© 2009 ICTS Newfield Global BVwww.ictsglobal.com

Reducing Loss at Check Out: an untapped opportunity

LP Watcher Release 4 Presentation

Madrid, August 2009

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

1

ICTS is specialised in the implementation of efficient check-out Exception Management Tools, generating remarquable results and

a swift return on investment during the first 3-6 months of the project in many cases

The enhancement opportunity at Check-Out is significant in Loss Reduction terms

Check Out represents a real opportunity: it accounts for

as much as 30% of Total Loss

Internal Theft47%

External Theft33%

Internal Errors15%

Suppliers5%

Unknown Loss drivers in Retail

*Source: ICTS Database

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

2

Check-out Loss is an extraordinary source of immediateprofits and an issue worth tackling asap

“New problems will appear to replace the ones solved”

“It is a security issue”

“My company is different: It would not work with us”

Myths and legends about Loss Reduction at Check Out: change inhibitors are mainly cultural

Not at all. Our model focuses efforts on following up onmain issues, enhancing the productivity of assignedemployees

Certainly. We help by doing it in a swift, focused, comprehensive and sustainable way

Within 3 to 6 months, initial investments will have paidoff, and that with the existing team

Sure. We will repress fraud and errors that are currentlyharming your bottom line and we will monitor potentialnew frauds

Unfortunately not: processes, people, information tools and protection measures are involved along the entire supply chain

It always works, no matter where you stand. Dissuasion isinstrumental in achieving real results

“We can do it by ourselves … we are already doing it”

“The timing is not right: we do not have sufficient money, nor time nor people for that”

“Check-out fraud is inevitable: it is part of doing business”

“We will have to increase the number of security and control employees”

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

A Check-Out loss management tool will get the most out of different fonctionalities

COMPANY POLICIES

Cashiers

StoresEvents

References

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

4

Returns and exchanges

Null sale

Cancellations

Manual discounts

Credit/Debit/Loyalty Card Repetition

Non-scanned products

Supplier and gift vouchers

Negative amounts

Late night operations

Number of non-existing employee operations

Number, value and percentage of price corrections

References with the largest number of: returns, exchanges and cancellations

… and triggers a follow-up workflow, generating a dissuasion effect that drasticly reduces check-out errors and frauds

Suspected frauds are detected thanks to alerts of parameters and company policies’ infringements

Examples of indicators to build company rules:

ACTION PLAN

ALERTS

RULES

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

5

6 cashiers

10 cashiers

25 cashiers

34 cashiers

4 RISK PROFILES

3 RISK PROFILES

2 RISK PROFILES

1 RISK PROFILES

Source: ICTS Database

Detecting risks and company rules’ infringements at Check-Out on store/regional/national level is possible

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

Real life example of risk detection at Check-Out: excessive use of discounts by cashiers

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

0

50

100

150

200

250

0

2

4

6

8

10

12

14

16

18

113

25

37

49

61

73

85

97

109

121

133

145

157

169

181

193

205

217

229

241

253

265

277

289

301

313

325

337

349

361

373

385

397

409

421

433

445

457

469

481

493

505

517

529

541

553

565

577

589

601

613

625

637

649

661

673

685

697

709

721

733

745

757

769

781

793

805

817

Total CuponesCupones Redimidos

por Día

EMPLEADOS

CUPONES REDIMIDOS POR EMPLEADO

CUPONES REDIMIDOS POR DÍA

TOTAL CUPONES

7*Source: PoS file / Real anonymised hypemarket example

Focusing on high risk employees is possible

NUMBER OF VOUCHERS REDEEMED

PER DAY

VOUCHERS REDEEMED PER EMPLOYEE TOTAL NUMBER OF REDEEMED VOUCHERS

EMPLOYEES

VOUCHERS PER DAYTOTAL VOUCHERS

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

8

0

5

10

15

20

25

30

35

40

45

NB OF NULL AMOUNT

LINES

STORE

TOP 10 STORESNUMBER OF NULL AMOUNT LINES

Mean: 7,90 Lines

0

5

10

15

20

25

30

35

40

NB OF NULL AMOUNT

LINES

CASHIER- STORE

TOP 20 CASHIERSNUMBER OF NULL AMOUNT LINES

Mean: 3,10 Lines

Identifying cashiers with most null amount lines is possible

The tool allows to focus company ressources and actions ( training, interviews, follow-up ) on high-risk cashiers and employees

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

9

21%19%

20%22%

13%25% 19%

18%19%

18%

0

200

400

600

800

DISCOUNT AMOUNT € TOP 10 STORES

TOTAL DISCOUNT PER EMPLOYEE

12% 21%18%

21%

19%

25%19% 23% 12% 19%

0

100

200

300

400

500

DISCOUNT AMOUNT €

TOP 10 STORESTOTAL DISCOUNT PER EMPLOYEE

Importe Descuento Empleado

% s/ Importe Total Empleado

Identifying discounts applied by employees in stores is possible

AMOUNT DISCOUNT EMPLOYEE

% DISCOUNT / TOTAL SALES EMPLOYEE

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

10

Identifying the cashiers with most manual entries is possible

0

200

400

600

800

1.000

1.200

1.400

1.600

1.800

0

20

40

60

80

100

120

140

343

7-1

240

322

2-1

533

323

7-1

540

290

4-1

142

286

3-1

240

322

8-1

536

329

3-1

525

000

0-1

576

366

1-1

073

374

0-1

240

322

9-1

540

000

1-1

037

355

8-1

257

201

9-1

039

152

4-1

106

215

9-1

071

012

5-1

533

204

2-1

106

156

0-1

037

000

1-1

075

000

0-1

469

000

0-1

529

AMOUNT €NUMBER OF LINES

CASHIER - STORE

TOP 20 CASHIERSWITH MANUAL ENTRIES

MEAN: 167,67 €MEAN: 10,73 Lines

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

11

The tool allows to focus company ressources and actions ( training, interviews, follow-up ) on high-risk cashiers and employees

Sorting cashiers by risk level is possible

0

100

200

300

400

500

600

700

0 10 20 30 40 50 60 70 80 90 100

CORRECCIONES SIN LLAVE

ANULACIONES SIN LLAVE

ANULACIONES Y CORRECCIONESSIN LLAVE

CLUSTERDE EFICIENCIA

CLUSTERDE RIESGO

CLUSTER DE OBSERVACIÓN

CAJERASDEALTO RIESGO

(5.4 % DEL TOTAL)

*Source: Pos File / cashiers with a steady activity*Real anonymised hypermarket example

CORRECTIONSWITHOUT KEY

CANCELLATIONS WITHOUT KEY

CANCELLATIONS AND CORRECTIONSWITHOUT KEY

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

12

The Check-Out Exception Management Tool contributes efficiently to Loss Reduction

An advanced Checkout Loss Prevention solutiontriggers large potential benefits and low levels of risk

Losses

Benefits

Investment

• Reduction of losses between 30 % and 60 % depending on the company / format, generated by mistakes and collusion

• Multiply the productivity of the Loss Prevention actions

• Increase operational efficiency at Checkout

• Pay back of 3/6 months

• The cost by store / month is minimal

© 2009 ICTS Newfield Global BVwww.ictsglobal.com

13

Selected references of ICTS Newfield in Loss Prevention and Risk Reduction for the last 10 years

ICTS Newfield Global has operated in Europe since 1986

World Bank