Tough Guys Step Out From the Shadows
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Tough Guys Step Out From the Shadows: The Once-Murky World of Private Detectives and Bodyguards has Gained Visibility and Respectability Since September 11
Published by: the Financial Times
Peter Thal Larsen
April 11, 2002


Highlights of the Article:

(...) Beyond the immediate steps to improve physical security, there is a broader recognition that companies must make a better assessment of the risks they face. "The days of guards and gates are gone," says Harry "Skip" Brandon, a former head of counter-terrorism at the FBI who now runs Smith Brandon International. "While protecting a warehouse may have some significance, it may not be the most important thing." (...)

For the full article see below.




If it is possible for an industry to come of age, the corporate security business formally reached maturity on September 11 2001.

In the aftermath of the terrorist attacks on the US, the once-secretive world of private detectives and bodyguards shrugged off the last vestiges of shambling amateurism and emerged as a professional - and highly relevant - branch of the service industry.

In the new environment, much of the immediate focus has been on physical security as companies - especially those in the US - rushed to reassure their workforces. In airports, government buildings and large offices, security procedures have been noticeably tightened.

Yet the war on terrorism has also reached further into the intelligence and investigations end of the corporate security business.

The search for terrorist funds, and the attempts to crack down on companies which - even unwittingly - do business with organisations linked to terrorism, have once again highlighted the pressing need for up-to-date business intelligence.

The change has been swift. In 2001, a survey of the largest companies in the US conducted by Pinkerton found workplace violence to be the main security threat, followed by internet security and employee screening. Terrorism ranked a lowly 17th. In the same survey this year, terrorism has become the third most pressing concern for the largest US corporations, although workplace violence remains the leading worry.

"There was an immediate response in requests for security assessments," says Naz Paciotti, president of Pinkerton's consulting and investigations division. "Companies wanted to know their vulnerabilities."

The shift in attitudes has prompted industry players to beef up their traditional security consulting arms. Mike Cherkasky, chief executive of Kroll, the leading consulting group, says the company has hired an extra 96 people to conduct security assessments since September 11, doubling its staff in that area.

Even for companies that are used to worrying about threats to their overseas operations, there is a sudden focus on offices not previously seen as vulnerable. Ira Lipman, chairman and president of Guardsmark, the privately-owned security firm, says companies can no longer afford to make distinctions between offices in different locations. "If you allow yourself to be an easy target, you will be hit."

Beyond the immediate steps to improve physical security, there is a broader recognition that companies must make a better assessment of the risks they face. "The days of guards and gates are gone," says Harry "Skip" Brandon, a former head of counter-terrorism at the FBI who now runs Smith Brandon International. "While protecting a warehouse may have some significance, it may not be the most important thing."

Another effect of the attacks is that senior executives are taking direct responsibility for security issues. "There was a trend to have the security director report to the human resources department," says Bart Schwartz, chief executive of Decision Strategies. "That responsibility is now coming back to the company's general counsel."

The war on terrorism has also provided plenty of work for financial investigators. In the US, the USA Patriot Act has forced companies to examine their business partners more closely.

Meanwhile, the broader fallout from the stock market downturn, the collapse of Enron and the scandal engulfing Andersen has also played into the hands of investigators. "Clients are saying: normally we would go to our auditing firm, but we need somebody independent," says Jules Kroll, executive chairman of Kroll.

The flurry of activity has also led to further consolidation. At the physical security end of the business, Group 4 Falck has made its move into the US by buying Wackenhut, and other deals are expected to follow.

In the consulting business, the past six months has been marked by the entry of media and marketing firms into the business. Omnicom is backing Safir Rosetti, a new company set up by the former New York police commissioner and a former Kroll executive.

Meanwhile, a breakaway group from Kroll has set up a corporate intelligence and investigations arm for Incepta, the public relations company. Both are actively hunting for acquisitions.

Perhaps the most prestigious new arrival to the business is former New York mayor Rudolph Giuliani, who has set up a consultancy with help from Ernst & Young. However, rivals remain unclear about the services Mr Giuliani, who declined to be interviewed, plans to offer.

Industry observers remain sceptical about the inroads likely to be made by marketing companies, pointing to a similar attempt by the Big Five accountancy firms to move into the business during the 1990s. With a few notable exceptions, that effort has largely failed.

"I foresee problems in terms of the pure size of these businesses and the conflicts that may engender," says Patrick Grayson, former head of Kroll in London, and now a consultant on security and investigations. "The pure investigation firms are at least in control of their own destiny."

What's more, past experience shows that large companies have a patchy record in retaining their most talented staff. This was illustrated most recently when Amy Lashinsky and Ambrose Carey, the founders of Asmara - now part of Armor Holdings - left to set up a new business.

"This industry is unique in terms of personalities and skills," says Terry Lenzner, the veteran Washington-based investigator. "It's a bit like rounding up cats."

Another aspect of increased respectability and visibility is that corporate security firms are more likely to be regulated. In the UK, the newly-created Security Industry Agency - while mainly aimed at nightclub bouncers and companies that put wheel clamps on parked cars - may also have implications for the investigations business.

Yet these concerns are minor compared to the sense of opportunity that corporate security executives have felt in the past six months. The overwhelming feeling is that this is a business whose time has suddenly come, and the players in the industry now have a chance to show their worth.

As Richard Burt, the former US ambassador to Germany and chairman of Diligence, says: "September 11 has not stopped globalisation. It will continue but in a much more uncertain world."
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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