TT Talk - Theft, Smuggling and Terrorism

How much does cargo crime really cost? Globally, the value of stolen cargoes runs into hundreds of billions of dollars each year. The FBI estimates this figure for the US alone at over USD 18 billion each year. Others think that this is a gross underestimate and that cost could be as much as 45 billion dollars. Whatever the figure, it is a truly staggering sum.

In an article in the US Journal of Commerce, Mr. Michael Wolfe of the North River Consulting Group points out that theft, smuggling and terrorism form an unholy trinity with proceeds of one often used to fund another. The vulnerability of the supply chain to terrorism is the greatest concern to national security and international law enforcement agencies, while for individual transport companies it is the risk of theft that is probably more important. The problem, as Wolfe sees it, is that corporate controllers regard security costs as an expense, without considering the impact poor security can have on the company's bottom line. In his view, managers responsible for insurance, security and risk management can easily make an economic case for greater security and should be talking to the financial director in a language he or she understands: return on investment.

Much of the cost of cargo crime is borne by individual companies but is largely hidden from view. The value of the items stolen can easily be assessed, but in addition there are lots of intangibles: the sales lost to stolen goods, the damage to brand reputation when stolen items turn up on the black market, the extra expenses of sending urgent replacements, the damage to the company's relationship with its customers and the management time spent in trying to repair it, the costs of claims processing; and the impact on insurance rates. By using credible estimates of these sorts of costs - and the benefits to be gained - to demonstrate a business case, Wolfe argues that claims professionals should be able to prove to the accountants that investment in security does have a payback and therefore deserves a higher priority

Security against cargo crime and security against terrorist attack are often two sides of the same coin: nowadays it is as important to stop cargo slipping in through the gate unannounced as it is to stop it leaving without permission. Wolfe argues that effective measures to reduce vulnerability to terrorism will also be effective against theft or smuggling. He also believes that politicians and government officials could do much more in the fight against terrorism by recognising the causal link between measures to reduce theft and those to reduce vulnerability to terrorist attack. They should also support the collation of clear, believable numbers about the total impact if theft and smuggling. Finally, he calls on government to drive the incentive theme home by stating loudly and clearly "Help yourself as you help national security - be pro-active on cargo security and reap the surprisingly large business benefits that come with reduced theft."

Staff Author

TT Club