Liability vs. ROI Analysis

Customers often come to us with an idea that they want to implement some sort of technology to a mitigate a liability, but in most cases there is no budget nor a full understanding of the overall cost associated to the liability.

All expenses incurred by a company should be budgeted and based on a calculated ROI (Returns On Investment). Security budgets and expenditures are no different than marketing budgets, maintenance budgets, staffing budgets, etc. they should all be based on empirical calculations, not only on what feels appropriate as is often the case.

Some department budgets are justified by their ROI through increased revenues, other budgets such as maintenance and security are justified by reducing losses through investment.

The term liability as used in a security context is used to encompass all possible sources of losses; financial or otherwise.

The term ROI as used in a security context is not an investment that provides a revenue return. It's an expense that pays for itself in reduction of losses, increase in reputation, increases in safety, increases in moral and the prevention of loss of life, etc.

Liability vs. ROI Analysis

There are three components to this calculation:

1. Identifying all actual liabilities and translating them into quantifiable business risks.
2. Identifying how to mitigate the liabilities, and determining the associated cost.
3. Calculating the ROI as the per cent of cost of mitigation divided by the cost of the risk.

After properly identifying the liabilities a company is facing, the application of physical security policies and procedures supported by appropriately designed and effectively implemented technology can mitigate the liabilities, thereby generating a ROI.

Patronus Laboratories can assist in developing the business case to specifically show how potential costs associated with liability, caused by security breaches, can be minimized by implementing a sound security policies and procedures and supporting technology infrastructure.

This approach of utilizing an ROI to cost justify a security budget is the same premise used to purchase insurance for commodities like office furniture, computers, etc. The difference is that if a security breach occurs as a result of not implementing the proper protection procedures, the associated costs far outweigh the costs to replace furniture.

The potential liabilities, such as loss of production and/or loss of reputation are translated into actual dollars in the ROI. The security budgets are created by taking a small percentage of the cost of the potential losses and applying it to preventative measures.

The first step is to identify the liabilities and work with the companies financial office to determine the cost associated. Once the costs are identified an annual budget can be established. Given a budget Patronus Laboratories can work to enhance the policies and procedures intended to mitigate the liability and when appropriate design a solution to enhance the staffs ability to monitor and enforce the policies and procedures.

Contact us to assist you in working through the above process.

Call us

Call us on 1-818-232-7726 and we'll be happy to answer any questions you have.

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