From LP to Internal Audit to Enterprise Risk Management

signet jewelers brands

EDITORS NOTE: Kevin Valentine, CFI, LPC, retired at the end of 2017 as senior vice president of internal audit, loss prevention, and enterprise risk management for Signet Jewelers. He spent more than thirty-five years with the company in various management roles. During his career, Valentine was active in the loss prevention industry supporting LP Magazine, the Loss Prevention Foundation, and the Loss Prevention Research Council.

EDITOR: Who is Signet Jewelers, and what brands make up the company?

VALENTINE: Signet Jewelers Limited is the largest specialty jewelry retailer in the US, UK, and Canada. Signet operates approximately 3,600 stores primarily under the name brands of Kay Jewelers, Zales, Jared The Galleria Of Jewelry, H.Samuel, Ernest Jones, Peoples, and Piercing Pagoda. Signet also operates The companys annual sales of approximately $6.4 billion derive from the retailing of jewelry, watches, and associated services.

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EDITOR: How did Signet come about?

VALENTINE: Signet Group PLC was incorporated in England and Wales on January 27, 1950, under the name Ratners (Jewellers) Limited. The name of the company was changed on December 10, 1981, to Ratners (Jewellers) Public Limited Company, on February 9, 1987, to Ratners Group PLC, and on September 10, 1993, to Signet Group PLC.

The group expanded rapidly by acquisition during the period 1984 to 1990. It first entered the US market in 1987 by acquiring Sterling Inc., a company based in Akron, Ohio. Kay Jewelers Inc. was acquired in 1990 and Marks & Morgan Jewelers Inc. in 2000.

On September 11, 2008, Signet Group PLC became a wholly owned subsidiary of Signet Jewelers Limited. Signet also moved its country of domicile from the United Kingdom to Bermuda on the same day, although it retains headquarters in Akron, Ohio.

In February 2014, Signet Jewelers Ltd. agreed to buy Zale Corporation.

In July 2017, Virginia Drosos was appointed as the new CEO of Signet Jewelers Ltd., replacing Mark Light who had served as CEO since October 2014.

In August 2017, it was announced that Signet Jewelers Ltd. agreed to buy R2Net, owner of online jewelry retailer James Allen.

EDITOR: You advertise yourself as the worlds largest retailer of diamond jewelry. What are some of the statistics that relate to that claim?

VALENTINE: This is based on the volume of Signets sales and the overall percentage of those sales that are diamonds.

EDITOR: In how many countries do you have retail operations or manufacturing locations?

VALENTINE: Signet has retail operations in the United States, Canada, and the United Kingdom. Signet also has a diamond liaison office in India, a diamond-polishing factory in Botswana, and a design center office in New York.

EDITOR: Describe your career path and previous responsibilities inside the company.

VALENTINE: Originally when I was hired as the director of loss prevention, the company was called Sterling Merchandise. We were a privately held company with seventy-three stores. I was the companys first loss prevention person and was given the task of building a loss prevention program with no staff. There was literally nothing except a table, a straight-back chair, and a two-drawer, empty filing cabinet.

In 1985, I was able to justify hiring my first regional loss prevention investigator and was also given the responsibility of the inventory control department and the telecommunications department. In 1986, an investment group purchased the company, and we went public, which allowed us to start expanding and acquiring other jewelers across the US. Becoming part of the due-diligence team as we continued to make acquisitions became a very exciting and fulfilling experience.

In 1987, the company was purchased and became a wholly owned subsidiary of UK-based Signet Jewelers Limited, which operated jewelry stores in the UK. Because of the companys growth, in 1989 we started an internal audit department, and I was promoted to director of loss prevention and internal audit Sterling Jewelers, another company name change. We also started a store retail and corporate audit program.

Then in 1992, I was promoted to the vice president of loss prevention, internal audit, and inventory control with the responsibility of 500 stores in seven years, having grown from seventy-three. In 2002, the internal audit department became the project management office for Sarbanes-Oxley (SOX) compliance. In 2012, I was promoted to vice president internal audit and enterprise risk management (ERM) Signet International, which included all LP, internal audit, risk management, and physical security in the US, UK, India, and Botswana. At the same time, I started to report functionally to the audit committee of the board of directors of Signet, with administrative reporting to the CFO. What was unique about this was that this was the first time a department was over not only our US operations but also international.

My last promotion was in 2015, when I was promoted to senior vice president of internal audit, loss prevention, and enterprise risk management Signet International, which was a result of continued growth of the company along with the acquisition of Zale, which took the company to over 3,600 locations and $6.4 billion in revenue. So in over thirty years, I had the pleasure of being part of this growth from a seventy-three store, privately owned jeweler to the largest retail jeweler in the world.

EDITOR: You own multiple responsibilities in the company. Describe your organization and the various staff and roles reporting to you.

VALENTINE: During my career, I have had the opportunity to have many great team members that like myself have worked their way up in the retail jewelry industry. The following individuals have well over eighty years combined experience in the industry and with my retirement have some new roles. Mark Neapolitan, senior director of loss prevention, is responsible for all the field LP teams in the US and UK. Chris Hackler, senior director of physical security, is responsible for the entire store, corporate, distribution center, and our factory in Botswana. Tom Kimble, senior director of internal audit, is responsible for all corporate audit and store audit for the US and UK. Scott Robinson, senior director of enterprise risk management, is responsible for all Signet responsibilities for ERM and SOX compliance.

EDITOR: With your long tenure in your company and the retail security industry, how do you view the change that has occurred as an LP and risk management executive in this industry?

VALENTINE: Progressive departments can be an integral part of the leadership teams within the organizations and have the ability to impact companies results. LP can definitely have a voice, thereby affecting change and direction. This doesnt happen by chance. You must earn it by adding value that can be measured.

EDITOR: What are the challenges of managing risk at a specialty retailer dealing with expensive lines of merchandise?

VALENTINE: You need to have an enterprise risk management process that is created and agreed to by LP, operations, and management. There are two sides of risklooking at risk to control the probability and/or impact of an event or to maximize opportunities. At the retail level, it is managing risk of loss to the customer experience. There is not an LP policy or procedure you want to put into place that takes away from that positive experience and results in a sale. Thats a challenge.

EDITOR: Given the global nature of your business, how do you protect the supply chain from source to manufacturing to delivery to the store?

VALENTINE: We utilize very sophisticated software and well-trained people that have the ability to identify and locate product not only where it is at but also the location within a specific area.

EDITOR: Inside the store specifically, what technologies and procedures are in place to prevent both internal and external losses?

VALENTINE: Stores are risk ranked depending on a number of factors, and that drives what technologies and procedure we use. It starts with strong physical protection complianceeverything is under lock and keyand then it is supported by the appropriate technologies, in other words, alarms, CCTV, remote interactive monitoring, security officers, and so forth. In addition, we do extensive counting of product with the assistance of an automated merchandise piece-count system that allows us to determine that there is no loss on a daily basis.

EDITOR: How have these technologies and systems evolved over the years?

VALENTINE: First, LP technologies and systems are now fully integrated, providing data that supports the point of sale, merchandise systems, and marketing efforts. These technologies have allowed LP to add value to the retail business. Second, vendor relationships have become more important as they continue to help develop solutions to our complex problems. Vendors have really evolved into true business partners and solution providers. When we look at an issue, it is as simple as where you are, where do you want to go, and how do you get there. The first two are relatively easy. The third one is the work. Working with solution providers who understand that is important.

EDITOR: Do you have a vision of how they may change in the future?

VALENTINE: I cant stress enough that these areas must have an IT expert that is connected and helping to develop the department roadmap. If not, you will be lost.

EDITOR: Retail in general has changed significantly in recent years as it relates to e-commerce and omni-channel retailing. Are you seeing similar changes in jewelry retailing? If so, how is that changing your role?

VALENTINE: Many years ago, I can remember we opened a stand-alone distribution center for e-commerce. It was thought of as a separate channel. Boy, has that thought changed! It is now the total customer experience, highlighted with the expectations for the need for instant sell and pick up. The biggest challenge is how to manage the omni-channel logistics online orders and manage your inventory for a maximum sell through, fulfilled to the buyers home, online sent to store for in-store pickup, orders submitted through other distributors and their logistics infrastructure, not to forget the merchandise return process. Having a lot of involvement from the internal audit side to ensure that all these new systems have adequate controls in place is a must. It is a total change from the only option of brick and mortar.

EDITOR: What would you regard as your proudest accomplishments during your career as an LP executive?

VALENTINE: I would say it isnt about one single accomplishment but rather the sum total of what was accomplished over the years, with the same company. Being with a retailer with such a tremendous story of growth, adapting to those growth needs, and being able to contribute meaningfully was very rewarding. I had very supportive bosses that gave me many opportunities for continuous growth and as a result accomplished many wonderful things. My success was possible because I was blessed to work with fantastic team members that were very talented and committed. As a result, we were able to consistently and systematically drive value, which created an environment resulting in very low department turnover.

EDITOR: You are a member of the board for the Loss Prevention Foundation (LPF). Describe your role as a board member and head of the audit committee.

VALENTINE: When Gene Smith, then foundation president, asked me to be on the board, I was honored and excited to work with such a distinguished group. As a board member, my role is to work with the other board members in helping to focus on the organizations mission, strategy, and goals. Unlike many other industry-related groups, LPF requires a full board vote to be accepted as a board member. What an honor to be recognized by your industry peers.

As the audit committee chair, my role with other audit committee members is to have open communication with the independent auditor, accountants, management, and the board of directors. We meet with management and the independent auditor to review and discuss the foundations annual financial statements and quarterly financial statements, as well as all internal control reports. We also appoint, retain, and oversee the work performed by the independent auditor retained for the purpose of preparing or issuing an audit report or any related work.

EDITOR: What are your views on education and continuing education for LP associates?

VALENTINE: I am a strong supporter of education and continuing education for team members. A number of department team members at Signet have taken advantage of the tuition reimbursement and have received either a bachelors or masters degree as a result. As a department, we pay for our team members to receive their LPC or CFI certifications. There are a number of groups that provide great continuing education, such as National Retail Federation, Retail Industry Leaders Association, Jewelers Security Alliance, the Institute of Internal Auditors, ASIS, CLEAR, and the Risk Management Association to name a few, and we encourage team members to attend frequently. I would also stress that team members understand the business from start to finish and most importantly the financial side of the company they work for, not just their department.

EDITOR: Your retirement was recently announced. What is next for Kevin Valentine?

VALENTINE: I plan on staying active in the industry. I also have done some consulting in the past, and I will be doing more in the future. My responsibilities at Signet required a lot of travel over the years, and I plan to spend more time with my family. I am also a partner in a cigar shop called Royal 10 Cigar in North Royalton, Ohio, so I will be more active in that. And as you know, I really enjoy golf and just need an excuse to go fishing.

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