What is Loss Management

Loss management describes a system a business uses to detect, identify, investigate and prevent events that cause a drop in the value of any of an organization's revenues, assets and services. Loss-management improvements may involve changes in a business's operating policies and business model in order to limit instances of accidental and/or intentional loss.

BREAKING DOWN Loss Management

For example, both intentional theft of company property and accidental damage to products as a result of faulty machinery constitute sources of loss that would be the responsibility of loss management. Company representatives may work alongside consultants and members of the insurance industry to improve a business's loss-management practices.

Loss management can be proactive or reactionary in nature. Many retailers will utilize any number of methods to discourage or prevent theft, and consider the theft of product to fall under loss management protocols. These steps could include magnetic security tags to clothing — placing products behind glass encasings — and securing merchandise with thin wires or cables.

Other loss management techniques include training employees to spot suspicious activity. By raising knowledge levels surrounding loss prevention methods, businesses can empower their biggest asset, personnel, to act as the first line of defense against unwanted loss and risk threats.

Advancements in data gathering and analytics have further improved businesses' loss prevention and management techniques. Similar to predictive policing methods, sophisticated loss management capabilities can now leverage mathematical, predictive and analytical techniques to spot elevated risk levels.