1. Retail Loss Detection and Prevention
Policies and Procedures
By-JohnE. GrimesIII,MS,CFE,CFI

2. Loss prevention defined
Loss Prevention is the concept of establishing policies,
procedures and business practices to prevent the loss
of inventory or monies and preserve profit in a retail
environment.

3. Role of Loss prevention
• While each retail company approaches the mission and purpose of their
loss prevention programs based upon the unique needs, structure and
culture of the organization, at its core the role of loss prevention is to
enhance the profitability of the company – just like every other role in
retail. Primarily, that role focuses on the reduction of shrink (losses).
• Loss prevention departments look at all of the various issues that can
potentially lead to losses, devise strategies to minimize those pitfalls within
the business, and implement strategies that are practical, actionable, and
consistent with the goals of the business.

4. Shrinkage (shrink)
• Inventory Losses in a Retail Environment are referred to as Shrinkage.
• Shrinkage can best be described as the amount of merchandise physically
available in a location versus the amount of merchandise that should be on
hand based on inventory records. In simple term it is missing product.

5. Measuring shrink
There are many other factors that are accounted for
when determining the expected inventory count other
than purchases and sales. They include:
• Markdowns
• Markups
• Returns by customers
• Returns to the supplier
• Damaged merchandise

6. What causes inventory
shrinkage
• Internal Theft (various schemes, including cash theft schemes)
• External Theft
• Vendor Theft
• Paperwork Errors
• Inaccurate shipments
• Inventory miscounts
• Poor receiving practices
• Failure to record all markdowns.

7. Non-inventory dollar losses
Non-inventory related losses that occur at store level.
• Net Cash Register Discrepancies
• Net Deposit Loss and Discrepancies
• Credit Card Charge backs
• Bad Check Loss
• Gift Card Loss due to theft
• Cash Robberies

8. THIS IS WHY IT IS IMPERATIVE THAT
LOSS PREVENTION BECOME A CRITICAL
COMPONENT OF BUSINESS
PHILOSOPHY!

9. The 5 psof loss prevention
People
Philosophy
Policies
Procedures
Practices

10. Philosophy
Set The
Tone at the
Top!
Create a
Positive
Organizational
Culture!
Have a Written
Code of Ethics!
Zero tolerance
for fraud!
Empower
People to
Achieve Goals!

11. Policies
Overarching
published rules
that govern and
embrace general
goals of your
business
Fortifies the
corporate
philosophy

12. Procedures
Published Directives
that govern personnel
in conducting
business operations,
including internal
controls to prevent
and detect losses.
Published Directives
that govern
personnel in what
steps to take when
detecting indications
of loss.

13. Practices
Acts that are
performed habitually
or repeatedly
Practices should
conform to
established
procedures

14. People
THE HUMAN FACTOR
Employee Theft

15. 10-10-80 Rule
10% of the human population is
good. They will not do anything
wrong, no matter what pressure
or opportunity presents itself to
them.
10% of the human population is
bad. They will take advantage of
opportunities or create
opportunities to steal.
80% of the human population
are on the fence and could
possibly fall on the wrong side of
the fence if pressure enters their
lives, and could take advantage
of an opportunity and make the
wrong decision and steal,
rationalizing their decision in a
number of ways

16. Understand why some of the
80% fall on the wrong side of
the fence.

17. The Fraud Triangle
was developed by
Dr. Donald Cressey
in the 1950s while
conducting research
on why people
commit fraud.
Variations of the Fraud
Triangle have been
discussed since that
time, including the Fraud
Diamond adding a fourth
side representing
capability.
Fraud
Triangle
For the proposes of
this course the Fraud
Triangle with the 3
sides of Pressure,
Opportunity, and
Rationalization will be
utilized.
PRESSURE

18. Thank you !