Security Expenditure: Cost Benefit Analyses Based on the Quantified Crime Hypothesis

C. Roelofse

Studies in Economics and Econometrics, 2015, vol. 39, issue 2, 63-86

Abstract: The article explains the development and application of a model, based on the expanded crime hypothesis proposed by Coetzee (1989). The model enables analysts to perform a cost-benefit analysis on security expenditure as expressed by a Return on Investment. Security is an important part of modern societies. Crime rates, especially in South Africa, have forced organisations, businesses, individuals and even the state to employ security guards and to install, security hardware and technology. Burger (2014:1) raised the point that 74% of business executives in South Africa indicated that rising security costs is a great concern. The frequency was 45% in 2005. Security expenditure is a great concern for executives and often decision-makers struggle with the problem whether money spent on security has any benefits. Part of the problem of justifying expenditure is that the industry lacks a reliable model to calculate cost-benefits. This article's aim is to provide industry-standard terminology and to develop a cost efficiency model culminating in a model to calculate a Return on Investment on security expenditure. The cost-efficiency model is based on an integration of a number of disciplines and fields of study, notably, criminology, probability and finance. The outcome is a model for which the author developed a number of formulae that can be used to calculate a return on investment for security expenditure.

Date: 2015
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DOI: 10.1080/10800379.2015.12097281

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