Economic justification: making security pay

Sep 1, 1997 12:00 PM, Larry Anderson

Management eyes are focusing more intently than ever on the bottom line, and security directors and managers sometimes have to fight an uphill battle to get the money needed to expand and improve their security systems. However, some reports suggest security systems are an easier sell to top management than they once were. An exclusive survey by Access Control & Security Systems Integration magazine, for example, indicates 37% of security professionals are finding it less difficult to convince management to spend money on security systems than it was five years ago. An optimistic interpretation would be that management is coming to appreciate the value of security systems and their positive effect on the bottom line.

However, even more of survey respondents-38.7%-are finding it just as difficult ("about the same") to convince management to spend money on security systems as it was five years ago. Another 23.4% are finding it more difficult.

Security managers have always had to deal with economics, but money issues are more prevalent than ever in today's climate, as corporate accountants have sharpened their pencils and boards of directors have focused unblinkingly on profit margins. Security efforts can suffer if they are looked on as overhead-an expense-rather than as a way to cut costs, add value, or at least keep value from going out the door. One survey respondent summed up the challenge as "convincing management that security is an investment, not an expense."

More than half the respondents to our survey-56.2%-said their management considers "return on investment" (ROI) relating to security system installations. In other words, they expect the systems to pay for themselves by lowering other costs. For example, 75.0% of respondents in retail, 65.4% in banking and 63.5% in insurance say their management considers ROI of security systems. However, some 40.7% of total respondents answered their management does not consider ROI, led by 71.4% of government-non-military and 58.8% of real estate.

The survey also estimates 3.49 years as the mean time period during which a security system should "pay for itself" in terms of lowering other costs. Some 63.6% of respondents set the acceptable payback period at 3 to 5 years, while 29.3% set it at 1 to 2 years.

Overall, an overwhelming majority of management seeks to cost-justify investments in security hardware and security, according to our survey. Some 37.2% say their management "always" seeks to cost-justify security investments, while 33.8% responded "often" and 22.3% responded "sometimes." Only 5.1% responded "seldom" and 1.2% responded "never."

Several measurements are used in justifying security costs, according to the survey. Some 68.0% considered "lower incidence of crime/violence" as an offsetting factor, led by 83.3% in the public institutional category, 77.8% in the insurance category, 75.0% in the real estate category, and 73.1% in the banking category.

Another factor used to justify security costs is "less loss and shrinkage," which was cited by 49.2% of survey respondents, led by 75.0% in the retail category. A third factor is "lower insurance premiums and lower liability costs," which was cited by 39.7% of respondents, including 48.2% in service, 48.1% in banking and 46.2% in retail.

"Smaller guard force required" was listed as a security cost justifier by 31.0% of respondents, including 53.7% in utility, 46.4% in government-military and 44.2% in banking.

Respondents were also asked to rate various security system technologies according to how easily they can be cost-justified (see table on page57). On a scale of 1 to 6, with 6 being "easy to cost-justify" and 1 being "impossible to cost-justify," fire detectors, alarms, door entry systems and ID cards rated high, while metal detectors/X-rays, guard houses, security intercoms and gates rated lower.

Price is an important consideration when investing in security systems, and price of systems rated 4.85 on a scale of 1 to 6, with 6 being "very important" and 1 being "doesn't matter." Price was most important in the government-military (5.17), private institutional (5.10), retail (5.04) and banking (5.00) categories; less important in the diversified financial (4.52), government-non-military (4.73) and service (4.77) sectors.

The survey was completed by the publisher and editor of Access Control & Security Systems Integration in conjunction with Intertec Publishing's marketing research group. A total of 2,340 surveys were mailed to the magazine's end-user subscribers. 820 completed surveys were returned, resulting in a 35.7% response rate. The margin of error is +/-3.42% at the 95% confidence level. The final results are presented in total and by 13 main business classifications.

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