Calculating ROI for Better Security
Here, we dive into more conventional ROI justifications for security purchases.
In the first article, we discussed how Life Safety can be an effective argument for not only getting your purchase approved, but making it a priority. Here, we dive into more conventional ROI justification.
When purchasing or implementing new equipment, there are three schools of thought that determine when an enterprise will jump into a new technology. These decisions are based on budget for sure, but also on risk mitigation.
Some organizations seem to have an unlimited budget for new technology, always positioning themselves to be the “Beta site” for an innovation. This costs them more money, but from a risk standpoint, it generally keeps them out of the legal woods. Litigation is generally targeted at “inadequate” or “negligent” security. It is difficult to prove either of those accusations against a company that maintains state of the art technology to protect its personnel or visitors. So, their savings (ROI) is on the “back-end” or in risk management.
The second group of technology buyers is the most common. These are the ones that wait until a “best practice” is established with the new technology. This buying strategy is circumstantial, often less expensive and safer from a risk standpoint. It is circumstantial because most companies do not have cash lying around to try the latest gadget before it has proven itself. So often it is purchased later, as that is when the capital is available. Purchases made later are less expensive, because the price on technology generally comes down as it ages, even if just a year or so. Waiting for the herd to come up with an industry standard is safer because it is easier to defend in court if best practices were used, as opposed to some new gimmick.
The final group of buyers are the ones who wait until everyone else has the technology, and they climb on board more out of necessity. This may be due to a lack of capital or it may be because whomever is in charge wants to be certain that is the way the industry is headed. These companies save money initially in not making the purchase, but may take a gamble on being the only one, or one of a few, in the market to lag behind the curve.
After the 2017 shooting in Las Vegas, where Stephen Paddock opened fire on a crowd of concertgoers at the Route 91 Harvest music festival and killed 58 people and wounded 413, we all waited to see how the hospitality industry was going to react as far as implementing new security measures. A few resorts immediately established armed response teams, search dogs and hired off-duty police. The majority, though, waited for one or more best practices to develop before making drastic changes to their security posture. A little over two years after the incident, at least one hotel is going to install and staff metal detectors at their elevator banks. It will be interesting to see if this becomes the best practice that everyone will be “forced” to follow, or if another technology will replace it as being more effective. And as it goes, the security leaders with no capital budget for such things may be left vulnerable. Hotels across the country will, under pressure from the herd, take up this decision whether they want to or not.
What does all this have to do with ROI? The answer is, for major purchases that are going to change your security posture (like metal detectors), your capital request may depend on management’s stance and where they want to be: front of the pack, part of the herd, or bringing up the rear. Once you know that, make your request accordingly. The thought: “Everyone else has one, so we should too” is not very intellectual, but it is a reality for many security directors.
ROI – Secrets to Getting What You Need
Next, we will discuss timing, which is everything. This goes for capital requests, as well. We have discussed Life Safety, labor savings and best practices as solid strategies for showing ROI. There are, however, some things you can do to help assure approval of your request.
Timing. Did you know that capital money is given out quarterly? Most departments will ask for money that will be spent as soon as the calendar flips to the New Year. In an effort to save money, the corporation that holds and distributes the checks does so on a quarterly basis. This means that while all the money allocated for the first quarter may be ear-marked, the third or fourth quarter may have some unclaimed funds that are available for you.
It’s who you know. There is likely one individual in the enterprise or business unit who controls the purse strings. It’s not the GM or CEO, but it is someone like a controller who actually receives and distributes the money to departments. This individual should be your best friend. Take him/her to lunch, and find out how funding for capital improvements works. “How do I write a request that will get approved?” “What types of purchases get approved?” etc. This individual will also help you with timing.
Speaking of timing. Did you know there is often extra capital left over after each quarter? If the sales department put in a request for a $500,000 customer lounge and it only cost $450,000; that is $50,000 that will be sent back to corporate. Unless you grab it. You are correct in your assumption that additional money can be set aside for a lounge to buy a security vehicle, so you need to be creative (but honest). How about asking for new security cameras for that lounge that will cost $5,000, with plenty of money left for you to upgrade the rest of your video surveillance system?
Strength in numbers. One of the best ways to show a ROI and get the security technology that you need is to team up with another department – especially a revenue-generating department. Much of the security technology on your wish list has relevance to others in your organization, as many of the technology being purchased elsewhere in your enterprise can be useful to you, as well. For example, license plate readers have an obvious crime-fighting feature, but perhaps another department could benefit from knowing when their best customer is on property. Same with facial recognition. Video analytics are used by large retailers for loss prevention, but they also share this technology with the Operations team to monitor the efficiency of cashiers, customer buying patterns and product placement. An access control system in a parking lot can reduce burglaries, but it can also make a nice profit. The sky is the limit on partnerships.
Security often gets left behind with each new budget. Hopefully, these strategies will help you cross off some items from your wish list and keep your people and assets safe and secure.