Expert Security Strategies to Protect Your Cannabis Business with Tony Gallo, Managing Partner at Sapphire Risk Advisory Group

In this episode of the Roots to Risk Podcast, hosts Eric Schneider and Isaac Bach are joined by Tony Gallo, a leading security consultant and founder of Sapphire Risk Advisory Group, to discuss the critical role of security in the cannabis industry.

With over 11 years of experience and involvement in over 800 cannabis projects across the country, Tony shares his expertise on how to prevent losses, the importance of thorough employee training, and the value of tailored security solutions.

This episode is essential listening for cannabis operators looking to safeguard their businesses against both internal and external risks, ensuring long-term success in this high-risk industry. Tune in to gain actionable insights and learn how to build a resilient security framework for your cannabis business.

Transcript

00:00 Eric Schneider:

This is the Roots to Risk Podcast hosted by Eric Schneider, alongside Isaac Bach. Roots To Risk brings you insights, the latest stories, and long form discussions about the cannabis industry. You’ll hear interviews with industry leaders and their perspective on current and future trends, how they’ve built success and what challenges they have faced. Our goal is to facilitate candid conversations and provide informative content for the cannabis community at large. Let’s go. How we doing, Isaac? What’s going on, man?

 

00:30 Eric Schneider:

Good to see you.

 

00:32 Tony Gallo:

I’m

 

00:32 Eric Schneider:

Good. How are you doing? I’m great. I’m great. Excited to, to be on, have another Roots to Risk podcast. We have a great, great guest on deck, somebody who’s really been in it from the start and providing a service that, you know, is, is very, very much needed in the, the cannabis space specifically. And, and he’s had a lot of experience and other, I would say, hi.

 

01:04 Eric Schneider:

Ah, fuck God, damnit. Hey Tony, how are we doing today? Thanks for joining us on the Roots to Risk podcast.

 

01:12 Tony Gallo:

Thank you. Thank you for having me on.

 

01:15 Eric Schneider:

Absolutely. Well, you know, we’ve, we’ve had the pleasure of getting to know each other and obviously, you know, you’ve been involved and in the cannabis space since its inception, but we’d love to, you know, hear from you, you know, what Sapphire risk brings to the cannabis industry and how you got into the cannabis industry as well.

 

01:36 Tony Gallo:

Sure, sure. So just a little, little background about the company. So we are the oldest national security consultant company in the cannabis industry. We just celebrated our 11th year, actually the 12th year I’ll become up in August. And in that time we worked with about 800 cannabis clients in 37 states. We do three things, we call ’em phases. Phase one was we help with the application process. So currently we’re pretty active in Kentucky and Minnesota, Delaware, Rhode Island are the me states for application.

 

02:11 Tony Gallo:

Phase two is we help and actually design the security. Think of us like a security architect would be. We designed the video, the alarms, the access control. We decided, we just opened our hundred 57th location, our 26th in New Jersey. So, nice. Definitely a great, yeah, definitely excited about that. And, and then our third is probably our most important is, and you know, a lot we’re dealing with, it comes with insurance.

 

02:40 Tony Gallo:

Good fit is we do a lot of policies and procedure training, employee training, robbery awareness, cash management, culture of honesty for employee theft and so forth. So we do a lot of work with clients. We, we like to say, you know, the old expression, you know, operation, application to operations. We, we really believe in that. We’ve been with some clients for over five years that we’ve worked with, like kind of their, in-house security director would be most companies, cannabis companies are, a lot of them cannot afford an in-house secure director.

 

03:17 Tony Gallo:

So that’s where we started. And then you asked me where we start, how I started the, so it’s a very interesting story. So I’ve been in the high risk retail business about 25 years and you know, jewelry pawn, liquor firearm, convenience stores, basically any retail company that has a high amount of cash and a very desirable piece of merchandise, jewelry, guns, tobacco, lottery tickets, cannabis.

 

03:45 Tony Gallo:

And about 11 years ago or so, I get this call from the startup company called MJ Bizz. And they call up and they say, we’re doing an event in Boston, Chicago and San Francisco, and we’re looking for a company that can talk about cash, how to secure cash. So I said, well, let me call you right back. And then I went and I googled, because I’ve never done it either to the cannabis industry before. And I said, well, high amount of cash, very desirable piece of merchandise, A little bit like a jewelry store or pawn shop or something like that.

 

04:19 Tony Gallo:

So I called him back and I said, I will speak at that event. There’s 125 attendees. I remember 15 vendors. The guy in front of me was the owner of Med Men. The guy behind me was the owner of GTI, the guy, another guy was Steve D’Angelo. So if you look at that roster, it’s like a who’s who of the cannabis industry. And then there’s me and then I spoke at it. So, but interesting, 11 years and, you know, love working with clients. That’s

 

04:48 Isaac Bock:

Awesome. Yeah. You, you literally were there with the, the originators and founders of the, the industry we as we know it today. But, you know, with that in mind, like what have you seen over the last 11 years, you know, from whether it’s the application side, the security side, or the SOP side, that’s kind of changed as cannabis from a, you know, more regulated side of things has continued to be mature.

 

05:16 Tony Gallo:

You know, that, that’s a very interesting question. ’cause it came up in our conversation. We were talking about Kentucky today in, in, in Minnesota, when the industry about 11 years ago was involved, there was a lot of regs that came in from the states that actually didn’t make a lot of sense. They would have requirements that they took from the jewelry industry or requirements that they took when it came to security that really didn’t, didn’t pertain to cannabis. And as I see the industry growing, it learned a lot, a lot of the states learned that, you know, if you look at how cannabis in the United States became legal and it migrated from the west, Colorado, Oregon, Washington, California, and headed east.

 

06:01 Tony Gallo:

So the more east you get, the better. A a lot of the security requirements was what we focus on come into play. You know, an application process in, in New Jersey is very different than you would see an application process in Washington.

 

06:18 Tony Gallo:

And you know, that’s one of the things I think a lot of the, the clients that are now applying need to understand the value of the security is really something that they’re gonna use going forward. And maybe looking at making sure that those programs are in place prior to them opening and not in place after they have had a loss. And, and I see a lot of, a lot of focus on that in a lot of the new applicants, more geared to actually running their business after they’ve opened than just the fact of trying to open.

 

06:58 Eric Schneider:

Yeah, no, that, I mean, that makes a lot of sense and, and obviously we kinda delve in similar areas, but different, right, in terms of risk management, you know, what are some best practices or, and things that are like low hanging fruit that, that operators typically miss or, you know, can implement to help reduce a lot of the risk. And then, you know, after that, after that answer, we’d also love to hear, you know, what are some things to avoid, right?

 

07:29 Eric Schneider:

Like, you know, early on and where you’ve seen a a lot of operators have challenges since you’re involved early, during and throughout the life cycle of a cannabis operator.

 

07:44 Tony Gallo:

No, so definitely a good question. So we’re very focused on the prevention. You know, I’ve been in retail, I worked for Sears, I worked for Macy’s, I worked for a 1300 store pawn shop chain. So one of the focuses that we always push with our clients is to be, to have a preventive security program. We don’t see that a lot or we don’t see it enough. You know, some states their requirements are not, not gonna really help them as they grow.

 

08:15 Tony Gallo:

And, and we’ll see some, some owners who try and cut corners to, you know, to open their location and it, it comes back to bite them. You know, they can pay us now to help them with the prevention or they can pay us after they lost a hundred thousand dollars and, and a safe being cut into or a break in occurring or an, an employee stealing or a robbery going on.

 

08:38 Tony Gallo:

So a lot of times when we have conversations with, especially a new business owner in the cannabis industry, we, we try and explain to them that, you know, that you wanna design your security to prevent losses from occurring. You don’t want to design your security to either catch people doing bad things from going on or having to adjust after bad things have occurred. You know, you know, we do a lot of post security that comes into post, meaning that they’ve already experienced that loss. There’s been a break in, there’s been a robbery, there’s been an employee that has stolen, you know, a lot of people lose sight of the fact that 80% of all the losses that occur in the cannabis industry are internal and the employees themselves are, are the ones that are the bigger losses.

 

09:24 Tony Gallo:

And sometimes their focus may not be there.

 

09:27 Tony Gallo:

You know, I think a big miss is, and you see this on the west coast more than the East coast, is what kind of safe they use. The west coast did not have a requiring safe. So a lot of people would go to Costco, Walmart and buy a safe. You don’t see that as much on the east coast because it’s a little more requiring. And that, and that trued out a few years ago, we had unfortunate situation where there was a lot of looting that occurred throughout the United States. There were 83 dispensaries that we were aware of that had been broken into, 23 of them had their safes breached.

 

10:02 Tony Gallo:

All 23 of them were gun safes and not TL rated safes that you would see in other states. And you know, the, the hundreds of thousands of dollars of loss that occurs from there. And then a lot of times a, a, a miss is that they spend a lot of money trying to open, you know, and they lose sight of actually training their employees.

 

10:22 Tony Gallo:

And you see from the insurance point of view, you know, we do a lot of expert witness testimony and you know, a lot of its centers around lack of training of that employee in a, you know, unfortunate situation, whether it’s a robbery or a break in or shoplifting or something of that nature. And then there’s a lawsuit and then, you know, the question is, well, what kind of training have you given that employee? And the answer really for most part when it comes to that is none. You know, and that can definitely hurt a client. So I, I would say that the big, that’s the biggest efficiency I’ve seen in the cannabis industry is the poor training when it comes to security of their, of employees in this.

 

11:00 Tony Gallo:

Yeah,

 

11:00 Isaac Bock:

That makes a ton of sense. And one of the things that, you know, we’ve seen on the insurance side is just certain areas obviously have higher risk of loss in terms of theft. So how on your guys’ end, do you guys go about addressing it? Is it kind of a universal standard you hold across the country for certain areas? Do you guys implement a different practice? How do you guys look at that from like an exposure standpoint?

 

11:27 Tony Gallo:

Yeah, so much like we do with other high risk businesses, we have a grading system of high, medium and low risk locations. Obviously, you know, an area that has a high risk where we’ll do a crime study of the area or understand what’s going on will provide additional security, whether it’s a, a roll down gate at the front, whether it’s a a a, a Robbie training course more robust to, to that, that neighborhood or, or the alarm system or the camera system.

 

11:59 Tony Gallo:

And then obviously going down from medium to low, most cannabis facilities fall into that medium range. There are some that fall into the high, very few fall into the low locations. We, you know, but we do see a a a lot of times where a lot of time we’ll go in and we’ll fix the problem after they realize now they are a high risk, you know, especially when it comes to the, how they secure their facility at night and, and, and what that looks like.

 

12:32 Eric Schneider:

That makes a lot of sense. I mean, it sounds like there’s a base level that you guys approach that everybody should have, but depending on the operator circumstances, you know, the, the scope of the exposure, the crime score, you guys are taking a, a tailored approach.

 

12:51 Tony Gallo:

Yeah, so I, you know, every location needs to have a, a, a good video camera system, a a a a system that allows you to see it on your phone, maybe give access to the police department to have that ability. Then the other thing that you also want to see is a good alarm system. You know, it, that’s your backup at the end of the night. A lot of times we’ll see where the alarm system wasn’t properly installed or didn’t, you know, isn’t gonna give the adequate coverage that they need to give when it comes to the security part of it.

 

13:24 Tony Gallo:

And then obviously the access control, you know, you know, how do you prevent a robbery from occurring in the cannabis industry? Well, it’s, it’s a lot easier than it may be a convenience store or a jewelry store because you have to come in and you have to show id, if it’s a medical, you have to show your medical card if it’s, if it’s a, a adult use, you have to show your, your driver’s license or, you know, proof that you are over 21 years old.

 

13:49 Tony Gallo:

And right there, that prevents a lot of people from what we call rushing in to rob a store, you know, and, and you know, most locations have some sort of access control device that restricts people from the public to coming straight into the sales department. And, you know, that really helps reduce that robbery that occurs and you see in other high risk businesses. And again, it goes back to having that proper prevention that, and, and a lot of times will, will resolve the, the issue before you have to spend the money to resolve that issue.

 

14:22 Isaac Bock:

Yeah, I think one of the things that you said was

 

14:24 Eric Schneider:

Oh, absolutely, and I know No, you’re good.

 

14:29 Isaac Bock:

So Tony, one of the interesting things you said is that, you know, 80% of losses kind of come from internal, you know, employees or whatever the case might be. So how, you know, what do you recommend in addition to training or what type of training do you recommend providing to help prevent that? Because seems like that’s more of a human nature potential issue, rather than something you can kind of train out with people.

 

14:55 Tony Gallo:

Sure. So let, let’s, let’s start, we’ll back it up and then we’ll come back to the, the internal issue, physical security. A lot of people need to focus on what their building looks like. Is it inviting to someone? So we call it, you know, there’s, there’s a, a theory that I prescribed to, which is called the broken window theory. If you ever look up, if you wanna read a a, a pretty good book about that and that, and, and what that means is if you walk by a building and you see an abandoned building and there’s some windows that are broken, you’re more inclined to pick up a rock and throw a a through through the window because everyone else has been doing that.

 

15:32 Tony Gallo:

Take the same thing with a cannabis dispensary. If you pull up to the dispensary and the parking lot is dirty, there’s not good lighting.

 

15:39 Tony Gallo:

If there’s graffiti on the walls, if it says to you, the people at the dispensary really don’t care, the chances of someone doing something bad at that increases dramatically. A lot of times people don’t think of that, of what their outside looks like and what your message you’re conveying to the neighborhood when it comes to break-ins when it comes to robbery attempts. So a lot of that physical starts right there. Is there a good camera coverage when you walk in? Will you be on there? Are you being buzzed in or is there some sort of a, a, a restriction of access to the back rooms or whatever that really, if you look at most of these break-ins that occur, you can, you can stop right there from that internally, I think a lot of people, we call it the culture of honesty, just do not understand that you’re not allowed to take home product.

 

16:30 Tony Gallo:

You can’t, you know, you’re not, you know, friends come in, you can’t under ring merchandise, you can’t hand things out. You can’t allow theft to occur, you know, and a lot of times we’ll see employees who were not going to steal, steal because people are allowed to steal, you know, other people you’re watching and other people are allowed to do something. No one’s ever mentioned anything about them. And that forces that dishonesty in, in, in the store. So really, I think, you know, like I said, developing a good culture of honesty for that those employees, understanding that, you know, theft would not be tolerated, that there’ll be actions to that, that there’s a way to monitor, you know, you know, we do accept and report based monitoring where we’re able to look at transactions and, and look on the video, just letting the employees know that package checks, you know, maybe we don’t do package checks all the time, but at least they know that there is, maybe they don’t put stuff in their bags when they leave at the end of the night.

 

17:28 Tony Gallo:

And then again, going back to communicating to the, to the outside world is how do you look, you know, are, do you look like somebody who really doesn’t care? So why should they?

 

17:41 Eric Schneider:

That’s a, that’s a great point. Those are the subtle nuances that I think a firm like yourselves brings to the table, right? And, and at the end of the day, a lot of times, like, you know, I’m a firm believer in this, but it’s, the, the big things are, are definitely fairly obvious, but it’s those little subtle details that can really make or break, you know, a, a company’s security plan and, and the ability to prevent those types of actions.

 

18:10 Tony Gallo:

You know, WWI see this all the time. We’ll, we’ll get calls and, you know, established a cannabis facility and they’ll incur a, a, a huge loss, a hundred thousand, 200,000, you know, and when they bring us in to do that risk assessment, you know, which we do, a lot of them, you know, you can clearly identify, you know, well, your bathroom window opens to the outside, or you have a bad waste disposal program and they’re taking trash out at two o’clock in the morning, they’re coming back in and empty, you know, taking the product out of the, out, out of your waste or you, or you’re allowing employees to do this or, you know, the breakin occurred because your alarm system hasn’t been ever tested or anything like that.

 

18:52 Tony Gallo:

And, you know, it’s sad because a lot of these business owners as you know, you know, this is their, their, their business.

 

18:58 Tony Gallo:

They started, you know, the, we call ’em mom pause, but you know, they, you know, they, they, you know, there’s not a huge amount of corporate cannabis right now and, and you know, it’s their money, you know, it’s not a corporation’s money and, and you know, and, and it’s sad sometimes when we walk in and we go, you know, had we had you put this lock on this door or had you used, have you secured the, the secured storage at the end of the night, you wouldn’t be filing a $300,000 insurance claim or something of that nature.

 

19:31 Eric Schneider:

Understood. Well, well, Tony, this has been really helpful and I think, you know, anybody that wants, you know, further additional information for their specific location should reach out directly to you because, you know, at the end of the day there’s definitely a lot of overlap in terms of things that everybody should do. But you know, as you mentioned, there’s subtle nuances depending on the location where they are, the, the type of operation. So, and, and you guys take a very customized approach and, and it’s very, very needed in the cannabis space and it continues to add additional legitimacy to the space, right?

 

20:08 Eric Schneider:

Whenever you have additional security regulations, you know, it, it protects the industry and, and we appreciate everything that you do.

 

20:16 Tony Gallo:

Thank you, appreciate it.

 

20:19 Eric Schneider:

Another great one in the books, something that, you know, we are, are fairly familiar with and, and see a lot and, you know, obviously risk management is a tremendously important part of this industry and, and what Tony and his team do, you know, starting from the application process all the way through getting the, the security system set up and then ongoing servicing and education, I think is, is really, really important to allow the industry to grow and scale with without the disruption that an unforeseen unfortunate circumstance can cause.

 

21:00 Isaac Bock:

Yeah, I mean, I think, and you mentioned it while we were speaking with him, like a lot of the small details he mentioned, you truthfully don’t think about and even, you know, in what we do day to day, we see the, the controls that need to be in place at all these locations even get insurance. So having a security consultant who understands, you know, what the pitfalls might be and explain that to the businesses, invaluable to a, keep the business safe and growing.

 

21:28 Eric Schneider:

Absolutely. And you, and you can’t duplicate the experience, right? And, and all of those subtle little details that he points out is all from previous experience, right? And just, and seeing a lot of different businesses, not only in the cannabis space, but also in in other high risk retail businesses. So, you know, if anybody wants to have a further conversation with employee to reach out to, to Tony Gallo and his team directly and look for an individual consultation and another great one in the books and, and something that we haven’t had on here previously.

 

22:03 Eric Schneider:

And as I’ve said time and time again, the goal of this is to bring in a lot of different folks throughout the cannabis space, get their perspective and provide their value on this platform. So another great one and, and appreciate your time Isaac, as always,

 

22:19 Isaac Bock:

Absolutely appreciate your time as well and excited for the next one.