Difference between Loss Prevention and Loss Reduction-

Loss Prevention-

1. A risk control technique that reduces the frequency of a particular loss and is the act of taking proactive measures to prevent or abate identified risks which, if left unmitigated. It is the concept of establishing policies, procedures and business practice to prevent the loss of inventory or monies in a business environment. It is a “pre loss” strategy.

Examples-Workers Compensation covers wages and medical benefits for injuries arising out of work.         Loss Prevention Example:As the manager of expediting services, he/she has experienced 2 employee work injuries in the last six months and multiple complaints about lifting heavy boxes. And he/she discovers a great new lifting device that will reduce the injury potential for their employees and a local resource that can come do injury prevention training for their employees.  

General Liability is a type of claim that members of the public file if they feel that the organization has been negligent by an action and/or by an omission and that action or omission results in their sustaining bodily injury and/or property damage.  Loss Prevention Example:Although the organization is diligent in maintaining safe premises, the most common complaint, due to their lengthy snow and ice seasons, arises out of slips and falls.   A loss prevention project idea may include additional floor mats to absorb melting snow for high traffic building areas. Other loss prevention ideas may entail warning signs for risks such as snow sliding off roofs, etc.

The major area of caused loss in the retail environment is through Errors. Often considered paperwork errors, these mistakes can contribute upwards of over 15%-20% of an organization’s annual loss. Ironically, most of the errors seen in organization are employee-caused, thereby making an organization’s employee perhaps the highest contributor to the business loss every year

For example- Errors can occur anywhere from checking in shipments, to ringing on the register to transferring merchandise. These errors can include the inaccurate counting of merchandise to the improper discounting or accounting of a sale or tender. Simple mistakes caused over and over again have resulted in thousands of dollars lost to a single retail establishment.

Loss Reduction-

It is a risk control technique that reduces the severity of a particular loss. This is a “post-loss” strategy that is essentially a response plan that addresses what will be done if a loss does occur. An effective Loss Reduction strategy can effectively reduce the impact of a loss and can make the difference between an inconvenience and a catastrophe. Management methods are used to limit the extent of losses when they do happen. Practicing strict legal compliance with all environmental laws and safety procedures as well as maintaining good public relations is extremely important in managing loss reduction when unfortunate situations develop.

For example- An automatic sprinkler system installed in a building is an excellent example of a loss reduction program. It doesn't eliminate the possibility of a fire, but the chance of a fire being a severe loss is greatly reduced because the extinguisher system should help put the fire out before it causes too much damage

Another example is a one-person operation with few face-to-face client interactions most likely won’t need personal injury insurance. But the need might change as the customer base grows and you hire employees. Regularly monitoring a loss reduction plan is essential to make sure it remains effective.

For example the selection of a legal course of action, salvage of damaged property, etc., with a mindset of halting or reducing the spread or effect of a loss that has already occurred.