Managing risk: the key issue

There is presently a sense of post-traumatic stress disorder in the marketing department at the National Security Inspectorate (NSI). The team has that world-weary air of soldiers returning from the front, still desperately trying to come to terms with their experiences.

The reason? We have just completed a series of 11 seminars across the UK, at which we have spoken directly to one of our key stakeholder groups – the insurance companies and brokers/intermediaries. Those who take the critical commercial decisions on who shall or shall not receive insurance cover, and at what premium. This is an uncompromising audience, and we have been forced to work hard in answering their challenges.

Security Management Today (SMT) readers with a keen historical awareness will of course know that the connection between the NSI and the insurance industry is not a new one. Indeed, the need to ‘refresh and renew’ our relationship is constant, since we have so much in common.

In the early 1970s, it was the insurance industry which recognised the need for security companies to operate to demonstrable standards and gave birth to our forerunners. It was not until 1998 that the proverbial apron strings were finally cut.

The long association continues to be strong, based on two fundamental – and still growing – factors. The first is the objective measurement of past performance. NSI-approved companies have proven their value in claims histories, yielding improved premiums and the increase of insurance capacity which inevitably follows.

The second is the speed at which the NSI has proven that it can adjust the delivery of standards in line with technological and market advances (and at a speed calculated not to decrease, and ideally to reduce, the risk burden on UK plc).

Feedback: the performance to date

Before running these seminars, we polled the insurance industry to give us its feedback on our performance, not least in order to form the basis of the discussions we needed to have with insurance experts on a face-to-face basis. Hundreds of insurers and brokers offered their views. We then collated the results. They make for interesting reading.

91% of insurers and brokers specify NSI for electronic security systems (the split being 97% for insurers and 88% for brokers). Although this is not a great surprise to those aware of the relationship, the result speaks volumes for the quality of performance of NSI-approved companies in this sector.

Meantime, 32% specify NSI for security guarding and cash services delivery. Although this figure hasn’t been measured at any time in the past, one underlying trend is that our merger in 2001 – in addition to the new branding in 2003 – has given the first real impetus to this requirement. We believe it is in everyone’s interest (including insurers) to specify this sector more strongly. The argument is simple – why leave the protection of a site or installation open to a weak link?

If the electronic systems need to be NSI approved, so too (surely) must the guarding element – a physical presence, key holding or CCTV operations, for example.

Insurers told us that their specification and/or recommendation decisions in this area are growing, but they also pointed out their concerns in such areas as Glasgow where, to some extent at least, intimidation has undermined confidence in the sector. We, in turn, promised to continue acting as a strong gatekeeper, regardless of these threats.

Given the resounding vote of support which the top end of our industry has now received from the risk management professionals – that is to say the insurance industry – we should now expect that NSI approved companies will (to quote Gordon Brown) receive the “light and limited touch” of regulation

Of those insurers and brokers questioned, 35% specify NSI for fire systems. A truly remarkable result. Three years ago, NSI was the ‘New Kid on the Block’ in the fire industry, and – outside of the well-established world of sprinklers, which has been operating since 1880 – we are now the leading third party certification body for fire detection/alarm systems and fixed fire suppression systems. The insurance support in this sector is both very impressive and hugely gratifying.

With the new CFOA policy starting to bite – and it will bite hard in 2008 – and given the imminent Fire Safety and Reform Order, it is set to grow, thereby linking even more strongly the integrated security systems/guarding/fire systems approach. An approach which represents the future of risk management.

Perhaps the most important question we put to insurers concerned their views of us as an organisation. We asked them if any other body matches our rigour and consistency in the security and fire industries? 88% said ‘No’, with much of the remainder given over to the Loss Prevention Certification Board’s fire scheme (which, as stated, we have now overtaken).

Then we asked them another critical, related question… Is there any other body which matches our rigour and consistency in any other industry? 93% of respondents said ‘No’.

There is a general sneering at the security industry in certain quarters. We have all heard the negative comments made about us. They never give full credit to the top end of the industry, where the readers of SMT either provide or receive a quality service. That credit is now forthcoming from an industry not much given to sentimentality, and with an overview of every risk in every industry.

We, say the insurers and brokers, are the best of all. A superb accolade for the NSI, but also for every company meeting the high standards to which we operate. Those companies (ie between 10% and 15% of all security/fire companies by number) represent 70%-80% of the industry by contract value.

Cutting back on red tape

Chancellor Gordon Brown’s 2005 Budget contained details of his unequivocal support for the Hampton Report as the view of ‘new’ tracts of regulation which the Government is wholeheartedly embracing. In addition to a series of initiatives designed to reduce the amount of red tape which burdens business, this is the key to Government regulatory policy.

Top of the list of recommendations contained in the Hampton Report is that risk management should form the basis of all regulatory decisions, and that the Government must focus on those areas which are of higher risk. In our industry, this equates to the weak, unscrupulous end of the market populated by criminals and cowboys.

We should now expect that NSI approved companies will (to quote Gordon Brown) receive the “light and limited touch” of regulation.