Insecurity and Fear Feed a Once Secretive Industry

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Insecurity and Fear Feed a Once Secretive Industry
Published by: the Financial Times
Peter Thal Larsen
April 11, 2002

 


 

Highlights of the Article:

(...) Smith Brandon International.

While many security companies claim to offer a full range of services, Smith Brandon , the Washington-based group, is unashamedly specialised. It aims to provide high-level political analysis and business intelligence, while its New York office concentrates on due diligence and financial investigations. (...)

For the full article see below.




Insecurity and fear feed a once secretive industry: WHO'S WHO by Peter Thal Larsen: Business has boomed since the September 11 terror attacks on the US

The corporate security industry has grown up. When Jules Kroll started his business in 1972, investigators largely operated in the shadows and their existence was rarely acknowledged, even by their clients.

In the aftermath of the terrorism attacks on the US on September 11, the industry's image could hardly be more different.

Eager to reassure their employees, many companies were more than happy to tell anyone who cared to listen that they had hired a corporate security company to advise on how best to protect their workforces.

Despite the advances, data on the industry remains hard to come by as most companies are still privately-owned and reluctant to divulge financial information.

Below we offer a snapshot of the leading industry players and catalogue some of the new entrants.

* Kroll Still regarded - even by rivals - as the leading company in the sector, covering the broad range of security, intelligence and investigation services worldwide.

Under the watchful eye of its chairman, Jules Kroll, the company has unwound its ill-fated merger with O'Gara, the armoured-car manufacturer, and is expanding. Kroll has three core businesses: security services, employee screening and consulting services, such as investigations, forensic accounting and due diligence.

Last week, Kroll added a fourth leg with the Dollars 140m acquisition of Ontrack, the provider of data recovery and computer forensics services.

* Control Risks Founded in 1975, Control Risks has long been one of the leading players in Europe and is rapidly establishing itself in the US.

Although its origins lie in kidnap and ransom advice, the group now offers a full range of political risk, due diligence, and investigative services. It has made the occasional acquisition but its experienced management team has resisted regular overtures from larger players.

* Decision Strategies The company, which was founded by the former federal prosecutor Bart Schwartz, has returned to its original name five years after merging with Fairfax International.

Last year, the company was sold to SPX, the conglomerate, which has given Mr Schwartz and his executives a remit to expand through acquisition.

Although there are few examples of security concerns prospering as part of a larger owner, Decision Strategies so far appears to be performing well.

* Pinkerton By far the oldest name in the detective business, Pinkerton traces its roots to 1850, when Allan Pinkerton was retained by the US government to protect the currency.

Now part of Securitas, the Swedish security group, the group is using the Pinkerton name for its high-end security consulting, investigations, intelligence and forensic accounting businesses.

* Armor Holdings One of the few publicly-traded companies, Armor spans a manufacturing business as well as a consultancy division, which it has assembled largely by acquisition.

The company has benefited from the post-September 11 vogue for security companies, seeing its share price almost double since the attacks.

Jonathan Spiller, chief executive, has made acquisitions, buying the O'Gara armoured-car business from Kroll and snapping up consultancies in the UK. However, hanging on to talent in its consultancy businesses has proved difficult.

* Risk Advisory Group London-based Risk Advisory Group was started by a group of former Kroll executives with Bill Waite, the former Serious Fraud Office investigator.

It offers a range of investigation services and has a well-respected emerging markets practice. It has also branched out into the employee screening business.

* Investigative Group International The Washington-based group founded in 1984 by Terry Lenzner, one of the veterans of the industry, remains a force to be reckoned with, especially in US government-related matters.

The company has seen a pickup in demand for traditional security work since September 11, but investigation work has been growing too.

* Bishop International Bishop's origins were as an agency working mostly for clients in the Lloyd's insurance market. But under chief executive Jeff Katz the company has switched to corporate intelligence and investigations as well as patent and trade mark protection.

Bishop is understood to have had approaches from several rivals, but for now continues to plough its own furrow.

* Smith Brandon International While many security companies claim to offer a full range of services, Smith Brandon , the Washington-based group, is unashamedly specialised. It aims to provide high-level political analysis and business intelligence, while its New York office concentrates on due diligence and financial investigations.

* Quest Founded in 1995 by Nigel Layton, a former PricewaterhouseCoopers investigator, Quest conducts investigations and provides a range of M&A-related services. Shareholders include Sir Harry Solomon, the former chairman of Hillsdown Holdings, the food group, and his daughter, Louise.

* Guardsmark With 17,000 employees, Guardsmark is one of the largest privately-owned security companies in the business. It provides security advice to corporations and supplies manned guards. It has been growing rapidly in the past year, and is especially proud of the stringent criteria its employees need to meet before being hired. New players

* Omnicom Safir Rosetti,a company set up by former New York police commissioner Howard Safir and former Kroll executive Joe Rosetti, with backing from the global advertising giant Omnicom. The company has already snapped up Noesis, a Californian investigative group, and has now turned its sights on targets in Europe.

* Citigate Intelligence and Security is the start-up set up by a breakaway group from Kroll led by Ernie Brod, with backing from Incepta, the PR concern.

* Alaco is the name for the new company set up by Amy Lashinsky and Ambrose Carey, the founders of Asmara, who left the London-based group a few months ago after several years under the umbrella of Armor Holdings.

* Diligence, based in Washington and London, was founded by a former CIA operations officer and an ex-MI5 intelligence officer. The group has some high-profile supporters, including its chairman, Richard Burt, the former assistant secretary of state.

* Objective Team was formed by former members of the UK army and intelligence services to advise companies on security. Working with a loose network of specialists, it aims to advise large companies on which services they need.
Highlights of the Article:

(...) Although the economy is doing well, companies that want to conduct business in the global market should not throw caution to the wind, said Gene Smith, founding partner of Smith Brandon International, specializing in international investigative services. A significant sale can go sour after the product is delivered due to a lack of background knowledge and business intelligence, she told delegates. (...)

"Some business gurus advise Western-based businesses to set foreign sales targets of 40 percent of all business revenues. But any global ventures must take into consideration the potential risks as well as rewards," she said. (...)

The Internet enables companies to do business around the world by connecting them, but global connections also "create serious security concerns," said Harry Brandon, founding partner of Smith Brandon International. The "Love Bug" virus was created in the Philippines but quickly swamped computer networks around the world, he reminded delegates. "Is the credit information you have on file secure from hackers?" he asked the delegates. (...)

Even with the risks associated with the Internet, Brandon says companies have "no choice" but to embrace electronic commerce. "The goal is to do it right, in a safe, secure, protected environment." (...)

For the full article see below.




If credit managers felt they were somehow immune to the business effects of the digital revolution, electronic commerce innovation and global economic transformation, they discovered differently at "Exploring the New Frontier", NACM-Canada's second annual Credit Conference and Expo held in Toronto, Ontario on October 11 and 12.

The Internet brings disparate cultures together for social and commercial interactions. Global communication at Web speed changes both the nature of societies and the culture of business, conference speakers told the NACM delegates. In a world where almost every new business venture begins with an "E", geographic boundaries are disappearing, and companies are open 24 hours a day.

Instant digital connectivity creates a host of business opportunities and challenges, delegates were told. Credit managers need to protect corporate financial interests while supporting the development of new opportunities. Armed with new digital tools, they can process information faster and make decisions quicker. At the same time, they are dealing with more information from more sources than ever before. That's life on the new frontier.

OUTLOOK POSITIVE

When it comes to overall financial matters, "the global outlook for the next 18 months or so continues to be upbeat, not withstanding the sharp increases in oil and natural gas prices," Dr. Lloyd Atkinson, chief investment officer for Perigee Investment Counsel Inc., an investment and money management solutions firm, told conference delegates.

Growth is driven by the technology revolution, and the pre-emptive action taken by central banks, most notably the US Federal Reserve, to keep inflation in check. The result: US productivity has increased significantly at inflation-safe speeds. Inflationary pressures have been contained and there have been real gains in wages, salaries and corporate earnings.

While there will be economic slow downs, "they will be much more muted than in the past, and there is no recession in the five year forecast... Barring economic accidents, such as occurred in Asia in 1997, we continue to be very optimistic about the longer term," Atkinson said.

While business-to-consumer e-commerce ventures such as Amazon.com have received a great deal of media play, Atkinson called them "small potatoes" compared to business-to-business e-commerce. The old economy--automotive, financial services and other traditional sectors--are using the tools of the new economy to change the way they do business. For instance, General Motors will use the Internet to reduce distribution costs by 30 percent over three years. This is a direct benefit to General Motors and suppliers who adapt to the news ways of doing business in the digital age will also benefit.

CAUTION ADVISED

Although the economy is doing well, companies that want to conduct business in the global market should not throw caution to the wind, said Gene Smith, founding partner of Smith Brandon International, specializing in international investigative services. A significant sale can go sour after the product is delivered due to a lack of background knowledge and business intelligence, she told delegates.

Even though there are risks, "there is no option to sit out e-commerce." Forecasters indicate that e-commerce will generate $ 1.3 trillion dollars in global sales in 2003. "Some business gurus advise Western-based businesses to set foreign sales targets of 40 percent of all business revenues. But any global ventures must take into consideration the potential risks as well as rewards," she said.

To successfully tap global markets, companies require strategic plans that integrate e-commerce into their overall business strategies before they build secure, transactional-based Web sites. And they cannot afford to overlook due diligence. "A classic case of 'it's too good to be true' is often accompanied by an online request--or even demand--to evaluate a proposal quickly and sign the necessary papers at once," she said. "If the prospect is so compelling, it can wait until it is given adequate review."

If a new client places an order from your web site, how do you determine who they are, if they have the authority to place such an order and if their company has the ability to pay? A company can "proceed on faith," or it can sort out all potential transactional dilemmas before hanging its shingle in cyberspace. The Internet is making it easier for companies to conduct business in foreign countries, and it is making it easier for companies to conduct credit checks on foreign companies, said Julie Gage, business project manager, Dun & Bradstreet Canada, a NACM-Canada Credit Conference sponsor. Companies like Dun & Bradstreet can help credit managers adopt to the new global reach of the Internet by providing them with background and credit information online or by e-mail, she said. Scott Blakeley, partner with Blakeley & Blakeley LLP, concurred. The most dramatic effect on the Internet "is the shortening of the credit cycle," he said. Vendors are using the Internet to conduct background and credit checks on com panies, cutting dramatically into the time required to approve credit.

SECURITY A CONCERN

The Internet enables companies to do business around the world by connecting them, but global connections also "create serious security concerns," said Harry Brandon, founding partner of Smith Brandon International. The "Love Bug" virus was created in the Philippines but quickly swamped computer networks around the world, he reminded delegates. "Is the credit information you have on file secure from hackers?" he asked the delegates.

Companies are even posting order acknowledgement forms and invoices on secure web sites that customers can access. While clients enjoy the freedom of accessing information any time, they want to be assured their credit and purchasing history is secure, or they will look for other vendors.

"Computers are efficient, and they empower employees, but there are downsides," Brandon said. Fraud cost North American businesses $ 350 billion in 1990 and $ 400 billion in 1999. Computer fraud grew exponentially over this same time. Damages pegged at $ 300 million in 1990 hit $ 50 billion in 1999. Over 25 percent of Fortune 500 companies are computer crime victims, and employees have perpetrated many of the crimes.

Risk avoidance is obligatory. Firewalls and virus protection are required to keep hackers out. ID, passwords and other internal measures, including forensic audits, are required to prevent or track down illegal activity by employees.

Even with the risks associated with the Internet, Brandon says companies have "no choice" but to embrace electronic commerce. "The goal is to do it right, in a safe, secure, protected environment."

STREAMLINING THE CREDIT DEPARTMENT

Using technology to do it right also includes employing information technology systems to make the credit department more efficient, says Brian Cheney, vice president technology, IHS Solutions Limited, an information management solutions technology company. Companies can increase collection efficiency without increasing operational collection costs using technology, he said.

Companies moved from paper-based document management to microfiche and then to CD-ROM. Now they are moving to Web-based data that puts information in the hands of clients. For example, if a vendor establishes a secure e-business web site, clients can search for the status of orders or for lost invoices based on purchase order number, product code or other criteria. Centralized credit databases and computer networks allow credit managers to fax or e-mail "lost" invoices from their desktop to overdue accounts while on the phone. This gives the credit manager the opportunity to say: "It's there now, so let's talk about the bill."

Information management automation is not a process than can be implemented overnight. Companies must review existing business practices and define ideal practices and then build systems that meet defined needs. Staff input is important if they are to buy into, rather than resist, automation, Clients also have to be kept in the loop and reassured that credit and payment information is secure.

Automating the credit department and integrating back office databases with web sites can be expensive propositions. The results, however, can include streamlined business practices, improved productivity and a higher rate of closure on outstanding accounts, Cheney said. "But why stop there?" asked Mark Visic, vice-president sales, Kubra Data Transfer Ltd., a document fulfillment, management and e-commerce company. Although companies have automated many aspects of traditional "print and mail" bill presentment, they still spend time and money printing invoices, stuffing and stamping envelopes and mailing bills. The post office then takes time delivering bills, which customers lose or claim they did not receive. Some companies have outsourced the entire print and mail process, which means a third party has to spend time doing what internal staff once did. And the post office is still involved in the equation. An automated electronic bill presentment and payment (EBPP) can reduce the time it takes to get invoice s in the hands of customers and payment in the bank, Visic said.

EBPP is an emerging technology that will eventually replace mail, fax and electronic data interchange (EDI). "EBPP offers corporations the ability to send invoices or statements to consumers via the Internet and process an electronic payment. Companies employing EBPP can post bills on their web site, with a financial institution or a third party clearinghouse. The client receives a secure notification and can view and pay bills online using credit cards, debit cards or other forms of electronic payment, trimming time off the invoice-to-payment cycle. The electronic bill is traceable from the moment the client receives notification, Visic said.

While 7 in 10 companies indicate that billing cost reductions are key to EBPP, the process can also be used to bring clients to a vendor's web site, allowing the vendor to market its brand and continue to sell to the client. "Now bill payment can be used to increase brand awareness, loyalty and sales," Visic said. "This represents a new opportunity for businesses to strategically use billing to sharpen their competitive edge in the new electronic economy."

EBPP is not yet simple or inexpensive to implement. "There is considerable sticker shock," said Visic. The return on investment is not there for every company considering it. Even so, the future holds some form of EBPP for most companies.

If you are still skeptical, look back over the last five years and review how the digital revolution has influenced the way your company does business, and the way you work. "When it comes to advances in technology, we haven't seen anything yet," said Dr. Atkinson. "In five to ten years, we'll look back at the technology we are using today the way we look back at dinosaurs." In other words, companies and credit departments will continue to evolve with the digital world and global economy, or face extinction.

Paul Lima is a freelance journalist and workshop leader based in Toronto, Ontario.

As companies begin to conduct e-commerce in the global market place and move to online billing and payment systems, they must tackle the issue of international law head- on, speakers at NACM-Canada's second annual Credit Conference and Expo told delegates in Toronto.

"In the virtual world, as in the paper world, commerce is based on contracts," said Marie-Pierre Simard, copyright lawyer with the law firm Brouillette Charpentier Fortin. Before a dispute over a virtual contract arises, credit managers need to know what makes virtual contracts acceptable to the courts. "Sometimes it seems as if the law cannot keep up with the information age. Yet, people involved in e-commerce must be able to identify the laws upon which e-commerce relies so that [virtual contracts] may be seen as a valid, enforceable, credible way to do business."

The federal governments in Canada and the US are developing national standards to govern e-commerce transactions, but many provinces and states have different laws, as do different jurisdiction around the world.

In some countries, only contracts with handwritten signatures are allowed in court. In other countries, an electronic signature (fax, scanned document, use of a PIN or password) is acceptable. Other jurisdictions--particularly in North America and Western Europe--will accept digital or encrypted signatures to prove a client ordered a product, and the vendor shipped in good faith.

In the US, electronic signatures cannot be "denied legal effect, validity or enforcement solely because it is in electronic form", said Scott Blakeley of Blakeley & Blakeley LLR. However, an electronic signature does not mean a company will win its case. All other laws for commerce come into play.

Blakeley also warned credit managers to be careful about what they write in email, especially if discussing a client's credit information with a third party. E-mail is easy to send, receive and forward, and sometimes people forget slander and conspiracy laws that cover the printed word, he said.

There are risks and opportunities associated with doing business in the global economy. When dealing with new clients in foreign countries, companies can protect themselves by insuring receivables, explained Angela Boston, business development manager, Export Development Corporation, which is a Canadian crown corporation that helps credit managers mitigate risk in 160 countries.

Her thoughts were echoed by Mark Hall, associate broker and credit insurance specialist with Dan Lawrie Insurance Brokers Ltd. Hall, which offers credit insurance for both domestic and global markets. "This is not a replacement for due diligence or a well-managed credit department," he said. "But it adds another layer of security."

If companies are having difficulty collecting uninsured payables, they can use training or technology to improve their ability to collect, or outsource collectables.

"Effective training can show people how to be assertive, not aggressive and collect more while retaining customers they want to keep," said Tim Paulsen of T. R. Paulsen & Associates, a company specializing in "creative receivables management."

Automating the collection process can boost the rate of return, says David Phillips, Guthrie Phillips Group (GPG) president and CEO. GPG's CAT2000 recovery system puts complete customer history in the hands of each staff member and schedules follow-up correspondence and calls. It can be connected to the company accounting system and updated the moment an invoice has been paid, so collectors are working from current information.

If collectables get out of hand and hiring more staff is not an option, then companies might look to outsourcing some or all the responsibility, says Robert Ingold, president of The Commercial Collection Corp. He admits some companies resent having bills turned over to collection agencies. However, his company can "work as an extension of the credit department" so the overdue client doesn't know the account has been turned over to a collection agency.

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