4 Security Risks in the Cannabis Industry—And How to Mitigate Them

4 Security Risks in the Cannabis Industry—And How to Mitigate Them

An inadequate alarm system or the improper storage of product and cash can increase the risk of theft. Here’s how to mitigate these risks.

The cannabis industry is vulnerable to theft from both inside and outside the business, including employee theft, robberies at retail locations and stolen product during deliveries. Despite these risks, many cannabis businesses are not adequately protected from theft, through insufficient security camera coverage, rudimentary alarm systems or lack of proper employee protocols, according to T.J. Frost, U.S. cannabis segment leader at HUB International, an insurance broker that provides a variety of business and personal insurance products, as well as employee benefits.

Here are the top four security risks cannabis businesses face—and best practices for mitigating them.

Problem #1: Inadequate security. Camera systems or alarms that only cover a portion of the building or operation can leave the business exposed to theft.

Solution: Install comprehensive camera and alarm systems. These systems should be installed by a company that has previous experience with the cannabis industry and should be able to cover any future expansion needs, Frost says.

A HUB International risk consultant walks clients’ facilities and suggests security measures, he adds, which can include additional cameras, a check-in system for those entering the facility and implementing a dedicated security staff.

“We go through the gamut from how to protect [a facility] from an insurance point of view, [and] having a security company that actually focuses on the cannabis space is suggested,” Frost says.

Problem #2: Missing or weak employee protocols. This can include a failure to check employees and their bags as they enter and exit the facility or worksite.

Solution: Implement robust employee procedures. Companies should consider implementing check-in and check-out processes for each room and shift change, as well as supplying employees with company-issued work attire that is worn during work hours and stored on-site.

Internal theft can be difficult to mitigate, Frost says, and theft and crime insurance policies are available to cover any losses. “There are also EPLI claims, just in case. If it’s wrongful termination, there are claims there that can be paid.”

Problem #3: Inadequate employee screening prior to employment.

Solution: Vet potential hires with background checks. This helps identify any potential issues prior to hiring.

“[HUB International] sets forth guidelines, and most of the states have their own regulation and compliance rules when it comes to [hiring],” Frost says. “Most of the time you can’t have any felonies. [Employers] have to do background checks. Some companies do credit checks, [as well as] auto [and searching a potential hire’s] DMV records. That’s a big issue because the premiums for auto [insurance] alone are expensive, and now if [an employee has] a bad report, that’s just going to drive those premiums even higher.”

Problem #4: Noncompliance with basic insurance requirements. This includes failure to properly secure product at the close of each business day.

Solution: Establish in-house security teams to manage compliance. Companies can also work with their insurance brokers to assess all the business’s vulnerabilities and work to get programs in place that address the company’s unique risks in each area of the business.

Different states and insurance carriers will have different regulations about securing product and cash at a business’s facility, Frost adds.

“Some states [make it] mandatory that you have an 800-pound vault in your cultivation,” he says. “Some, there is [no regulation]. Obviously, our goal would be to have a banking solution, and each state is slowly coming on.”

It is important that cannabis businesses work with insurance brokers that have experience in the industry, Frost adds, as they can help the business establish protocols to increase workplace safety and security.