How do you assess this risk?

A risk practitioner is working with operating management to assess the risk of inventory losses due to theft at either or both of its two satellite warehouses.

These are the facts:

  • The two warehouses are in industrial areas of Sydney, Australia and Paris, France.
  • Crime and policing levels are approximately the same. Neither is considered a high crime area.
  • Inventory levels fluctuate but are comparable, as are the sales they support.
  • The Security department has inspected and evaluated security measures at both sites. They are considered up to industry standards and appear to be operating effectively.
  • Background checks are performed for all new hires, and quarterly drug tests are mandated.
  • Employee turnover at both locations are within normal ranges for the industry and the local economies.
  • Your recent inspections of the fencing around the sites found one small hole in each where a child could get through.
  • Losses due to employee or other theft are considered acceptable if they remain below 10 units per month, as industry research has shown that additional measures would cost at least as much as any reduction in losses.
  • It would take shortages of 50 units to seriously affect the ability to fulfil sales orders and generate revenue. At that level, customers might consider moving to a competitor. Loss of any major customer would have a significant effect on revenue and the ability to meet annual corporate targets. Read more:

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