What are the Security Challenges of Protecting the Cannabis Industry?
29 Jul 2020
The advent of a truly new market for the physical security industry is a rare occurrence. Particularly rare is a new market that is both fast-growing and provides an environment that is not just conducive to application of physical security technologies but that actually demands it. Such is the case with the market for legalized marijuana. We asked this week’s Expert Panel Roundtable: What are the security challenges of protecting the cannabis industry?
The biggest challenge I have encountered in the cannabis industry is convincing cannabis operators that their retired law enforcement or military buddy is not always the best choice for a security leader, and their security alarm or camera vendor is not usually the best source for a security plan. There are three things that must be present simultaneously for a crime to occur, and security systems must be designed to reduce or remove the one element of the triangle they can most affect: Opportunity. They may also reduce an adversary’s ability and desire by increasing the complexity of skills they must possess or plans they must orchestrate in order to succeed at the crime. Security systems such as cameras, electronic access control, and alarms are tools. Tools are not solutions. A strong security management program based on cannabis operations management experience and security best practices and standards must be implemented.
Protecting the cannabis industry has unique challenges that require a true security expert. First is the patchwork of legal and regulatory requirements that vary by state and municipality. For video surveillance alone, there are specific state and local requirements regarding everything from days of storage to coverage areas to frame rates. The security integrator must have a comprehensive understanding of these requirements lest the customer run afoul of regulators. Even more important is the unique exposure of the cannabis space because it is a cash-heavy industry with high-value inventory. Unlike a typical retail environment, most transactions at cannabis dispensaries are done in cash. At the same time, the cannabis product itself is easily converted to cash by criminals. Consequently, security integrators must bring their more advanced solutions to the table. In particular, cannabis businesses can benefit from interactive remote monitoring by trained professionals who use live video and two-way audio.
In general, the biggest challenges have to do with meeting stringent compliance requirements for licensing, specifically when it comes to video security. Each state has its own set of rules with regards to camera coverage, video quality and days of retention so it’s important that operators work with systems integrators or a consultant who designs security plans for the cannabis industry with experience in a certain state. It is also important to understand the risk profile of the different segments of the cannabis industry. The risk profile for cultivators is quite different than that of dispensaries so you cannot really take a one-size-fits-all approach. One mistake we see happen is operators will choose low-cost technology without realizing that there are options particularly in video security software that allow you to do more with less resources through technology like video analytics or integration with access control, Seed-to-Sale software and environmental sensors.
The cannabis industry is full of contradictions. In the US, more than half of the states have legalized some form of cannabis commerce and usage, yet it remains illegal under federal law. As the cannabis industry matures, so does the demand for sophisticated physical security solutions to protect the process and properties from seed to sale. In addition to keeping compliance top of mind, cannabis cultivators operate in a high-value product and a cash-intensive business, making them ripe targets for thieves. Smart camera placement maximizes viewing areas. To comply with regulations, camera resolutions and frame rates need to be high enough to easily identify faces and movement of product throughout processing. To help prevent break-ins, outdoor cameras should send real-time notifications to key personnel. And, because the cannabis industry is growing so rapidly, security systems should be scalable so more stores and cultivation locations can easily be added as needed.
Within the cannabis sector’s manufacturing side exists many operational facets requiring robust protection at all times. One of the major security challenges is protecting against internal theft. The cannabis industry also must contend with a number of regulatory requirements around how companies must stay compliant, such as maintaining effective video surveillance – which also enables a business to act quickly if an employee exhibits suspicious behavior. Some states maintain that if video feeds go down, the entire network must shut down operations until video is operational, which can mean a significant loss of revenue. Another security challenge is transportation, with cannabis businesses requiring secure transportation to move products from operations to warehouses to retail. Companies that implement a security command center should take all of these challenges into consideration when implementing a control room or security operations center within this market, with special emphasis on the various requirements from seed-to-sale.
Cannabis cultivators and dispensaries face a number of unique challenges when it comes to physical security, but the greatest of these is probably compliance. The rules and regulations around securing cannabis facilities are vast and complex – and there is no room for error. In North America, there are very specific requirements covering camera placements, resolution, and video retention times.
In places like Europe, different challenges exist because the laws around cannabis use are still evolving. Additionally, any solution in this part of the world has to balance security needs with strict privacy legislation. One thing that is common to all cannabis businesses, regardless of where they are situated, is the need to protect high-value assets. Many facilities are largely cash businesses. Further, condensed cannabis oil and other packaged cannabis products can also be prime targets for thieves, so having a video surveillance system with intelligent real-time alerts is a must.
The cannabis industry is expanding fast as growers, distributors, and retailers are looking to build and extend their businesses into new markets and territories. As the industry evolves and mergers and acquisitions occur, security teams often inherit a multitude of security applications that were not designed to work together. As a result, cultivators need to consolidate and centralize their security operations in one unified platform so they can manage access control, video monitoring, and alarms across all their locations. The complicated nature of ever-evolving federal, provincial, and state regulations can complicate compliance for expanding cultivators operating across state and federal borders. Cannabis businesses need a security system that allows them to meet compliance regulations and to be ready for the next audit. Cultivators and retailers are competing in a rapidly growing and evolving industry. To succeed, they need to stay ahead, maximize operational efficiency, protect customer data, and manage compliance.
Cannabis is still considered a Schedule 1 drug in the U.S., even as it is legal for recreational use in 11 states and the District of Columbia, decriminalized in 15 states, and legal for medical use in 33 states. On the ballot in November 2020, the U.S. could also see up to 11 states approve some form of medical or recreational use, additional decriminalization and/or social equity initiatives. Various jurisdictions have dissimilar regulations and penalties on implementation, or lack thereof, of electronic physical security (EPS). There is no nationwide “definitive” set of regulations regarding EPS in the cannabis space. The “Security Plan” is typically the heaviest weighted aspect of the myriad of licensing requirements. Without the Drug Enforcement Administration (DEA) declassification and getting a specific exemption in the Controlled Substances Act (akin to alcohol and tobacco), the burden of EPS implementation can leave licensees exposed.
There are increasingly stringent and evolving security requirements in the regulated cannabis industry. Practical solutions must comply with existing regulations and be flexible enough to evolve as the customer grows. While security requirements are similar to those of any high-value location, such as a bank, a big challenge is simply the scale of some cannabis sites, which can be 1 to 2 million square feet, usually in large warehouses or greenhouses. Proper application requires knowledge of standards and innovation to apply the advanced intrusion, intensive video coverage and global access control rules. Third-party remote video health check and management solutions are often required to monitor employee activities. Motion detectors are needed in the mechanical rooms to protect air conditioning units, to minimize potential interference with growing conditions. For open-air outdoor cannabis sites, video surveillance and intrusion demands are very stringent as the natural wall and ceiling protection is not in place.
Meeting regulatory requirements is a major challenge in the cannabis industry, especially when it comes to video systems to oversee facilities and operations. Cannabis business owners are also particularly vulnerable to crime, given their cash-only business model and high-value inventory of goods that could easily be sold on the street. The physical security market is rising to the challenge of delivering solutions to meet the needs of this fast-growing sector, which represents a rare opportunity for the security industry – a lucrative emerging market.
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