Author Archives: Emily Holbrook

About Emily Holbrook

Emily Holbrook is a former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writing at EmilyHolbrook.com.
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Less Litigation, More Regulation

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It looks like businesses in the United States and the United Kingdom have seen slightly less litigation in 2011 compared to 2010. However, regulatory actions and internal investigations are climbing — this according to the latest Fulbright & Jaworski Litigation Trends Survey.

But corporate counsel doesn’t expect the trend in decreased litigation to continue. Many respondents expect the year ahead will bring more litigation (and even more regulation) as companies attempt to grow in an economy that remains volatile.

The vast majority of corporate counsel polled in the U.S. and the U.K. predict litigation will either rise or remain the same in the next 12 months: 92% of U.S. companies and 85% of U.K. companies. Of those, one-third of U.S. respondents predict an increase while 20% of U.K. respondents expect a rise in legal disputes in the coming 12 months. That compares with 31% and 16%, respectively, last year.

Why? And what sectors?

According to the report, stricter regulation and company growth topped the reasons cited for the anticipated increase in litigation. The industries bracing the most for an increase in litigation are technology, engineering, health care and insurance.

“Our survey respondents have a front-row seat to the increased scrutiny brought on by stricter regulatory enforcement,” said Stephen C. Dillard, the head of Fulbright’s global disputes practice. “This year, our survey confirmed a heightened level of governmental investigations focused on the energy and insurance industries, with the health care, manufacturing and engineering sectors not far behind.”

The report reveals that whistleblowers remain a concern in the coming year. More specifically, one-quarter of respondents anticipate an increase in the number of claims or lawsuits brought by whistleblowers next year. This year, 22% of respondents said their organizations were subjected to whistleblower allegations. Due to the Dodd-Frank whistleblower provisions, we can definitely expect more in litigation within this category for 2012. Companies, and more importantly, risk managers, should prepare themselves.

Biggest ID Theft Bust in U.S. History

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In the largest bust of its kind, authorities arrested 111 people in connection with a massive identity theft operation based in Queens, New York. The suspects are allegedly responsible for fraud losses that amounted to more than $13 million in the 16-month period between May 2010 and September 2011.

The group, who apparently have ties to gangs in Asia, Europe, Africa and the Middle East, were under surveillance for two years in a sting called “Operation Swiper,” in which police placed wiretaps on dozens of phones in the area, intercepting thousands of conversations in Russian, Mandarin and Arabic.

This is how the thieves apparently operated their massive scheme:

Bosses of each crime ring received blank credit cards from suppliers in Russia, Libya, Lebanon and China. The bosses then hired “skimmers” who posed for jobs such as waiters and retail shop workers so they could use electronic devices to steal information from customer credit cards. That information was then sent to a “manufacturer” who programed the information into the magnetic strips of blank credit cards.

The crime rings also used card printing machines to forge credit cards and state drivers licenses to match them. “They can actually make a license from any state in the union, print credit cards of any color and even put the holograms on there,” said NYPD deputy inspector Gregory Antonsen.

Police then said “shoppers” in the crime rings would use the forged credit cards and IDs to go on weekly shopping sprees around the U.S. at retailers such as Nordstrom’s, Macy’s, Gucci and Best Buy and sell those items mostly to people overseas.

But by far, Antonsen said, thieves spent the most time buying computer products from Apple. “This is primarily an Apple case,” Antonsen said. “Apple is a big ticket item and a very easy sell.” Antonsen added forged credit cards were easy for criminals to make here because U.S. credit cards are less sophisticated than those in Europe, where fraud of this magnitude would have been much more difficult.

Which brings us to the topic of U.S. credit card companies and their lack of initiative regarding credit card security. Queens District Attorney Richard A. Brown mentioned just that when he accused U.S. credit card companies of “putting too much money into marketing and not enough into security.” He stated that these companies would rather take the losses than invest in much-needed security measures.

Europe has already caught on to the fact that credit cards need the highest level of security embedded into them. European cardholders are required to enter a personal identification number on a keypad during purchases. These “smart cards” also contain computer chips that encrypt the customer’s transaction information. U.S. banks issue cards with a simple magnetic strip on the back, which are more vulnerable to thieves.

American banks realize they need to change, but are reluctant to do so because, of course, it costs money. The good news is, however, that change must come — and soon. Both Visa and Mastercard have announced that retailers who do not support smart cards by 2015 and 2013, respectively, would be liable for fraudulent transaction.

Is the smart card our answer to credit card fraud by way of ID theft?

Maybe. But only until thieves figure out a way to outsmart the smart card.

Apple’s Succession Plan

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Many are already aware of the passing of Apple’s former CEO, Steve Jobs. Though he is gone, his products, vision and motivation will be around forever.

As the business world mourns the loss of one of the greatest innovators of all time, they should also learn from Apple’s succession plan. In the October issue of Risk Management, we covered succession planning in a section of the feature, “Immovable Objects.” In it, author Lori Widmer writes about Jobs’ battle with cancer, his three medical leaves of absence within a six-year period and the board’s decision to develop a CEO succession plan. She writes:

In August, when Jobs eventually relinquished command of the company he built, the business world went nuts. Many feared the stock would plummet overnight. One month later, however, the tech giant’s share price was higher than it had been during Jobs’ final weeks at the helm and was threatening to eclipse $400 per share for the second time this year. Investors have responded favorably to the company’s new CEO, 13-year company veteran Tim Cook, who Apple’s board was confident could successfully lead the company. After all, he had already done so on three other occasions when Jobs was forced into medical leaves of absence.

Unfortunately, stories of seamless transition are uncommon. Few boards build a succession plan. In fact, while 84% of directors find succession plans to be essential, only half of boards of Fortune 1,000 companies have them, according to Korn/Ferry International’s “34th Annual Board of Directors Study.” It seems that boards are long on talk but short on action.

Those figures are sobering. Without a complete succession plan in place, no matter if the current CEO is in good health or not, a company is often left in limbo, usually scrambling to chose who should fill the shoes. The transition, without a proper plan, can be anything but smooth and have ill effects felt throughout the entire company.

A recent report from Cutting Edge Info on succession planning states that “forward-looking companies ses succession planning as an opportunity to reinforce corporate identity, elevate operation performance and ensure continuity. They recognize the link between organizational objectives and individual goals, and they understand how succession planning impacts the bottom line.”

Without a comprehensive succession plan, companies risk more than losing a CEO.

 

October Issue of Risk Management Now Online

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The October issue of Risk Management magazine is now online. The cover story, “Immovable Objects,” focuses on how complacent boards of directors fear change, often retaining CEOs past the expiration date of their effectiveness. We also cover food safety in a feature by John Turner, North America product recall manager at XL Insurance. And, as is tradition with our October issue, we highlight cyberrisk, this time in a four-part feature covering cyberattacks and critical infrastructure, the military and its vulnerability to hacking, the cost of protection and a guide to selecting cyber insurance.

Our columns explore topics such as:

If you enjoy what you seen online, you can subscribe to the print edition to enjoy even more content.

Please let us know what you think in the comments below. And stay tuned to the blog for even more coverage in the future. Lastly, you can follow the magazine on Twitter, “like” us on Facebook and join our LinkedIn group.