How can you assess the risk of theft or damage to your capital equipment?

2 Evaluate the likelihood and severity of theft or damage

The next step is to evaluate the likelihood and severity of theft or damage to your capital equipment, based on various factors, such as the type, location, and usage of the asset, the nature and frequency of the threats, and the availability and effectiveness of the preventive and protective measures. For example, some capital equipment may be more vulnerable to theft or damage than others, depending on whether they are portable, attractive, or easily accessible. Some threats may be more common or severe than others, depending on the environmental, operational, or human factors that may cause them. Some measures may be more feasible or efficient than others, depending on the cost, benefit, or impact of implementing them. You can use a risk matrix or a risk score to rank and compare the different scenarios and outcomes.

3 Estimate the financial impact of theft or damage

The third step is to estimate the financial impact of theft or damage to your capital equipment, based on the value and depreciation of the asset, the cost and time of replacing or repairing it, the effect on your cash flow and profitability, and the tax implications. For example, if your capital equipment is stolen or damaged beyond repair, you may have to write off the remaining value of the asset and recognize a loss on your income statement. You may also have to incur additional expenses to acquire a new or similar asset, which may affect your budget and liquidity. You may also have to adjust your depreciation schedule and tax deductions, which may affect your taxable income and tax liability.

4 Implement risk management strategies

The fourth step is to implement risk management strategies to reduce the likelihood and severity of theft or damage to your capital equipment, as well as the financial impact. You can use a combination of preventive, protective, and corrective measures to achieve this goal. Preventive measures involve taking actions to avoid or deter theft or damage, such as locking, labeling, or tracking assets, installing security systems, and training staff or contractors. Protective measures are designed to limit the extent of theft or damage; for example, covering assets, using backup power sources, storing items in secure locations, and having contingency plans. Corrective measures are intended to restore capital equipment after theft or damage; for instance, reporting the incident to the authorities or insurance company, claiming compensation or reimbursement, repairing/replacing the asset, and updating accounting records/tax filings.

5 Monitor and review your risk assessment

The final step is to monitor and review your risk assessment regularly, as the value, condition, and usage of your capital equipment may change over time, as well as the nature and frequency of the threats and the effectiveness of the measures. You should update your inventory and valuation of your capital equipment, as well as your risk matrix or score, at least once a year, or whenever there is a significant change or event that may affect your capital equipment. You should also evaluate the performance and efficiency of your risk management strategies, and make adjustments or improvements as needed.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?