How to Reduce Operational Risk with Smart Data
4 May, 2020
Operational risks and shoplifting, which, though having no large repercussions in the short term, take on much importance in the long term.

When thinking of financial losses, certain situations of large amounts lost in an instant easily come to mind. It could be even one of those movies of millionaire bank robberies. (Pardon the cinematographic comparison.)

More seriously now, there are, unfortunately, other risks in our sector that need to be considered. Two good examples are operational risk and shoplifting, which, though having no large repercussions in the short term, take on much importance in the long term.

Operational risks refer to resources that are lost during prior‑to‑sale processes, and hence, never yield any income. On the other hand, shoplifting –a constant threat to retailers– represents products that some clients intentionally take without paying by using different methodologies, such as shrinkage or deliberate forgetting.

Going further into the details, it seems necessary to explain how one of these methodologies work. Shrinkage consist in a thief stealing a small amount of products on every visit to an establishment. It is imperceptible, little by little, but amounts for a considerable financial loss at the end of a year. According to a study presented at the 22nd Congress of the Spanish Association of Manufacturers and Distributors (AECOC) on Loss Prevention (November 2019), this phenomenon accounts for retail annual losses of approximately 1.8 billion euros in Spain.

It is, therefore, evident that companies in the retail business should not overlook these events, since they seriously affect results, and that they should also seek measures to mitigate the losses caused by such acts.

There are some measures that have proved to be actual solutions to these problems. Some companies apply new methods based on Smart‑Data technologies, which consist in gathering all of the data for smart processing with algorithms, exhaustive analyses and identification of all information relating to store incidents. Consequently, Smart Data enables prescriptive and descriptive analytics leading to real‑time decisions aimed at reducing and closing this loss breach that is so important to companies.

Thanks to new technologies, companies like ALTO España (Spain) offer services for unknown loss reduction based on Artificial Intelligence.



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