In the News

Jun 1, 1997 12:00 PM, >By Staff

Study warns computer industry: Wake up to loss prevention Companies can put a stop to rising losses from computer theft, warranty fraud and counterfeiting, says a study of 17 top computer manufacturers and distributors. Three companies that implemented comprehensive asset management programs reported significant loss reduction, according to the study, including one company that saw its annual losses drop from $12 million to less than $500,000.

BJSI, a Raleigh, N.C., asset management technologies company, surveyed computer distributors about their use of asset management and loss-prevention practices. The third annual study quantified losses, identified industry trends and best practices and examined the advantages and disadvantages of loss-prevention technologies.

Notable findings Worldwide losses from computer theft, warranty fraud and counterfeiting are rising at an alarming rate. Losses in 1996 are estimated at $4.8 billion and are expected to grow to $9.6 billion by 2000. According to Asset Management Technologies (AMT), the FBI calls the theft of high-value computer components one of the fastest-growing criminal enterprises in America. Based in Cary, N.C., AMT provides loss-prevention services to the computer and electronics industries. An estimated 80 percent of computer thefts are committed by employees and other insiders, says AMT.

Although losses have skyrocketed, the industry has been slow to respond. The computer industry must adopt the successful practices of the retail and banking industries and begin treating high-value assets like gold - not like parts, says BJSI. Toward that end, several industry trade associations, including the High-Tech Crime Industry Association, the Theft Prevention Foundation and the Freight Claims and Damage Task Force of the Computer Technology Industry Association, have joined together to address the issue and educate members.

Three companies that have begun comprehensive asset management programs reported significant loss reductions. These companies have concluded that asset protection is a management responsibility and have implemented integrated security solutions involving more than the traditional response of cameras and guards.

Four key factors

The significant rise in high-tech crime can be attributed to four primary factors:

* A conducive environment. Several factors make the environment conducive to losses, starting with an insatiable demand for the latest and greatest computer technology. In addition, perpetrators of computer theft are well-organized and have established distribution networks, and downsizing and outsourcing at computer companies have resulted in reduced employee loyalty and a you owe me attitude.

* The intrinsic nature of computer components. Computer components are generally high in value (worth more than their weight in gold), small in size (easily put in a pocket), pluggable (novices can use them to upgrade), exposed to warranty fraud (even dead components can be traded for replacements) and are not serialized (cannot be traced).

* Ineffective business controls. Imagine a bank or a gold vault with no measurements to identify and report unexplained losses of $1,000 in gold bars and you can begin to understand the conditions inside some computer companies. High-value computer components are not treated like gold; they are still treated like parts. For example, inventory variances (often up to 5 percent of inventory) are tolerated by both the internal and external audit communities, because they are only parts.

The result: A diminished ability to effectively identify a theft, prove ownership and prosecute.

* Minimal use of technology. Other industries, such as retail, banking, automobile and even nuclear weapons protection, have long employed the newest and best technologies and practices effectively to combat crime. The computer industry is just beginning to explore using these technologies. Camera surveillance, benefit denial, metal detection, electronic article surveillance, package inspection and serialization are not being deployed as widely as they should be. Those companies that have used best practices and new technologies have experienced dramatic reductions in losses.

Seminar series focuses on remote security The first in a series of eight instructional seminars on interactive technology and its security applications will be held June 4 in Los Angeles.

Dubbed the AIMS Interactive Security and Site Management Seminar, the series is sponsored by AIMS (Alliance for Interactive Management Solutions), which is a joint effort of AIT Corp., Ottawa, Ontario, Canada; Westec Interactive Security, a division of Westec, Newport Beach, Calif.; and Pac Bell Network Integration.

Remote interactive technology is a two-way audio/video communications system in which real-time response is direct and continual from a remote location.

These seminars are invaluable for business managers seeking to learn the fundamental concepts of remote interactive technology, says Lou Fiore, president of L.T. Fiore Inc., a security consulting company in Orlando, Fla.

Seminars will feature an overview of remote interactive technology, security applications and supplemental business and site management features. Current crime prevention techniques will be discussed and examples will be given on how interactive technology can be used to either complement or replace conventional techniques. A live demonstration of interactive technology at work will be provided as the grand finale at each seminar.

Richard R. Nuss, president of Nuss and Associates Inc., a Winter Springs, Fla., security consulting firm, will be keynote speaker. Nuss retired from the Winter Park, Fla., Police Department after 20 years of service as a crime prevention unit supervisor and media specialist. Seminar dates and locations * June 4, Los Angeles * June 5, San Jose, Calif. * June 10, Chicago * June 12, Dallas * June 17, Boston * June 18, Washington, D.C. * June 19, Secaucus, N.J. * June 24, Orlando, Fla. Seminar time: All seminars begin with continental breakfast at 8 a.m. and end at approximately noon. Admittance fee: individual - $49 For information: Visit the AIMS web site, www.aimsalliance.com, or call Robin Hahn at Westec Interactive Security, 714-725-6642, or Wendy Smith at AIT Corp., 613-722-2070.

Iris identification technology advances Dr. John Daugman of Cambridge University in England has developed computer algorithms that enable the unique features of an iris to be encoded in as few as 256 bytes, according to The London Press Service. With the technology, a computer equipped with a camera establishes identity by comparing the iris to 40,000 reference patterns per second. Additional dedicated hardware can speed up the search to 160 million patterns per second.

While access control products and car anti-theft devices have been targeted for commercial development, the first commercial application of Daugman's system has been commissioned by Oki, a large Japanese manufacturer of automatic teller machines (ATMs). Oki plans to use the technology to identify users of ATMs.

The complex mathematics needed to encode and compress the large quantity of digital data contained in the image of an iris into a small data-storage volume is at the heart of the technology.

According to the London Press Service, the system detects small variations such as constriction and dilation of the pupil - characteristics of a living eye - so it cannot be deceived by a fake eye or photograph.

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