Property Losses: What can happen?

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Fire and theft pose the most significant threats

By Brenda Wells

When analyzing loss exposures, there are two things you have to consider: frequency and severity. Frequency is how often something might occur, and severity is how serious and costly it might be if it does happen. It is important to never underestimate either of these dimensions, but in my experience, people have a propensity to seriously underestimate severity of loss.

Consider the Titanic. No one dreamed that the ship could sink, but it did just that. The designers were so sure this ship was unsinkable that they didn’t put enough lifeboats on it for all the passengers.

Another example is the World Trade Center. Those buildings were considered indestructible, able to withstand earthquakes and, yes, even plane crashes. The businessman who invested in those buildings was so confident nothing bad would happen that he didn’t have enough insurance to cover the total destruction of both buildings.

Finally, think back to the devastation of Hurricane Katrina. Who would have guessed that more than 1,800 people would be killed by a hurricane? Or that the city of New Orleans would be inaccessible for weeks? Very few people prepared for it appropriately.

My point is that losses can happen, and they can be a lot worse than what you predict they will be.  Optimism is a wonderful quality to have, but not when it comes to ignoring the potential for loss of your valuable property — specifically your crops, inventory and cash proceeds.

 

Crops and Inventory

You know better than anyone how valuable your cannabis crop and inventory are. Fire and theft are the two most likely causes of loss. Have you taken steps to prevent them? If not, don’t wait any longer. You need to assume worst-case scenarios and do what you can to minimize the risk of loss.

Indoor cultivation systems with extremely powerful grow lights present a serious fire hazard. There are several steps toward having the best protection against fire damage. First, have a monitored fire detection system. This guarantees a timely reaction from first responders in the event of a fire. Also, consider installing a sprinkler system in the building if you don’t already have one. It’s a big expense, but so is losing an entire crop of cannabis.

Another step you should take is to have a professional electrician evaluate your wiring and grow set-up to make sure it’s safe from overload.

Surveillance camera systems are relatively cheap these days and can go a long way toward preventing theft.

One more thought on theft: Do you know who is most likely to steal from you? Your employees. Make sure you know and trust the people who work for you.

 

Cash

I can’t stress enough that you need to be careful when it comes to handling cash. People can and will rob you if they know you have cash on hand. I have heard it said by industry experts that everyone in the cash-based cannabis business has been or will be robbed. It doesn’t matter how safe or crime-free your town is. Sooner or later you will be a target. (Yes, you!)

When I worked at a drug store in high school, the store manager would take the day’s cash proceeds out in a bank bag at the close of business. He would drive them to the bank and put the cash in the night depository. How he kept from getting robbed is a mystery to me, because thieves watch for those kinds of patterns and behaviors. They study their targets, and they find a weakness in the routine that presents the opportunity to steal.

My best advice is to use an armored car service to handle your money, which will minimize the risk of robbery in transit. But, until the banking industry gets a bit friendlier to the cannabis industry, you’re still going to have to store cash somewhere, and that presents a risk. Follow as many of these tips as you can:

– Do not accumulate large amounts of cash at one time. The more you have, the more likely you are to have it stolen.

– Do not accumulate large amounts of cash in one place. If you are storing cash, try to divide it into several smaller amounts placed in different locations.

– Do not give employees access to cash any more than you absolutely have to. Remember, they are the most likely people to steal from you.

– Get a good, heavy safe for storing cash and protect the combination religiously.

– Try not to be alone with large sums of cash. Robbers don’t like witnesses and will usually avoid a large group of people.

– Criminals hate light — so stay in well-lit, visible areas whenever possible.

– If you are transporting cash, make sure you vary your routine. Do not leave your business at the same time each day. Take a different route each time. Again, an armored car service is preferable.

– Be aware of your surroundings at all times. Pay attention when driving to make sure you aren’t being followed. If you think you are being followed, whip into a parking lot, turn around and go back out in the opposite direction. If you are being followed, this will usually put a stop to it.

 

Brenda Wells is the Robert F. Bird Distinguished Scholar of Risk and Insurance at East Carolina University. During her career she has taught insurance courses that include commercial liability, commercial property and insurer operations. She has published articles on the risk management implications of cannabis legalization and is a sought-after expert in the risk management and insurance field. She can be contacted at brenda@riskedstrategies.com with questions or suggestions for future articles.

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