The legal cannabis industry has changed rapidly since its inception in the United States. With these changes have come increasing competition, evolving regulation and an even stronger emphasis on security. Veterans in the cannabis industry have seen these changes occur first-hand and are some of the best equipped to ensure compliance in cannabis businesses.
David Kotler, a well-accomplished attorney practicing in the legal cannabis sector, has experienced the transforming cannabis industry directly. In 2014, the biggest hurdle was getting legacy participants up to speed by helping those ‘operating in the gray area’ to comply with newly issued regulatory guidelines. In his 6 ½ years in the industry, Kotler has also seen a shift in the importance placed on the security plan on the front-end.
“Win [competitive] markets like Massachusetts or California are now security plan dependent,” Kotler said. “There’s a necessity now to have a well-thought out and engineered security plan in advance to show the municipality and state regulators.”
Start Up
Although the cannabis industry has seen consolidation in the last few years, new players enter the industry every day. For those just starting in the industry, Kotler advises them to put good people in place to succeed and to take advice from seasoned consultants. It’s important to check resumes and experience in the industry prior to hiring and look to established cannabis businesses for ideas for operation and security.
“Double the time you think it will take you to get up and running and double the money that you think you will have to spend.”
Prepare for the Worst
Kotler, who holds extensive experience in risk management, advises cannabis business owners to be wary of losses caused by outside forces. Damage from robberies, burglaries or looting can be detrimental to a business. Although insurance can help to mitigate the cost of the damages, policy provision violations, like improper inventory storage, can often lead to lack of coverage. It’s better to take a proactive approach to facility security to prevent damage before it occurs.
“If you’re doing it on the back-end, you’re doing it too late. You may spend a little more on the front-end to save a lot on the back-end.”
Different Markets
Kotler has experience working in large competitive cannabis markets, like California, as well as in smaller markets, like Michigan or Massachusetts. While business risks across markets are relatively similar, Kotler stressed there could be a significant difference in price between compliant build-outs depending on the equipment selection and who is overseeing the project.
“You could do two plans, both of which meet any regulatory or local or state requirements, and there could be a significant difference in price depending on who’s running it. The level of difference in meeting a regulatory requirement can literally be six-figures.”
Future Predictions for Security
Although recent events have led to a tightening of security, Kotler believes in some ways security requirements will loosen in favor of more proactive approaches.
“I think [cannabis security] will stay on the same course with proactive planning and implementation… We pushed security for the cannabis industry, across the vertical, into something that was more in depth than what someone would have at a federal mint, which then increases costs.”
While some security regulations in place may be a bit over-engineered, hopefully the future of cannabis security reduces some of the costs while still ensuring the safety and security of employees and purchasers.
How can Sapphire Risk help?
Tony Gallo and the team at Sapphire Risk Advisory Group has over 30 years of security experience and expertise. Take advantage of our consulting services and subscribe to our newsletter to learn more. Follow us on Facebook or connect with us on LinkedIn to receive further security updates.
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