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Close Georgianna VaughanFebruary 26th, 2013 Vetting your supply chain – how far should you go?The recent horsemeat scandal has re-emphasized the importance of knowing your suppliers, but how far back do companies go in tracing the trajectories and provenance of their raw materials, and how diligent are they in ensuring that at every stage of the production process, company standards for corruption, human rights and product quality are met? Read More...
France’s Consumer Affairs Minister Benoît Hamon, has stated of the recent crisis, that the offending meat had left Romania clearly and correctly labeled as horse and that it was afterwards that it was re-labeled as beef by French meat processing company, Spanghero. His investigation also criticized French producer of frozen foods, Comigel, for failing to notice anomalies in the paperwork, or to realize that it was not beef from the smell and look of it once it was defrosted.
This is an issue that pertains not simply to the food industry, or to quality assurance. How can a clothing retailer be sure that its fabrics are produced under fair wage conditions? Does a car manufacturer need to check the health and safety standards in the rubber plant where materials for its tyres are produced? Does it need to go all the way back to the plantations where the raw materials are harvested to check sustainability and human rights parameters?
The simple answer is ‘yes’ but in an increasingly globalised world, production lines can, and do, get very complicated. In the horsemeat case, the meat moved from a slaughterhouse in Romania via a Dutch food trader and a Cypriot food trader before first the French firm Spanghero, and then Comigel, before finally being shipped to the UK. Nevertheless, in societies increasingly concerned with both the quality and the provenance of consumer products, companies face serious financial and reputational losses unless they monitor suppliers as well as their own processes. So what can they do?
A 2009 report by Labour Behind the Label noted that while John Lewis had in place mechanisms for auditing the supply company accounts to ensure the provision of fair wages, they allowed their suppliers to complete online self-audits allowing them essentially to report what they liked.
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E-mail address (required; will not be displayed) Submit Georgianna VaughanFebruary 08th, 2013 Let’s Talk About Cyber CrimeEinstein famously defined insanity as, “doing the same thing, over and over again, but expecting different results.” Yet in a world where the private and public sectors increasingly face threats of a digital nature, too little is being done to extend traditional security measures to the cyber sphere. Read More...
The Threat Earlier this month, U.S. media groups –New York Times, Wall Street Journal and Washington Post – and the social media network Twitter, were victims of cyber hacking. Such attacks are increasingly commonplace, and perhaps more worryingly, research suggests that the nature of data breaches is shifting from random sweeps, to incursions targeting specific information. The attack on US media outlets targeted the passwords of journalists linked to the investigation into business dealings by the relatives of Wen Jiabao, China’s prime minister. In December 2012, hackers used a two-stage Trojan virus which transferred itself from the victim’s PC to their mobile phone, recording banking codes used on a PC and verification codes from the bank sent via text message. By setting up a second real time transaction transferring money out of accounts, the hackers stole €36 million from European banks. Increasingly, governments are exhibiting an awareness of the need to protect citizens from internet crime. The U.S. National Security Council reports, “growing concerns about the threats to US economic and national security posed by cyber intrusions.” Australian Prime Minister Julia Gillard recently announced a government initiative to establishing a new Australian Cyber Security Center (ACSC) in Canberra. In Europe, Brussels is finalizing a bill which, if passed, will sanction any company operating within the 27 member states, which fails to notify national cyber crime authorities of any security breaches. Despite new efforts, however, significant challenges remain. Stigmatization The challenges here are threefold. Firstly, if a company’s instinct is to deny the attack, they will appear untrustworthy when the truth emerges. Secondly, a lack of transparency regarding a company’s exposure to cyber threat presents a greater risk for shareholders or investors, who are unable to ascertain the extent to which individual companies are being targeted, and their vulnerability. Finally, silence on the issue reduces the level of public debate necessary to galvanize those corporate boards with insufficient defence measures, to act. Ignorance Opposition International Coherence It is clear that greater international legislation is required but, because of the connection of cyber crime and warfare, cooperation is limited. In 2012, the Russian Federation promoted a treaty to regulate cyberspace, following the format of the Chemical Weapons Convention. This proposal was resisted by the US, perhaps understandably given the propensity of authoritarian regimes to use cyber security measures as a pretext for domestic censorship. Recommendations: What can businesses do? Invest in data protection Transparency Training Educating employees about cyber threats does not necessarily require complex technological understanding. Shaun Dakin, founder of Privacy Camp, highlights that it might be as simple as making employees aware that using personal electronic devices via a company network could put the company at risk. Until we start talking more openly about these issues, however, the necessary changes are unlikely to be made.
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E-mail address (required; will not be displayed) Submit Georgianna VaughanJanuary 28th, 2013 Oil & Gas Plants: Growing Security Risks
What happened in Tiguentourine? Read More...
What was the motivation for the attack? - What the attackers claim:
Has this kind of attack happened before?
In Algeria, terrorist attacks have proliferated since 2011. On February 4th 2011 an Italian woman and her driver were kidnapped near the border with Libya; in April AQIM militants assaulted an army barracks 140km east of Algiers; on August 26th a suicide bomb at the Military Academy in Cherchell killed 18 soldiers and injured 20; on October 23rd three European nationals were kidnapped from a refugee camp in west Algeria; and on June 29th, 2012 a suicide car-bomb attack killed a gendarme at a military base in Algeria’s central oilfield area.
Is this different and if so, how? Arguably, however, a high level of continuity exists between the past and the present. According to the Algerian forces, the Tiguentourine assault was also ultimately focused on damage, a view corroborated by the mining of the plant by the assailants. The name al-Mouwakoune Bi-Dima, is taken from a group of Algerian Armed Islamic Group (GIA) terrorists, distinguished for their hijacking of the Air France Flight 8969 in 1994. Noting similarities between the two outfits – perhaps surprising given that Belmoktar is the first GIA leader to split from the group – Andrew Lebovich highlights that in both cases, hostages were an ancillary to the real plan, and the attacks shared a declaration of purpose - targeting Algerian support for French military intervention in external conflicts. Regarding the risk for the oil and gas industry, it is also notable that while the 1994 group indiscriminately killed those working in the energy industry, in Tiguentourine, Algerian workers were specifically not targeted.
Is this type of threat likely to escalate?
What can be done to mitigate this threat?
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E-mail address (required; will not be displayed) Submit John DeverellJanuary 09th, 2013 A Crisis of Management? Questions all companies should be askingI recently had a conversation with DK Matai, an engineer turned entrepreneur and philanthropist with a keen interest in the wellbeing of global society. DK helped found ATCA – The Asymmetric Threats and Contingency Alliance, a philanthropic initiative to address complex global challenges through Socratic dialogue (ie. debate between those holding opposing viewpoints based on asking and responding to questions designed to stimulate critical thinking) and joint executive action to build a wisdom-based global economy. We discussed the reputational issues now facing Barclays, HSBC and G4S. He posed some basic, compelling questions which senior management of all publicly listed companies should be asking themselves as they attempt to frame their crisis management plans. Read More...
The questions were as follows:
Has your Board of Directors raised any of these questions? If not, why are they shying away from them? With the Basel Committee announcing earlier this month that banks will now have another four years to reach Liquidity Recovery Standards, which critics believe may help the banks to turn a profit but will damage the real economy, these questions are all the more pressing. As I look around, the damage from a lack of corporate and government responsibility to their stakeholders – whether they be shareholders, voters or just the customer or “man in the street” – seems increasingly evident. Pericles, a leader of ancient Athens, once noted, “although only a few may originate policy, we are all able to judge it.”
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E-mail address (required; will not be displayed) Submit Patrick RobinsonNovember 07th, 2012 Business continuity during Hurricane Sandy
As Hurricane Sandy hit the United States last week, our sister network was staring into the eye of the storm – King TeleServices (KTS) manages the over flow call centre
operation dedicated to NYC311 – a 24/7 information line for the 8 million residents of New York, as well as maintaining services for the other clients of the group.
As expected during the storm, call volumes increased drastically.
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Once businesses in New York were notified of the threat of the storm it was important to act quickly reducing the potential impact on continuity.
Anticipating a storm surge of up to 14 feet along the coastline, with widespread disruption to power, telecommunication and Internet services, KW’s
crisis management team made the decision to relocate to the KTS disaster recovery facility as the storm approached, which ensured uninterrupted service to
public and private sector clients throughout the storm and its aftermath.
The operations in New York clearly demonstrated the importance of having thorough crisis management plans in place and learning from past experiences. Hurricane Irene, the blizzard of late-2010, two transit strikes and the blackout of 2003 has tested the work force of New York previously – KTS and KW have continued to function through these events. Business continuity in New York was difficult for companies without appropriate steps in place to mitigate the threats. Other difficulties that King Worldwide companies faced were those associated with travel. Employees located over five boroughs had no access to the office space by conventional travel means - the company provided a shuttle service and over the seven days made over 5000 stops, ensuring the safety of employees travelling to and from work. The management skills and experience demonstrated last week shows the success that can be had when facing potential crises. Effective management ensured continuity, which meant that client focus remained a priority.
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E-mail address (required; will not be displayed) Submit Patrick RobinsonOctober 23rd, 2012 Is a data crisis imminent?An article in The Daily Telegraph warns of an impending data storage crisis following an interview with Mark Hurd, President of Oracle– “the amount of data being beamed back to servers is growing exponentially”. By 2016 the number of devices connected to the internet is forecast to be three times the global population with an 18-fold increase in mobile data traffic. This is going to place high levels of demand on servers and a higher dependence on cloud storage. Read More...
The growth in users and data traffic is likely to present much higher levels of data
insecurity. Remote data storage solutions for companies will reduce dependence on hardware, but could it be an invitation for cyber-attacks? If data is secured off-site, can its security
be guaranteed? Who has access to the data on the servers? Could geography affect the level of security, both legally and physically?
The need for cloud storage is undeniable, but what can be done to increase security? Who should companies trust to protect their information? Steve Wozniak, co-founder of Apple, warned that in the next five years there will be a lot of ‘horrible problems’. His concerns are that once files are stored on the cloud people may lose control of their data. The questions that remain are troubling. Once we allow our data to be stored on the cloud is it still ours?
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E-mail address (required; will not be displayed) Submit John DeverellAugust 24th, 2012 Crisis simulation
Dealing with a crisis is not just about how we perform on the day – it is about how we prepare before the day. To that end, we all need to maintain our crisis
preparedness on a continuing basis, in the margins of our core business.
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The reality is that a major crisis will typically afflict one in three businesses, across all sectors, in a five year period, and that only 40% of businesses engage
in crisis simulation as a mechanism for reducing the likelihood and impact of crises. And companies which do have a crisis management plan are more likely to carry out
simulation than those companies which don’t*.
Simulation can be complicated, time-consuming and expensive and this is often what puts managers off. But it doesn’t need to be any of these things, nor does it need to be embarrassing as a function of revealing vulnerabilities and failures of responsibility. By comparison, it can be immensely valuable just to get the key people who constitute the crisis management team around a table for twenty minutes once in a while to do a bit of “what if-ing”. Such an exercise, which is the simplest and cheapest form of simulation available, often reveals important surprises. In a series of crisis management seminars run for a FTSE 100 global technology company, a group of senior employees round a table routinely gave widely varying responses about whether or not an imaginary crisis merited the CEO being informed on a Saturday night or whether it could wait until Monday morning. A reminder about the practical and reputational implications of the imaginary event and the principles of crisis management helped to focus minds and produce a commonality of agreement about the urgency of the situation. The sorts of questions worth considering at simulation sessions can be generic, for example:
Or they can be sector-specific. Examples of the latter might be, from the point of view of, say, the healthcare industry:
Please contact us if you have thoughts on additional questions which in your experience management should be asking themselves. Unless companies make an effort to ask themselves the relevant questions now, they will find themselves on the back foot should such crises actually occur. So, if you want to persuade your executives to explore how they would manage the crises relevant to your business – then be careful about how you sell the idea internally. Don’t talk about doing an exercise or a rehearsal – or even simulation – because the result is likely to be some foot-shuffling and a search for reasons to kick the idea into the long grass. Instead, suggest a meeting at which a few simple scenarios can be presented, in order to check that thinking is on-track. And just ask people how they would feel if they were questioned in the aftermath of a crisis as to why they weren’t better prepared. *Source: IR Insight Research Report Number 3 June 2012
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E-mail address (required; will not be displayed) Submit John DeverellJuly 6th, 2012 Security and Risk: London 2012 Olympic GamesWith London 2012 fast approaching the issue of terrorism has rarely been more relevant. With potential to affect so many different companies, just how do they best handle the impact of the Games upon their business operations? External threats resulting from extremist network groups could include such things as large scale communication network failures, which could cripple their business, even if they are not actively involved in the running of the games. It is therefore important that company directors act to mitigate against these threats to ensure that their business stays up and running in the face of possible disruption. Read More...
Jonathan Evans, the head of MI5 recently admitted that it is going to be impossible to “guarantee” security at the Olympic Games, contingency planning has never
been more vital. Indeed, although the likelihood of a large scale terrorist attack is relatively low, the possibility of a ‘lone wolf’ or cyber-attack remains
comparatively high. The nature of terrorism is changing and the new phenomenon of ‘self-starter’ terrorism is on the rise as the access to online extremist paraphernalia
becomes more readily accessible. The threat of a cyber-attack in particular remains a real problem. ‘Hacktivists’ for example, may target Olympic sponsors and
partners which could result in large scale data loss or communication network failure. As reported by the BBC, during the 2008 Beijing Olympics, China was subject
to 12 million cyber-attacks per day resulting in huge challenges for the hundreds of businesses and sponsors involved. There are fears that cybercriminals may use
similar sophisticated attacks during the London Games, targeting a range of visitor systems from ticketing and transportation to hotel bookings, with the potential
to severely disrupt or indeed wipe-out entire systems.
The message to business leaders should be clear; you still have time to act to safeguard your company against possible disruption whilst ensuring business resilience for years to come. By having a contingency plan in place, business owners can go forward in the knowledge that they are mentally and physically prepared for any disruption that may arise. As Evans maintains, “planning for the future is always planning for uncertainty”. The 2012 Olympic Games should be no exception. How can your organisation prepare?
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E-mail address (required; will not be displayed) Submit John DeverellJune 22nd, 2012 The Character of Crisis
This is the story about four people in your company named Everybody, Somebody, Anybody and Nobody.
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E-mail address (required; will not be displayed) Submit John DeverellJune 1st, 2012 Keyhaven sponsors new investor research on crisis management.
The research conducted as part of the report confirms that many companies have failed to build an effective crisis management plan, despite the high incidence of crises over the past five years. This is a concern for investors who see a correlation between a company’s value and its competence in handling crises.
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E-mail address (required; will not be displayed) Submit John DeverellMay 25th, 2012 Data Insecurity - Mitigating the threat
According to a report by the Carnegie Mellon University of Pittsburgh USA on how boards of directors and senior management are governing the security of their organizations’ information and other digital assets, there is much which companies still need to do. This is despite improvements to data security over recent years. But the good news is that this is well within companies’ capabilities to put right.
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In general, the report finds that, “Although there have been some measurable improvements since the 2008 and 2010 surveys, boards still are not undertaking key oversight activities related to cyber risks, such as security programme assessments and top-level policies; assigning roles and responsibilities for privacy and security; and receiving regular reports on breaches.”
The improvements are largely organizational. There has been a noticeable increase in the number of boards with Risk Committees responsible for privacy and security risks (48% in 2012 compared with 8% in 2008) and in the number of companies that have established cross-organizational teams to manage privacy and security risks (72% in 2012 compared with 17% in 2008). Boards and senior management are lagging, however, in establishing key positions for privacy and security and appropriately assigning responsibilities in a manner which is consistent with internationally accepted best practices and standards. And less than half of boards hire outside experts to assist with risk. What can Boards do? The report recommends: 1. Evaluate the existing organizational structure and establish a cross-organizational team that is required to meet at least monthly to coordinate and communicate on privacy and security issues. This team should include senior management from human resources, public relations, legal, and procurement, as well as the CFO, the CIO, CISO/CSO, CRO, the CPO, and business line executives. 2. Review existing top-level policies to create a culture of security and respect for privacy. Organizations can enhance their reputation by valuing cyber security and the protection of privacy and viewing it as a corporate social responsibility. 3. Review assessments of the organization’s security programme and ensure that it is in line with best practices and standards and includes incident response, breach notification, disaster recovery, and crisis communications plans. 4. Conduct an annual audit of the organization’s enterprise security programme, privacy compliance and all associated plans as above – results to be reviewed by the Audit Committee.
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E-mail address (required; will not be displayed) Submit John DeverellMay 4th, 2012 Dealing with dramasSir John Harvey-Jones once said that there’s one big advantage in not preparing for crisis. When it hits, the CEO is spared the agony of worry during the days leading up to the disaster. This might sound an unlikely approach. But, in a recent survey we commissioned IR Magazine to do for us, 30% of respondents say that their companies either don’t have a crisis management policy or just don’t know whether they have one or not! And this is despite over one third of companies in the same survey having had a major crisis during the last five years. This lack of preparedness might be surprising in the circumstances. But it can spring from a variety of causes – not least an understanding of what is required. Read More...
One crisis we dealt with was in China. A factory was occupied by the workers when the company wanted to close it down. This greatly angered a key wholesale customer whose source of supply was cut off. Once the crisis was resolved, we wanted to get a sense of what lessons the business president had noted. He responded thus: “If you want me to conclude that we need a detailed contingency plan every time we do any restructuring, then that’s not workable”. I said that at least he should go into such situations with eyes open rather than closed.
As part of having a prepared mind, leadership needs to have a validated and communicated crisis management plan. This plan doesn’t need to be hugely prescriptive. Nobody would read it otherwise. Too much detail is overkill and destroys the flexibility of mind needed when things do go wrong. By comparison, a workable and easy-to-understand plan helps managers identify an impending crisis early, to ensure that critical information gets passed quickly, to know who’s on the crisis team, who leads it and what their delegated authorities are. This buys valuable time by helping them to start off on the front rather than the back foot. Thomas Edison noted that “the best thinking has been done in solitude and the worst has been done in turmoil”. It’s a scientific fact that the stress associated with a crisis massively reduces the brain’s capability to think laterally and creatively. People go into tunnel vision. An external agency can stop this tendency by providing objective and dispassionate advice both in advance of and during a crisis. Investors as well as the public expect today’s companies to have this sort of external validation in place. Not having it can create a perception that a company lacks the necessary rigour and objectivity in dealing with risk and crisis. An outside agency can also act as a barometer of sentiment across a broad swath of external opinion. This makes it easier to anticipate how external stakeholders would react in a crisis. CEOs would then no longer find it so difficult (as some have expressed to us) to anticipate potentially crucial stakeholder views. Something which can be bound to excite adverse comment is when companies lose data, whether theirs or their customers’. The growth of service industries and the increase in hacking means that data has never been so vulnerable. And yet, as another survey shows, typically 80% of a company’s data is completely uncontrolled, let alone protected. The vast majority of companies have no idea whether or not their IT systems have been penetrated. Very few know how to protect their conversations and data when they are on the move. And yet it is neither difficult nor costly to do so. Such ignorance might be bliss, but it’s the sort of ignorance that helps the competition. Leadership could also end up losing their shirts in court. The EU will soon join the Information Commissioner’s Office (a British body) in levying big fines on companies for being insecure with data. This is on top of other punitive new legislation. For example, the area of human rights is increasingly being scrutinised and regulated in a commercial context. And the Corporate Manslaughter Act makes management personally responsible for not taking care of their people if they are killed when travelling in difficult places. And yet - as another survey shows - over 2/3 of British companies have no clear travel security policy. And there’s not only a requirement for leadership are compliant with all this as far as their own company is concerned, but – as required by the UK Bribery Act as an example – they now need to ensure that their business partners, suppliers and agents are clean as well. So maybe it’s now less appropriate to quote Sir John Harvey-Jones in this context. A broad awareness of increasing legislation and liability does cause many CEOs to worry about what might go wrong, even though they may not have the time to think about what they should be doing. Instead we could quote Sir Winston Churchill, who knew a thing or two about crisis preparation. He said “I never worry about action, but only about inaction.” So companies should face their uncertainties head-on and then hire in an expert to validate what they have in place and help improve it.
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E-mail address (required; will not be displayed) Submit John DeverellMarch 30th, 2012 Operational risk
The U.S. technology services firm Computer Sciences Corp (CSC) has often been in the news over the last few years. Amongst various services which CSC provides to the NHS, the most infamous is its IT system for patient administration. The contract was priced at £3.2 billion. Delivery has been fraught with problems. The government was reported to be considering termination of the contract. Then we heard that termination would be more expensive than continuing. Negotiations and re-negotiations followed. The National Audit Office (NAO) is said to regard the CSC IT scheme as “poor value for taxpayers”. The Public Accounts Committee reportedly stated that the contract price would be reduced because of delivery failures. And, most recently, the London Times (6 March 2012) announced that CSC had agreed to forgo half its fees.
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At the heart of the matter is the difficulties people seem to face in understanding and dealing with what is commonly termed “operational risk”. This can be defined as the adverse effect on an entity (whether government department or commercial company) resulting from its business functions and processes being badly set up or carried out. The reasons are usually within that entity’s control. They are often due to employee error or poor managerial oversight – or just not being thoughtful enough about what might go wrong.
Operational risk can also be a function of external events. For example, it includes political risk. This can be very relevant in developing markets subject to arbitrary political decisions. In the commercial field this might include the Indian government’s recent decision to exclude foreign supermarket chains as a reaction to its own shopkeepers’ protests. In Britain this might be exemplified by our government’s short notice decision to reduce subsidies to domestic solar energy schemes. But perhaps these decisions are not so arbitrary as they might appear at first sight. They are within the bounds of plausibility and might have – indeed, should have - been foreseen as distinct possibilities by the affected parties. And then those parties would have been well-advised to have considered what mitigating actions they could put in place in order to minimise damage, rather than be faced by a massive “board-room shock”. Investing a lot of money in trying to establish a very large scale IT system is a good example of something which is attended by obvious and significant operational risk. In that light, it is surprising that the Department of Health does not appear to have put in place milestones and interim targets which would have needed to be satisfied for CSC to have been paid, stage by stage – as just one obvious way of mitigating risk. Across the commercial sector, many companies do now collect data on operational losses, whether caused by system or human failure. This data is being used to model operational risk and to try to find a consistent method of measuring something which, unlike financial risk, is not easily quantifiable. This then enables companies to understand better the cost-gain benefits of business decisions, in advance of those decisions being made. The companies can then choose not to pursue a particular course of action or can put in place a plan to take effect in the event of things going wrong. The financial sector is now obliged to deal with operational risk in a systematic and transparent way. As for the rest of us, it makes sense to adopt a respectful and thoughtful attitude to operational risk on a voluntary basis. And there is plenty of help available to assist companies to do just that, in the interests of averting expensive crises. Otherwise we might in due course see an amendment to the Companies Act which currently obliges companies to do no more than list their principal risks.
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E-mail address (required; will not be displayed) Submit John DeverellMarch 23rd, 2012 Risk registers and the new health bill
The health and social care bill passed its final legislative hurdles this week. It is due to become law by Easter. A last-ditch attempt by Labour to delay the bill until the publication of the NHS “risk register” outlining the potential dangers of the reform was defeated. In debate, government representatives argued strongly that publication of a risk register would mean that civil service advice to ministers would be opened up to public scrutiny. And that, they said, would mean the notion of impartial decision-making would be imperilled and the country would suffer.
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Observation over time informs us that the risk-gain equation often gets skewed by political considerations. For example, it might be a lot less risky to buy military equipment “off the shelf” from another nation which has already developed a piece of kit which our armed forces need. But the requirement to maintain British engineering capability and jobs may trump that consideration. And it would be politically embarrassing to reveal that the advice from within MOD had been not to buy British in the interests of a relatively risk-free solution.
Although we may not be allowed to know the mechanisms of governmental risk appraisal, are we at the least entitled to know that these processes are taken seriously?
Well, on the basis that the government is playing with our money and the implications can affect us personally – coming back to, say, healthcare – the answer would be yes. But I would suggest that we might be somewhat hypocritical in promoting that argument. This is because we continue to play fast and loose with risk in those areas of our own lives where we do have direct responsibility. There is little which can be achieved without a degree of risk, even in the smallest of domestic and commercial considerations. And maybe this contributes to the psychology of ignoring risk. It is too everyday a peril to be taken seriously, by and large. We have “been there before” and can therefore (we tell ourselves) afford to be a little complacent - not that we would care to use that particular word. And we don’t want to be unnecessarily bureaucratic and slow in taking decisions, by considering the risks which might assail us. Perhaps that’s fine in our personal lives. But where our decisions affect others and where those decisions might be (to use civil service jargon) “novel and contentious” then we do have a duty to consider the implications. One could be forgiven for saying that this should go without saying – but why then has it taken the Basel and Solvency agreements to get the banking and insurance sectors to implement proper risk management mechanisms? The UK Corporate Governance Code exhorts the wider industrial and commercial sector to embrace good principles of risk management. Stakeholders increasingly expect business to do just that. But examples abound where this has not been the case. And these are just the tip of the iceberg…… So, risk registers are very important, providing they are taken seriously – even if they are not made public.
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E-mail address (required; will not be displayed) Submit John DeverellMarch 16th, 2012 China takes a bite of the apple
An article in The Times last week (“Villagers in despair as river runs black with residue of the digital revolution”) serves as a good example for
firms operating in China of how the Chinese government can use Western media to further its own economic advantage in intellectual property
disputes as seen through the trademark battle between Apple, Inc. and Proview International Holdings Ltd., the Shenzhen-based company that claims
it owns the iPad trademark in China,.
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Apple, like many of the other major international electronics firms such as Microsoft, Amazon, Sony, Samsung, Acre, Gateway, Dell, HP, Motorola, Nokia
and Nintendo, who manufacture their products in China (see February 17th blog “Apple’s Foxconn concerns”)reportedly have a lot to answer for regarding
social responsibility and human right concerns.
It came the day after Apple unveiled its latest 4G version of the iPad and Proview, along with their Chinese creditors, issuing an open letter to China's suppliers and resellers, urging them immediately to stop selling, storing and shipping the iPad as of this week, warning that “anybody who continues to do so will be seen as intentionally infringing rights and the company will adopt the most severe measures by taking legal action." In short, attack a foreign company by stopping its local supply and distribution chain. Proview registered an iPad trademark in China in 2001, but Apple claims it paid Proview $55,000 for the trademark in 2009. The Chinese company contends Apple only bought the trademarks owned by its Taiwan-based arm, covering countries that include South Korea, Singapore, and Thailand but not mainland China. The stakes are high, though damages in Chinese IP cases are low by U.S. standards. The dispute has dented sales of the iPad in China, Apple's second largest market by revenue, and the two sides are now awaiting a key ruling by the high court in Guangzhou in the next few weeks, after a lower court ruled in favour of the Chinese firm last year. Last month, a Proview representative reportedly said Apple should pay US$400 million to buy the trademark in mainland China. The threat of such legal action by Proview’s creditors comes as the Chinese media are reporting that Proview is now seeking up to 10 billion yuan ($1.6 billion) in compensation for trade mark infringement. Proview owes the banks US$180 million China uses its legal framework to send a clear message to foreign firms – a shot across the bow – that “power lies with us”. Having attained the ranking as the world’s second largest economy, the Chinese government now feels confident enough to take on the world’s most valuable company by market capitalization and brand awareness. To those companies seeking to enter China to take advantage of the huge market opportunities which exist there, the lessons from the above should be clear. But, from personal experience, I feel that they are nonetheless worth spelling out:
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E-mail address (required; will not be displayed) Submit Samuel Passow
Your story on Apple and the obtuse negotiation tactics used by the Chinese against Western firms is very similar to a story I
uncovered while working on my PhD thesis on negotiating competition policy in a multilateral context. In September 2009, the
Chinese State Security detained a former Coca-Cola bottling plant employee accused of corruption and taking US$1.5 million in
bribes while working at a joint venture with Shen-Mei Beverage and Food in Shanghai. The female middle manager at the plant had
been detained by the Shanghai police earlier that year and then dismissed by the bottling company. But the case suddenly resurfaced
and was played up in the global media 48 hours after President Barak Obama imposed a 35% tariff on Chinese made tires sold in the United States.
John DeverellMarch 8th, 2012 Further damage to the 'Costa' brand
Costa cruises were in the headlines again last week after a power failure on the Costa Concordia’s sister ship the Costa Allegra.
The power outage was caused by an engine room fire that left the ship drifting in the Indian Ocean for several days.
The ship carrying over 1000 people had to be towed to the Seychelles so those on board could disembark.
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At the tactical level, vessels need to be able to cope with such situations. There must be some back-up or
auxiliary system which ensures that a fire does not lead to a complete electrical blackout. In short,
there must be emergency provisions, even for the most unlikely of events. .
At the strategic level, Costa Cruises must do everything it can to repair their reputation which is in tatters. As well as the official investigations into these two incidents, Costa and its parent company Florida-based Carnival Corp, the world's largest cruise operator, face a wave of civil suits from the victims' families and from passengers and crewmembers aboard the two ships. So this story will not go away for a long time. The company’s response in restoring confidence in its service needs to be backed by sincere actions which are then communicated to all stakeholders, including customers, investors and the wider public. Indeed, nothing short of changes to personnel at the top level is likely to demonstrate a serious resolve to change direction sufficient to assuage public and international opinion.
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E-mail address (required; will not be displayed) Submit John DeverellMarch 1st, 2012 Barclays standards called into question
The latest furore over the creative accounting practices of our major banks has claimed another casualty. Last time it was the £1million bonus
which the loss-making Royal Bank of Scotland was going to pay its CEO Stephen Hester; this time it was the £500 million tax avoidance scheme used
by profit-making Barclays Bank, with embarrassing consequences for its CEO Bob Diamond.
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So-called "liability management exercises", where banks buy back bonds at below their face value and cancel them in order to make a gain, have been undertaken
by many large financial groups in the past 12 months. It is arguable whether Barclays’ action was therefore any more “highly abusive” than the actions of others in the sector.
What is for certain however, is that Bob Diamond set himself up for a fall. Early last year, testifying before the Treasury Select Committee, Mr. Diamond revealed that the bank operated nearly 300 subsidiaries in tax havens and had paid just £113 million in corporation tax in the UK in 2009 – a year in which it handed out £3.4bn in bonuses. Several months later, in his BBC Business Lecture, Mr. Diamond remarked that “rebuilding trust requires banks to be better citizens”. He also repeatedly stressed that “We are signatories of the UK Government’s code of conduct on tax and comply with the spirit and letter of the tax code.” Barclays’ defense that it had "voluntarily disclosed" the existence of the schemes to HMRC and that it had received "guidance from professional advisors that the treatment was both legal and compliant with the tax code…..given others had used a similar treatment" is bound to fall on deaf ears in today’s political and economic environment, especially having just declared annual profits of £5.1 billion for 2011. Barclays has set itself up for a huge reputational hit, one which will cost it far more than the money it tried to save. The irony is that the bank had reportedly already made provisions in its accounts to write off the loss if the schemes had been rejected by the government in the first place.
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E-mail address (required; will not be displayed) Submit John DeverellFebruary 24th, 2012 Concerns over conflicts of interest in awarding government contracts
Hot on the heels of the vilification of Tesco and the government’s ‘back to work’ scheme comes news that Emma Harrison, the ‘family tsar’ appointed by the government to help get unemployed people back into work, has stepped down amid allegations of conflict of interest and growing controversy surrounding her company A4e.
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A4e is one of only five private firms signed on by the government to help the unemployed find work and has been awarded several other lucrative contracts. Indeed, A4e earned £180 million last year from state contracts alone. All this is despite numerous FSO investigations over the years, two of which are ongoing, into irregularities and fraudulent behaviour at the company.
The issues coming to light now are all predictable surprises which the government and company should have taken more trouble to anticipate and then formulate a plan as appropriate. One idea might have been to structure the relationship between the government and Ms Harrison differently from the start, namely by making her company ineligible for state contracts for the duration of her tenure as advisor. As things stand, the government can only benefit from Ms Harrison’s sudden resignation and to a certain extent they have successfully distanced themselves from the controversy surrounding her, issuing the briefest of statements thanking her for her work over the years. Likewise, her subsequent resignation as chairman of A4e will do much to salvage the reputation of the company she founded. However, just as was the case with the ‘back to work’ work experience scheme, it is employers and the unemployed who end up the real losers, while the government and company are left scrabbling to salvage their reputations.
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E-mail address (required; will not be displayed) Submit John DeverellFebruary 24th, 2012 CPP concerns over FSA probe
Credit card insurer CPP has warned that it is nearing bankruptcy following demands by the FSA that the company review all the past sales of
its credit card and identity protection for potential mis-selling.
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The insurer claims to have dramatically improved its sales procedures since the FSA launched its investigation towards the beginning of last year.
Perhaps they should have maintained higher standards throughout the years, and thereby avoided their current difficulties. Such is the loss of faith
in the company that it has lost key partners, including Barclaycard who last week joined HSBC and Tesco Bank in severing their ties with the insurer.
The company’s share price has dropped 64 percent since the investigation began and CCP has now suspended its shares for at least two weeks. One can only hope that CCP has activated an advanced crisis management plan to make the most of the next two weeks to come to an agreement with the FSA and give them a hope of salvaging some sort of future for the company and its employees.
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E-mail address (required; will not be displayed) Submit John DeverellFebruary 20th, 2012 KPN security concerns after cyber-attack
KPN, the Dutch telecoms provider, felt obliged to apologise last week following a shutdown of clients’ email accounts.
The provider was forced to suspend access to customers’ accounts following the theft of sensitive data from its servers.
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The company should have taken all feasible steps to prepare for, and safeguard against, such an attack. Cyber security is recognised as being of
increasing importance, given the digitisation of society and the threat is growing. Providers need to be particularly vigilant so as not to compromise
the security of their customers’ data. And they must have a plan which can be put into effect at a moment’s notice should this nonetheless happen.
This is not the first time that KPN’s security has been called into question. And they are not alone. Repeating the same mistakes will lead to an increasing lack of faith in KPN and damage to its reputation.
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E-mail address (required; will not be displayed) Submit John DeverellFebruary 20th, 2012 Sir Paul Stephenson named Senior Advisor at Keyhaven
Keyhaven, the global reputational and crisis management consultancy, is pleased to announce that Sir Paul Stephenson,
the former Commissioner of the Metropolitan Police, has been appointed as a senior advisor.
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Biographical Note: Sir Paul Stephenson QPM is one of the most experienced police officers in the world.
He joined Lancashire Constabulary in 1975 and was appointed to the rank of Superintendent in February 1988.
He was appointed Assistant Chief Constable Merseyside Police in October 1994, with responsibility for Territorial Policing Operations.
In May 1999 he was appointed Deputy Chief Constable Lancashire Constabulary, responsible for the operations and operational support portfolios.
In July 2002 he was appointed Chief Constable of Lancashire Constabulary, responsible for an organisation of over 5,600 staff and the provision
of policing services to one and a half million residents and visitors. In March 2005 Sir Paul was appointed Deputy Commissioner of the Metropolitan
Police Service. His role included the function of Chief Operating Officer and in particular oversight of strategy, organisational performance and
diversity. Sir Paul was awarded the Queen's Policing Medal for services to policing in May 2000 and he received a knighthood in June 2008.
In December 2008 Sir Paul became the Acting Commissioner of the Metropolitan Police Service, and in January 2009 Sir Paul became Commissioner of the
Metropolitan Police Service. He retired in July 2011, and was appointed as a senior adviser to Keyhaven, the crisis consultancy, in January 2012.
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E-mail address (required; will not be displayed) Submit John DeverellFebruary 17th, 2012 Apple’s Foxconn concerns highlight importance of supply-chain audit
Apple has once again been vilified in the press over the working conditions of its supplier’s employees in China. Over the past few years,
the technology giant’s ethical standards have repeatedly come under scrutiny- although this appears to have had little effect on investor and consumer demand.
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While in the past it might have been common practice to turn a blind eye to the exploitation of workers in poorer regions, protecting human rights,
and workers’ rights in particular, is no longer just a box to be ticked for a CSR report- it increasingly falls within the remit of senior corporate
lawyers and is subject to a growing raft of UN and EU guidelines and regulations.
Apple has made the right decision to send in an independent body to scrutinise workers’ conditions at Foxconn’s facilities in China, despite their claims that they have audited those factories already over 40 times. However, given Foxconn’s dominant position in Apple’s manufacturing supply chain, some important questions remain unanswered: if the claims of unethical practice turn out to be justified, then what plans does Apple have to remedy the situation and what alternatives do they really have? It is better to rectify the issues now than to contend with a reputational and managerial crisis downstream. Further to the above: Apple’s board remains under pressure over its inadequate corporate governance. Critical voices abound (would these have been less had Steve Jobs still been alive)? As a result, Apple has changed the mechanisms by which board members are appointed…
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E-mail address (required; will not be displayed) Submit John DeverellFebruary 17th, 2012 Welcome
We are excited to welcome you to our blog. We want to create a forum for intelligent discussion about the principles of successful crisis management,
using current stories as real-life case studies.
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