is the limit. The most successful way to combat such theft is to prevent or discourage it. A concerned company must have thorough systems of control and accountability over merchandise from the moment it is received through the various stages of preparing it for sale, displaying it to shoppers, and finally handing it over to delivering it to the purchaser.
Rigid adherence to these controls requires dedication by executives, supervision by middle management, interest and concern by staff employees, and some security presence as a form of insurance. Measures that should be taken to prevent some of the common means that employees use to steal merchandise are mentioned later. Some of these measurers require the employment of security personnel, and oftentimes their use results in direct observation of attempts at theft.
Employees' entrance:
Wherever possible, employees should be required to use a designated entrance when coming to or leaving work. In large establishments this is usually the case. Locker, cafeteria, and lounge facilities should be located in close proximity to the entrance. The time-clock area should be set up between these facilities and the store proper. A security person should be posted here. Personal parcels and overcoats, and so on, should not be carried into the selling or stock areas. Anything that is carried through the time-clock area should be subject to inspection. Female employees may be supplied with a clear plastic purse for personal articles they wish to have with them at work. Employees should be encouraged to keep small valuables and money on their person. The right to frisk and even search may be reserved by a company under certain conditions. The employment application should so state, the requirement should be publicized and fully explained, and this practice must be enforced in a nondiscriminatory manner. The rule should also apply to repair workers, contractors, salespersons, and others who enter the store through this area.
Porters:
Maintenance people and porters who must work within the store during non business hours should be accompanied by security people. Plainclothes detectives should occasionally be assigned to conduct observations of such work.
Garbage:
A favorite method of theft is to hide merchandise among the refuse before it is removed from the store. This material must be carefully inspected before it is removed.
Stockrooms:
Employees can find remote corners to idle time away or to hide stolen merchandise on their persons. Very often they will discard their own articles of clothing and wear the pilfered items in their place. Once the price tickets have been removed, unless there is a direct observation, proof of theft is difficult to establish. Whenever possible the stockrooms should be kept locked as a security precaution and as a means of keeping employees on the selling floor to improve customer service. Employees should request identification of any persons entering stock areas who are not readily recognized.
Keys and locks:
All doors should be equipped with strong tamper-resistant locks. Where there are many doors within a structure a master key system with changeable cores is recommended. Access to various areas can be provided on an individual basis according to job requirements. Employees should be cautioned to safeguard their keys. In the event of a lost key it may be necessary to change some cores. This is relatively inexpensive when compared the changing locks or cylinders. All keys should be collected and accounted for at the end of the working day, except for those which are used to close and open the premises. There are many keyless access control systems available today which offer computer-related features and technology.
Stashing merchandise:
Boxes, packages, and bundles of merchandise may be placed in various places to be later taken away by the employee or a friend. Such packages may be found in secure places on the selling floor. If refuse is not thoroughly checked, the garbage containers may become frequently used for such thefts. When such caches are discovered, the recommended procedure is to establish surveillance over the suspected packages.
Unauthorized markdowns:
A favorite method of "theft" that most employees regard as practically guiltless is to purchase articles at self-determined discounts. Marking down the price of merchandise at the proper time is an important factor in successful retailing. When markdowns are taken, various records must be adjusted to reflect the lower value in the inventory records lest a fictitious shortage be created. Those employees who desire an item at the height of the season, and certainly before discounts are in order, create their own price changes in one way or another. One way to discourage such activity is to frequently inspect goods that are held or laid away for employees. Alert sales people or cashiers may spot such price changes, but it may not be practical to expect them to deny the markdown to coworkers.
Receiving and shipping:
Platform and shipping employees can falsify the various receiving and delivery documents. Sometimes this is done in conspiracy with truck drivers. Incoming shipments should be physically counted and verified against the accompanying documents. Receipts given to delivery people should indicate any shortages found. Shipments should be verified again for completeness when they are unpacked and processed for the selling department. Valuable or easily concealable items should be transferred in security bins or racks. Test counts can be done randomly as a security measure. The documents which match the merchandise must be checked for detail, particularly as to retail price. Incorrect ticketing will create shortage whether it is mistakenly or deliberately done.
Warehouse:
Large companies may have one or more warehouses where incoming merchandise is received for storage and transshipment to retail outlets. Sometimes the ticketing operations are done in such warehouses. Theoretically, a warehouse should be easier to control than a store from a security viewpoint, since the environment is closed to the public. Truck drivers should not be permitted within the warehouse. Separate facilities should be maintained for them outside the perimeter, where feasible. Receiving platforms and shipping platforms should be physically separated. Cargo documents and purchase orders should be matched, so that proper bookkeeping is ensured. Cargo areas of trucks should be locked and sealed when transporting merchandise. Drivers should not have access to the goods. It is a good idea to inspect the trucks from time to time to ensure that they are sound. Within the warehouse there should be separate storage facilities for merchandise which is most often or easily stolen. Such areas may be specially safeguarded with locks, alarms, or even closed circuit television. If possible, management should reserve the right to search packages and persons. Typical warehouse environments are conducive to such activities as organized gambling or narcotics selling. These practices can easily lead to necessity for theft. If the pushers and bookies can be singled out, efforts should be made to discharge them. This type of problem is never permanently solved. If management does not stay alert, it will shortly return.
Theft of cash:
The theft of cash also presents a major problem to the retailer. The case thieves are ordinarily those persons whose jobs require them to handle money.
How cashiers steal:
Without a program of prevention, there are numerous opportunities for cashier theft, among them the following;
Helping self to cash from common drawer register
Failing to give receipt to customer and voiding the sale after customer leaves.
Avoiding ringing the sale; pocketing the cash
Under-ringing the sale; pocketing the difference
Failing to close register drawer after each sale
Imprinting more than one charge on a credit card transaction; exchanging surplus charge slip for cash
Allowing accomplice to remove cash; reporting the theft later
Raising the amount of a check taken from a purchaser; pocketing the difference
Accepting bad checks from accomplice
Selling to friends at discount
INVESTIGATION OF CASH THEFT:
Proper and adequate investigation is hampered by frequent employee turnover in retailing. Very often, by the time a particular pattern of shortage is detected, the guilty individual is gone. Some investigative procedures which may be used according to modus operandi follow:
If shortages exist in common drawer registers, switch cashiers daily and keep "over and short" records to track individual performance.
Frequent voids, no sales, or reports of till tapping should initiate surveillance of suspect at work. Results may be obtained by polygraph examination.
Spot checks of cashier's funds during working day
Integrity shopping
Integrity shopping:
The integrity of cashiers can be tested by means of "honesty shopping." These tests are conducted by specially trained people who pose as customers. Shoppers may be in-house or contracted from an outside service. Shoppers operate in different ways according to the type of registers in use and the way a store may conduct cashiering operations. One method is to shop as many cashiers as possible with the expectation that dishonesty will be detected. Another approach is to select as targets principally those cashiers who may be suspected for one reason or another.
For example, many stores maintain ongoing records relating to individual cashier performance. Those cashiers who are consistently over in cash may be creating the surplus so it can be pocketed. Additionally, shoppers may be given leads by supervisors or other store personnel.
Shopping test procedures:
The basic test in any integrity shipping operation is the "even money buy." All other tests are built around this one. The shopper selects an item and pays for it with the exact amount plus the tax. The idea is to afford the employee who takes the cash an opportunity to pocket it. Therefore the shopper must be in a rush and have no time to wait for a receipt or normal wrapping. In stores where the cashier function is separate from the sales function, an "even Buy" is a bit more difficult to accomplish. An element of successful shopping is the ability to later identify the documentation of the "buys" on the register tapes or other sales records. This is accomplished in several ways. The sale previous to the "buy" may be observed by another shopper. Sometimes and "identification buy" is made after the test buy, but only if the cashier has done something irregular or suspicious.
The "uneven buy" requires that the cashier make change. This buy is made by shopper number two whose principal function is to observe how the money from the "even buy" is handled. The "even buy" may be part of a "double buy," wherein the shopper, on being handed the change from an "uneven buy," suddenly decides to make an additional purchase. The shoppers suggest putting the item in the same bag, hands over even money, and leaves. There can be many variations of these buys. In an "exchange buy" the shopper hesitates in selecting between two items. Finally, the cheaper one is chosen and paid for, but at the transaction is completed the shopper changes to the expensive one, pays the difference and leaves. Shoppers should mark their "buy" money or record the serial numbers in advance so that proper identification can be made of the evidence later on.
Money rooms:
A special area for handling and storing cash may be necessary in large stores. Cashiers are usually supplied with working funds which are turned back at the end of a shift along with money received from purchases. The constant counting, disbursing, and receipt of cash often creates shortages that are temporary or permanent. While error in these operations may be common, the theft of money by the employees is not rare. Money rooms should be well constructed and burglar-resistant, if not burglarproof. Alarms should protect the perimeter, the inside area, and the safes. Holdup buttons should be strategically situated. Routine operations should require at least two employees in the room. Pre-employment screening should be particularly thorough for such employees.
Investigation of money room shortages:
Following are some procedures for solving shortages originating in the money room.
Thoroughly audit the entire room
Create deliberate error or shortage to test for reaction
Compare individual working schedules against times when shortages occur
Determine life-styles of employees
Since these shortages may be substantial, do not overlook possibility of recovering losses from insurance company.
Refunding:
Most retail stores have a fairly liberal policy of allowing merchandise to be returned and of refunding the purchase price by either cash or check. In some stores the refunding is done through the selling department, where the merchandise, the price ticket, and the sales receipt are examined and authenticated.
An authorization for the refund is issued at that point and given to the customer, who presents it at a service desk where the approval is issued and payment made. If price tickets or receipts are not presented with the refund request in such centralized operations, the customer is usually directed to the selling department for verification of correct price. There must be at least two employees directly involved in any refund, one for examination of merchandise and approval and a second to make the payout. Procedures must be established to constantly monitor payouts against related documents and merchandise. Deviations from these systems may be indicators of dishonest employees. Price tickets should be found properly attached to merchandise according to company practices. Data on these tickets should match the merchandise being returned. Many people switch to higher price tickets when seeking refunds.
Employees, in particular, can do this in comparative safety, since they usually know what sort of information will be accepted as legitimate for certain merchandise. It is advisable to maintain records of refund activity for each employee for possible detection of abuses of the system. Computers can provide such facts to auditors and security departments at periodic intervals.
There is an ongoing problem with safeguarding small items of high value from employee pilferage between point of refund and return to selling departments. Control records must be maintained for such items and special locked storage facilities provided. Supervisors must make daily inspections of records and facilities and see to the secure in-store transfer of the items. Since the refund operations are particularly vulnerable to employee dishonesty, particular care should be taken in personnel selection. Temporary vacancies due to illness or vacation should not be haphazardly filled. Proper and adequate training of all employees involved in the refund procedure should be rigid company policy.
Detaining suspected employees:
It is necessary to adhere strictly to legal requirements when detaining an employee suspected of theft. Hiding money or merchandise within the store or on the person is reasonable evidence of intent to steal. Very often, however, the suspect may offer some farfetched excuse for so doing, and the prosecutor or the court may be of the opinion that a reasonable doubt exists.
The safest course of action is to wait until an attempt is made to remove the property from the premises. The arresting employee should be an eyewitness to the actual commission of the crime. A rigid policy of prosecuting all employees caught stealing usually has a deterrent effect on others. Once an employee has been detained and accused of theft, the situation should be construed as an arrest. If there is no intention to prosecute, the investigation should be conducted without delay in an efficient manner. The investigation should terminate with a signed confession and a release against the company and its employees. The suspect may
be frisked or searched in order to recover the stolen property. If the complaining employee has done the proper job of witnessing the theft, the recovery of the evidence should not pose a problem. If the detained employee is to be prosecuted, the police should be notified at once and the investigation conducted and completed without delay. In some jurisdictions the arrest process is delegated to store security employees who deliver the necessary paperwork to the police. Most states have passed legislation to protect the retailer in the event of false arrest claims arising out of detentions to determine the ownership of merchandise, provided that there was reasonable cause to act and that the investigation was conducted in a reasonable manner.
Cashiers:
Cash shortages, failure to ring up sales, and failure to give receipts are not proof of theft. Prosecution is not recommended unless there is a direct observation of stealing and recovery of some tangible evidence in merchandise or money. Identifiable cash recovered from the person of the suspect is the best kind of evidence. This is often referred to as a "pocket case." Proper questioning based on observation of highly suspicious actions can often result in admissions of theft. Without further evidence, the best course of action is to explore the feasibility of obtaining restitution. Oftentimes, the employee admits to frequent thefts going back over a period of weeks or months. The amount of money involved can be significant. Very often restitution can be ordered and arranged through the courts. It is unwise to seek restitution without legal advice.
Undercover investigation:
Undercover investigation has long been used for providing intelligence information and is no less applicable to retailing. With sophisticated retail security, improved training and techniques, and the utilization of modern technology's latest advances in equipment and devices, the value and effectiveness of undercover investigation cannot be minimized. As a loss prevention tool, it can provide information to security and other management that is not easily obtainable by any other means. In practice, investigators posing as employees are placed within a firm. This effects their "cover" and should be done through normal placement procedures, with as few people "in the know" as possible during the term of the investigation. Resulting meaningful information is then accurately conveyed, as quickly as possible, to those executives who can put it to work. Once placed, these investigators then blend and mingle, developing relationships with their associates for the purpose of locating and identifying employee dishonesty. This is the primary objective under most circumstances and one which cannot generally be accomplished by in-house security personnel, because of known identities, techniques and so on. Additionally, relationships which are fruitful are evolved over a period of time and require patience and planning in developing the confidence of targets or other coworkers. While some information comes from occasional observation of isolated spontaneous thefts, the major portion of criminal information is developed over a longer period, after purposeful planning of the operative's approach to acceptance, and effective performance. Most information is developed through confidential conversation, initially with the use of comments and remarks specifically designed to elicit a response. This, of course, must always remain within legal boundaries regarding entrapment. The loss prevention aspects of undercover investigation apply not only to criminal loss, but also to loss by other means.
Loss and exposure to loss in operational areas can be pinpointed through monitoring of adherence to policy and procedures, conditions conducive to costly casualty loss, supervisory inadequacies, systemic deviations, and so on. Also, loss prevention can apply to loss of personnel. Here, loss is generally insidious but can have devastating financial effects. This also applies to loss, occasional and isolated as it may be, of public esteem because of poor customer service or other reasons. All of these factors contribute to loss, larcenous or otherwise. Loss prevention is vital in each area to insure profitable operation and to increase the "bottom line." Undercover investigation can be effective in accomplishing this. Ordinarily the information from undercover is used to develop cases in an independent manner, so as to avoid exposing the original source. When the information is deemed critical and there appears to be little or no chance to proceed in another way, the cover may be blown. Causes of business losses, other than employee-related, may be due to shoplifting, robbery, burglary, bad checks, stolen credit cards, vandalism bombings, and arson. Techniques for prevention and investigation of the most prevalent of these crimes are included in this section.
Prevention of shoplifting and other crimes:
The most efficient way to deal with the problem of crime is to take necessary steps to prevent it from taking place. Although it is unrealistic to expect to eliminate all crime, the proper use of people and equipment will have some effect in reducing the total incidence of theft and destructive acts. Some ideas are:
Security Guards
Plainclothes Detectives / Private Investigators
Fitting-Room Attendants
Shopping Services
CCTV Surveillance Systems
Employee Incentive Programs
Security involvement by staff:
The successful security program is expected to prevent theft. Since the commission of crime cannot be wiped out, recovery of merchandise is equally desired. There are many retail stores that do not have a security staff per se. In such companies the security effort depends on sales help, cashiers, stock persons, and others. Even where a security staff does exist, the total security effort will be more effective if the other employees are involved too. They must be trained to spot shoplifters and taught the action to take to prevent the loss of merchandise. Ordinarily, these clerks and salespeople are not expected to apprehend wrongdoers. However, if specially trained and instructed, anyone may be expected to take necessary action, including detaining shoplifters. The actual apprehension of a person attempting to steal merchandise from a store requires knowledge of penal statutes and codes which must be strictly obeyed. Lest civil and criminal charges result from wrongful actions. The safest policy to follow with all employees, except those specifically employed in a security role, is to design programs aimed at preventing theft.
Awards and bonuses:
Many employees perform better if there is an incentive program that encourages interest and participation. When a bonus is given to a salesclerk who pointed out a shoplifter, other employees sit up and take notice. While it is reasonable to expect wide
participation in combating shoplifting, the average worker will hesitate before turning in a fellow employee. Although cash awards for such information are usually larger than shoplifter awards, such incentives are not very successful. Some firms pay bonus money to security people also, since this usually keeps productivity at a high level. However, this practice has been criticized as a bounty system leading to over zealousness and false arrests.
Loss prevention procedures:
Although some shoplifting is inevitable, there are things that can be done to keep it to a minimum. All employees must be committed to enforcing those of the following procedures that are adopted by the establishment.
Articles of high value and easily pilfered should be safeguarded under glass or locked away.
Article surveillance or chains should be properly used.
Merchandise should be returned to stock after showing it to customers.
Displays should be set up so that they do not clock easy viewing by employees.
Before being handed over to purchasers, contents of pre-boxed merchandise should be inspected.
ID should be requested of any strangers in non-selling areas.
Price tags should not be loose or easily removed.
Prompt attention should be paid to customers, always.
Salespeople should not to turn their backs to customers.
Legitimate purchases should be easily differentiated from other packages.
All discarded sales receipts found on floor or anywhere else should be picked up.
Sales people should be alert to the fact that luggage, when purchased, may be filled with stolen merchandise.
Frequent inventories of expensive or desirable merchandise should be taken to detect the existence of a problem, so that immediate measures can be invoked.
Premises should not become a hangout. Employees should be alert to possibility of mass shoplifting.
There should be frequent inspections for empty boxes or containers. The foregoing procedures are but a sampling of the many steps that can be taken to combat losses. Other parts of this chapter on loss prevention offer additional recommendations.
SHOPLIFTING:
Shoplifters come from all walks of life, and they may be of any age and either sex. Shoplifters may be classified according to several categories: professional, amateur, juvenile, addict, and kleptomaniac. Many people who steal for the first time do so on impulse, and if they are caught, there is a good possibility that they will quit. On the other hand, those who get away with theft will most likely steal again, since it becomes easier to pilfer each succeeding time. Shoplifting is similar to many other crimes in that the lawbreaker will tend to return to the same place where he or she was previously successful.
SHOPLIFTING METHODS:
Following are some of the multitude of ways in which shoplifters operate:
Merchandise is concealed in boxes, bags or purses. Professionals may carry booster boxes.
Merchandise is concealed in clothing. Professionals may wear garments fitted with large pockets or hooks. Oversized garments may be worn to afford easy concealment.
Stolen garments are worn in plain sight and out of the store.
Merchandise is carried between thighs and hidden by long skirt or overcoat.
Professionals wrap garments around the legs and tuck them into tops of socks.
Small articles may be carried out hidden in the palm of the hand.
Some thieves snatch articles and run out of the store.
INDICATIONS OF POSSIBLE SHOPLIFTING:
Store personnel should be alert to the following signs that should cause suspicion of shoplifting.
People wearing overcoats out of season, or raincoats on a clear day.
People carrying boxes, bags, or umbrellas which could be used to conceal merchandise.
Nervous-looking people who are constantly touching the backs of their heads, tugging at sleeves, or adjusting socks.
Exceptionally fussy people who cannot seem to make up their minds about a purchase, or do not appear interested in purchasing an article that they have been examining.
People who walk around and constantly keep one hand in a pocket.
People who come back to the same area of a store several times.
People who are busy looking about, rather than at merchandise.
People who appear to be nervous.
People who walk into stockrooms or behind counters and have no business in such places.
Men who carry shopping bags.
APPREHENSION OF SHOPLIFTERS:
Many states have enacted laws specifically aimed at shoplifting. Otherwise the crime of shoplifting is covered by the larceny statutes. Generally, once it has become evident that the intent of the individual is to steal the article, the crime has been committed. If the suspect secretes the merchandise inside a shirt or under a dress, it may not be necessary to wait until the person exits from the store. However, there are jurisdictions and there are individual judges who do not agree on this point, hiding that unless the suspect has gone past the last possible cash register where payment could be made, the intent is not clear and it can be rebutted. Therefore, unless the statute is extremely clear on this point, the safest course of action is to make the first contact with the shoplifter at the exit. The store detective should attempt to keep the apprehension as low key as possible. There is less chance of disturbing other shoppers or of creating a physical confrontation when this is done properly. Store personnel must be alert and watch for the unexpected. The shoplifter may attempt to run, may assault the employee, or may even pull a weapon. The training of the security staff is the key to ensure proper action in accordance with developing circumstances. When guards are posted at or near exits, they should assist in apprehensions if requested.
Ordinarily, the suspect will come along quietly when asked. If the detective has made proper observations, the recovery of stolen articles should be uncomplicated. Suspects should be frisked for weapons and, when necessary, a complete search may be made. The use of handcuffs is recommended when appropriate.
CHECKS:
A significant portion of retail sales is transacted by personal checks. To many thieves, there is less risk in passing a bad check than in shoplifting. Unless there are meaningful controls that are adhered to by employees who accept these checks, the losses can become staggering. The following guidelines will help to promote caution in accepting checks.
Examples of bad checks
Drawn on a nonexistent or closed account.
A forged check drawn on a legitimate account.
A counterfeit check.
Acceptance procedures
Accept only personal checks payable to the store.
Inspect the check:
No postdated or undated checks
If out-of-town bank, use extra care.
Must be written in ink; no erasures or corrections.
Numerical amount and written amount must agree.
Should be for exact amount of purchase.
Be careful of "starter" checks.
Be careful when customer appears unconcerned about price.
Company should maintain a listing of previous bad check passers; consult list
Call bank if amount is over a predetermined amount or out-of-state.
If bank is closed, suggest delivery of merchandise.
Do not be pressured into accepting check too fast.
Require valid identification.
Compare signature and photograph.
Record all information on back of check.
Acceptable identification
Two forms of ID should be required.
Legitimate driver's license.
Licenses (pistol, and so on), permits or ID cards with photos.
Local Bank Card.
Medicare cards for elderly customers who do not have drivers licenses. Unacceptable identification includes: social security cards, bankbooks, utility bills, library cards, birth certificates, learners' permits, or membership cards.
INVESTIGATION OF BAD CHECKS:
If a bad check is inadvertently accepted, the following procedures should be instituted:
Insufficient funds
Re deposit and notify maker.
If still insufficient, request immediate payment; turn over to collection agency, or debt recovery service.
Final alternative is prosecution.
Check with police on local practice and procedure.
Closed accounts and forgeries
Identify the check passer. This may be difficult or impossible because the check may have been stolen or the clerk may not recall the individual
Police reports and notification to banks, motor vehicle bureau, credit card companies tend to verify the depositor's statements in connection with the whereabouts of the check.
Interview cashiers to get leads.
Publicize current names or aliases being used.
Communicate with other retailers and the police.
Alert refund departments.
Prosecute when absolute identification has been made.
CREDIT CARDS:
Losses due to acceptance of lost or stolen credit cards are on the increase. Suggested procedures which help cut such losses are:
Examine card for authenticity; expiration date. Imprinted name and signature must match.
Use terminal or telephone to obtain authorization.
Follow instructions according to code. If "hot card," confiscate if possible. If above floor limit, may need additional ID. Customer may be advised "cash only".
Be aware that lost or stolen cards issued by out-of-state banks experience unusual time lag in appearing on "hot list".
Examine ID carefully; compare signatures.
Be wary of customers who appear unconcerned about price of merchandise.
Watch out for customers in a hurry, particularly at closing time.
MISCELLANEOUS CASHIER GUIDELINES:
In addition to adhering to acceptance procedures with checks and credit cards, employees who handle sales transactions must be constantly alert to render efficient service, pay attention to prices, and safeguard the contents of registers. Training and instructions such as the following should cover potential problems:
Know the merchandise; prices; number of pieces.
Do not turn away from an open register drawer; keep it closed between transactions.
Do not count the contents of register on the selling floor.
Do not leave register unlocked; take the key.
If unusual amount of cash has been taken in, request it be collected.
If customer claims to be shortchanged, request assistance.
Allow only properly identified persons behind showcases and counters.
Be alert to detect counterfeit bills.
Portrait appears lifeless and background lines not distinct.
Treasury seal may have uneven points.
Border lines are not clear and distinct.
May be printed on bond paper without red and blue fibers; or printed with red and blue lines to resemble fibers.
Be alert for till tappers.
They create confusion, drop change, start an argument, divert attention while accomplice steals from register.
On any suspicion, close the drawer.
REFUND OPERATORS:
Some shoplifters find it more lucrative to refund stolen goods than sell them. Very often items that have been purchased with bad checks are converted into cash this way, especially by professionals. Some thieves find it less risky to seek a refund for stolen merchandise without ever leaving the store. Some policies which may be established to combat these practices follow:
Make refunds payable by check in the mail.
Insist on price tickets and sales receipts.
Verify merchandise and price in appropriate selling department.
Examine documents for alterations or erasures.
If purchase was made by check, allow time to clear.
Make refunds on credit card purchases through account.
Steal an item of merchandise, return same item for a refund without sales slip.
CONCLUSION:
Shrinkage is an insidious illness which does not cure itself. Proper systems will contribute toward prevention of losses, but there must be constant follow-up and reevaluation to ensure that what was adequate yesterday is still applicable today. Crime is on the march, and new schemes are constantly being devised. Expertise i loss prevention is as essential in today's retail world as fashion and salesmanship. The merchant has recognized and accepted the fact the money spent to protect company assets does its share in providing profits.
POLYGRAPHS:
Retailing is one industry that can use the polygraph to a significant extent both for screening applicants and investigating suspected crimes. However, the continued use of the polygraph in industry has come under attack in the U.S. Congress and state legislative bodies during recent years. Today, some 15 states either limit or entirely restrict such testing. Conversely there are 19 states which officially recognize the polygraph as a necessary tool for commercial purposes, and they have enacted licensing and regulatory laws.
Herewith listed are some of the arguments that have been advanced by both sides in the controversy over the polygraph:
The value of the polygraph
Reasonable to administer
Fast results
Licensing generates confidence in examiners and in credibility
Dependable findings in most instances
Obstacles to use of polygraphs
Claims that it is self-incriminating
Violates right of privacy
Unions oppose and advise members not to submit to testing
OTHER LIE-DETECTION DEVICES AND TESTS:
In recent years voice-stress measuring devices have been used with success in that they have shown strong correlation with the polygraph in their results. Opponents of lie-detection devices have been active in opposing the use of such instruments on the grounds that they are particularly incriminating, since they can test for stress in the voice without the subject being aware of it. This stress is the result of physiological changes in the voice. The results are unlike voice prints, which are used for other purposes. There are also a number of paper-and-pencil tests available which are designed to predict or measure trustworthiness and stability. The continued increase in the rate of employee dishonesty has created a vast market for any form of test that can offer reliability in spotting poor-risk applicants for jobs.
It is very important to define security before discussing the subject of Total Loss Prevention.
SECURITY DEFINE
Security means that it is the preventive wing of defensive intelligence. In other words, it nullifies sabotage, espionage, subversion, in the industry elsewhere and it protects the company from all kinds of losses as theft, pilferage, fire, leakage of information and wastage of all kinds.
SECURITY DEPARTMENT
To meet the above mentioned requirements of the security a full flagged department with the head of department reporting direct to CMD of the company is a very important point in security. It is important because this security head keeps everyone under surveillance including his CMD, and as well he has links with the top brasses of CBI, IB-RAW and others where he could report about his reporting officer the CMD to whom he reports and also it is very essential that the Security Officer is also under observation by the vigilance department and as such each person in the industry is covered under surveillance.
SECURITY STAFF
These are God chosen people with special flare of detection of crimes, their liability is unquestionable and every cell of their blood vessel is always focused on prevention of theft and loss control. Security is the primary need of any industry its function is indirect since every rupee saved becomes profit of the management, to prevent strikes, Labour unrest which increases the loss of the company and also to prevent theft and pilferage, and it is the most lovable baby of the management. The security staff has to perform physical security duties of gate control, personal search and ceaser as such they must know all the relevant rules and regulations in force procedures and their limitations of the training apprehending and producing the people before the civil police to ensure 100% prosecution. The security staff is very cautious of every happening of theft, sabotage, subversion and espionage and keeps the management of industries updated this applies only to private industries.
As far as the public sector undertakings are concerned CISF carries out the security duties. As far as other industry is concerned private security agencies are employed on contract basis for total loss prevention in the industry. These agencies are being run by retired defense or police officers and these persons have security industrial orientation. These private agencies are capable of only handling a physical security part of material loss but the white colour crime security of information like computerized documents of floppy’s etc are normally beyond the scope of these agencies and the information are a real sources of loss to the industry it is the requirement of the time some aspect of this loss prevention is taken note of.
CONCLUSION
In order to have Total Loss Prevention, we must follow the rules of physical security and safety regarding perimeter wall, watch towers, issue of I-cards, knowledge of Labour Laws, Criminal Indian Penal Code Labour Laws, Criminal Procedure Code and other laws in force.
