Academic journal article Trends & Issues in Crime and Criminal Justice

Financial and Psychological Costs of Crime for Small Retail Businesses

Academic journal article Trends & Issues in Crime and Criminal Justice

Financial and Psychological Costs of Crime for Small Retail Businesses

Article excerpt

The costs of crime against small businesses are potentially enormous but difficult to quantify. Police records offer little and, in any case, many crimes go unreported to the police. Estimating dollar costs is often difficult for victims, even for direct losses. It is considerably more difficult to estimate indirect losses and almost impossible to measure psychological effects. The costs of business crime also extend beyond the victimised business.

Based on a survey conducted in 1999, this paper provides an overview of the financial costs and psychological impact of crime experienced by a sample of Australian small retail businesses. Losses varied according to the type of retail sector, with liquor outlets experiencing the highest losses. Larger businesses (five to 19 employees) had higher crime costs than smaller businesses. The highest losses overall were from burglary and shoplifting. Psychological costs were substantial, with one in four victims of burglary, and one in two victims of robbery experiencing fear of crime; one in five victims of robbery experienced difficulty attending the premises where the crime occurred. Further research investigating the longer-term impacts of small business crime is recommended.

Adam Graycan


Estimating the costs associated with crimes against small businesses is difficult. The police do not routinely collect information on costs, and many offences are not known to them anyway. Estimating dollar values is often hard, even for direct losses. More difficult still is estimating indirect losses (for example, business disruption or time spent assisting the police with their inquiries). Estimating psychological costs is almost impossible (for example, emotional stress, the long-term effects on employability, and relationship difficulties). Moreover, business crime impacts not only on victims. It incurs largely incalculable costs:

* for government, through lost revenue;

*for customers, through higher prices;

* for taxpayers, through having to fund a more expensive criminal justice system;

* for employees, through increased fear and possible job losses; and

* for all businesses, through higher insurance premiums and the potential effects that business closures due to crime could have on other local businesses.

The closure of a petrol station, for example, can have extremely detrimental effects on the viability of surrounding businesses indeed, this situation occurred in the state of Victoria last year (Pallavicini 2001).

It is clear, then, that the financial consequences of crime against small businesses in Australia are potentially enormous, given that there are approximately one million such businesses employing 3.4 million people (ABS 1999a), and that the small business sector contributes strongly to national employment growth (ABS 1999b, 1999c). To date, though, there has been only one previous assessment of the costs of business crime in Australia. This was through a 1992 national survey by the Australian Institute of Criminology (AIC) of nearly 1,000 businesses spread across primary industries, tourism/recreation, manufacturing and retail (the latter numbering about 400 businesses). Results were reported by Walker (1994, 1995 and 1997); his estimates are returned to later.

The cost estimates in this paper come from a second national survey of businesses: the Small Business Crime Survey conducted in 1999 by the AIC and the Council of Small Business Organisations of Australia with funding from the National Crime Prevention Program. The survey sampled just over 4,000 businesses across Australia, mainly in the retail sector. While some preliminary results were published in late 2000 (Perrone 2000), both this current paper and an earlier report outlining victimisation patterns (Taylor & Mayhew 2002) build substantially on the preliminary findings. This paper cannot quantify all the costs of business crime, but focuses rather on some of the financial and psychological costs as reported by owners/managers in the survey. …

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