Criminal flash mobs pop up as new holiday risk

Risk managers at retail organizations are focusing on safety and loss prevention protocols to address the recent trend of criminal flash mobs during the holiday season.

While estimated losses from criminal flash mob and flash rob events are relatively low, there is a concern among risk mangers for safety around their operations and about public relations issues that ensue after an attack, experts say.

Not to be confused with flash mobs—groups that assemble in public spaces for entertainment and are thought to be relatively harmless—flash robs consist of groups that organize through social media to suddenly assemble in a public space to plunder stores, an activity that sometimes escalates to a level that can't be controlled by loss prevention, mall security or police, experts say.

The National Retail Federation said criminal flash mob events are an increasing trend and warned retailers of potential risks, according to an August statement.

Ten percent of the 106 retailers surveyed by the federation in July reported being victimized by at least one criminal flash mob event over the previous 12 months, with occurrences often resulting in injuries to customers or employees, theft and property damage.

James Stenstrom, director of risk management at Roundy's Supermarkets Inc. in Milwaukee, said that while he hasn't seen any kind of intelligence that his particular business is exposed to this threat, “there is a flash mob mentality that we are aware of.”

The issue was brought to his attention by Roundy's CEO, Mr. Stenstrom said.

“We talked about it at one of our budget meetings coming up for the year, and whether or not it's something we're addressing. We're looking at it from a negligence standpoint as a very small exposure,” he said, noting that it may be a greater concern for retailers that carry electronic and other consumable goods that may be targeted by thieves.

Flash rob risks are trending upward as social media use has increased, said George Jehlen, senior vp and director of risk control services for Wells Fargo Insurance Services Inc. in Atlanta. “It has been increasing over the last three years in particular. We've seen a number of incidents, both from a flash mob standpoint and a rob” standpoint he said, noting that some national retailers have experienced multiple hits.

Typically crime, general liability and property insurance policies will respond to criminal flash mob losses, insurance industry experts say.

“Currently there are no exclusions that I've seen in the marketplace on it,” Mr. Jehlen of WFIS said.

“It's not a focus on loss control as much as it's a focus on how to manage the situation from a safety standpoint,” said a risk manager of a national big-box chain retailer who wished not to be named for this report.

“We haven't had any incidents, but our loss prevention area has a protocol in place as a proactive measure. It appears this is more prevalent in a convenience store setting, so the exposure is greater with our gas stations than our main store,” the risk manager said.

Criminal flash mob events are a year-round threat, said Mac Nadel, Marsh Inc.'s retail, wholesale and food and beverage practice leader in Norwalk, Conn. But the risks may be exacerbated by the holiday season, which is so critical for retailers' profits.

“The actual losses themselves are not necessarily high dollar amounts. It's more the concern around safety in the stores and local public relations concerns,” Mr. Nadel said. As criminal flash mob events typically attract media coverage, shoppers may not come back to the retailer due to a tarnished brand reputation, he said.

It is important for a large retailer to evaluate its high-risk locations and perform an annual assessment of its security program, according to Kelly Brown, retail and wholesale industry practice leader for Zurich North America Commercial in Philadelphia.

“The worst thing that could happen would be to have an employee seriously injured or a fatality,” Mr. Brown said.

Establishing communication protocols to be used during an attack, such as a coordinated public relations response to media reports and inquiries, also is critical, along with vetted apprehension procedures to ensure the safety of employees and customers, he said (see list below).

David Johnston, director of business development for loss prevention services provider LP Innovations Inc. in Milford, Mass., said that focus is all about safety.

“Dealing with a flash rob situation, I can't stress enough the training and awareness of the employees,” Mr. Johnston said, noting that one or two employees cannot stop 25 to 30 individuals participating in the rob.

During an attack, retailers should stress to employees to never grab, stop, prevent, or lock in multiple offenders. “There are instances that people are doing that and all it's resulting in is unnecessary violence,” Mr. Johnston said.

Steps to consider to prepare for the risk of a criminal flash mob attack

• Establish policies and procedures to protect employees and customers from injury.

• Establish local and corporate communication guidelines to field questions from the media.

• Monitor social media to assess criminal flash mob threats.

• Determine apprehension guidelines to protect employees from injury.

• Establish “observe and report” protocols and documentation.

• After an event, secure surveillance recordings and preserve areas touched by theft suspects.

Source: Zurich Services Corp., the risk engineering unit of Zurich North America Commercial