A Recipe For Disaster – The Risk of Eroding Margins

Graham Tilly, Managing Director of Risk Management Security Services, discusses eroding margins in the security industry, the dangers this poses to companies and how this phenomenon has started to impact mobile patrols and keyholding services.

One service area that has certainly been appealing to many companies from within the security sector is that of keyholding and alarm response. However, why is the industry now, once again, starting to reduce prices and undermine the British Standards that are claimed to be adhered to by most security organisations.

The standard model for a keyholding and alarm response contract is a small annual retainer with a call out fee that is usually charged on an hourly basis or part thereof for the time spent on site. The annual retainer provides a contribution to the overheads of providing the service and the call out fee covers some vehicle expenses and contributes to the wages of the attending security operative; with some leftover for the company to make a profit.

This model has been successful for many years and considering the low cost to customers, this type of contract does not come under the scrutiny of the financial team, as would a manned guarding contract of £150k.

So, why as an industry, are we “beating ourselves up” again and frantically looking at ways of delivering cheap services when the world around us is trying to increase the image of the security industry and provide a service in keeping with the British Standards and the exacting requirements of the ACS scheme?

We regularly get offered keyholding contracts on a sub-contract basis and are told there is no annual retainer as we are not required to hold keys nor attend site to complete a survey. But we are not charging to hold keys. We are charging to provide a service and contribute towards the support mechanisms that are in place to enable the service to be delivered in a professional and effective manner whilst maintaining an acceptable margin to remain financially secure, that incidentally is a requirement of being an ACS company.

What is my point?

Since 2006 the security industry has been regulated and we should be embracing continuous improvement and raising standards that most companies now are inspected and audited against. The momentum to keep cutting prices will only result in corners being cut and thus service levels will go in the opposite direction to which the British Standards and ACS demand, successfully demonstrating, once again, how good the security industry is at undermining the quality standards that are currently in place.

Now, this leads me on to my second point and one that, whilst may not directly affect the day to day financial stability of a business, it certainly has the potential to bring a company down with one incident.

As mentioned earlier, we regularly get asked to attend sites and set up new contracts without having first completed an assessment of the premises and this is being used as another reason not to make a charge for the annual retainer. For very good reason the British Standards for Keyholding and Alarm Response Services, BS 7984, clearly state that prior to the commencement of a service, the organisation should undertake an initial site inspection identifying any health and safety and security risks that response officers could face in carrying out the service. So why, I wonder, are we are getting so many requests to take on work for keyholding and alarm response services without attending the premises to conduct a due assessment. In some cases, we are specifically advised not to attend the site as the customer is not aware that a regional contractor is being used to sub-contract the work to – 4.5 of BS 7984 clearly states that customers should be informed when the work is sub-contracted.

Therefore, for no charge, we would be exposing our operatives to hazardous situations without implementing any preventative measures beforehand, let alone being able to make staff aware of what dangers they could be facing when attending a property.

How is this being allowed to happen and who is responsible? I am sure that directors and senior management, who are fully aware of the standards and liability issues, would not accept this practice and therefore it is down to others. Perhaps it is the sales teams who are desperate to reach targets or the operational departments who are under pressure in many ways. Either way, it is the responsibility from the top down to ensure that all staff meet the standards that, as an industry, we claim to adhere to and that all sites are assessed before commencing work to ensure they are safe for our security teams to attend and inspect.

What is the driver behind this?

It is difficult to pinpoint this without conducting a lengthy and detailed analysis of the security companies that are operating in this way, however, a large part lies with customer education and senior management direction. For some reason, there seems a fear to tell customers exactly how our services work and that some elements may be sub-contracted. I meet so many customers who think their alarm installer also monitors the activations, when in fact, it is a third-party station such as Southern Monitoring, but they simply haven’t been told. Why are some people afraid of just being honest with the customer? All departments of a security company should be aware of the requirements under the British Standards and ACS and how they impact on their role in the business, coupled with the methods used to ensure implementation and service delivery are of the highest possible standards.

Can this be fixed, or can the approach be changed before it reaches a level where low charge rates become the norm and customers expect to receive a high-quality service, that at some point will not be sustainable? You wouldn’t go to a Harvester and expect Michelin Star food! The reality is, that low rates will result in corners being cut and processes not being followed, thus producing an outcome that is less than favourable for both the customer and the contractor.