Outlook Business Magazine :: Clear And Present Danger

Outlook Business Magazine

Companies could be the next ‘trophy targets’ of terrorists. Those that don’t rush to build adequate cover, whatever the cost, may not live to regret it

Corporate India has just realised how vulnerable it really is. And it is terrified. “If we pool in our resources,” says Mazumdar-Shaw, “such a force can get common training from an international training agency from Germany or Israel.” “In Israel, it is compulsory for all buildings to have bomb shelters,” says Vicky Kapoor, a security expert who trains special forces and heads the Indian Krav Maga Foundation. “How many Indian companies can claim to have one?” Counter-terrorism has not been a priority so far. Now it is. Corporate India has just realised how vulnerable it really is. And it is terrified.

Team OLB

When terror bared its fangs in Mumbai, it triggered an emotion that corporate honchos rarely experience—raw fear. Less than 48 hours after the first murderous shot was fired in Colaba, seven directors on the board of Oil and Natural Gas Corporation (ONGC), led by Chairman and Managing Director RS Sharma, were sitting in a hastily convened meeting at the company’s Bandra office. The presence of a few senior officials of the Indian Navy and the Coast Guard made it seem like a war room, not a board room. ONGC directors feared for hundreds of its offshore installations spanning across nearly 10,000 square feet into the Arabian Sea—basically, process platforms such as Mumbai High, rigs, wells and individual exploration sites. Mumbai High has a full-fledged defence system—coast guard to patrol the seas; surveillance by the Air Force; even an in-house radar (thousands of fishing vessels ply the seas there). “Even this is not enough,” says BC Nayak, the Executive Director responsible for security at the Rs 60,137 crore corporation.

Attacks could come by way of air, land and sea. There are no armed guards at the offshore installations because of the presence of huge quantities of inflammable material. Then, there are a number of unmanned wells in the sea that can be used by terrorists as hideouts to launch an attack. In short, Mumbai High could easily have been a sitting target for the terrorists, en route to their assault. A strike there would have been spectacular for the terrorists and incalculably costly for ONGC and the nation.

Nayak did much of the talking at that meeting. Never before had he had so much to say in a board meeting. He made many recommendations to spruce up security. He then put in an urgent request to the Ministry of Defence for more cover in the offshore area.

All shook up

Elsewhere in the city, CEOs had already reached for the panic button. “In the last 24 hours, I have talked with board members of 40 companies,” says Raghu Raman, CEO of Mumbai-based Mahindra Special Services Group, a subsidiary of the $6.7 billion Mahindra Group that provides security-related services to corporates such as the Aditya Birla Group, British Telecom, Citibank and Mahindra & Mahindra. “They wanted to know what they can do to secure themselves.” The Indian Drug Manufacturers’ Association (IDMA), which represents the $14 billion pharmaceutical industry, has called an emergency meeting on December 19 to develop counter-terrorism strategies. “It would be disastrous if terrorists find a way into our companies or production lines,” says BN Singh, President, IDMA.

The paranoia spread like wildfire beyond Mumbai, even into cities like Bangalore. Are These Buildings Safe?

Cuffe Parade in South Mumbai is just one cluster where several companies are headquartered. The following offices are some that are located in the buildings seen in the picture:

• Axis Bank
• Bharat Shell
• Council For Leather Exports
• Dena Bank
• Engineering Export Promotion Council
• Export-Import Bank of India
• Federation of Indian Export Organisation
• Forbes Infotainment
• Hawkins Cookers
• IDBI Bank
• IDBI Gilts
• Indian Institute Of Banking & Finance
• ICAI
• Mafatlal Enterprises
• Manugraph India
• Maratha Sahakari Bank
• Mecklai Financial & Commercial Services
• MVIRDC World Trade Centre
• Nuclear Power Corp. of India
• OTC Exchange of India
• Oriental Bank of Commerce
• Rama Newsprint & Papers
• SBI Capital Markets
• SBI Securities
• Shapoorji Pallonji Power
• Standard Industries
• Stanrose Mafatlal Lubechem
• Taj President
• Tata Consultancy Services

CEOs began speculating about the worst possible scenarios, unimagined ever before. “If 20 guys arrive with AK-47s and move into the shop floor, there will be mayhem,” says Shekar Viswanathan, whole-time director of Toyota Kirloskar Motor. Its car plant in Bidadi has 2,560 employees. “We can’t make any assumptions that the corporate sector will not be hit (by terrorists). Currently, we are checking all employees’ cars at the gate for explosives, etc.” Bangalore’s well-oiled corporate networks are in full flow. Prominent figures like Biocon Chairman and Managing Director Kiran Mazumdar-Shaw, Infosys’ Director-Human Resources TV Mohandas Pai and Ficci President Rajeev Chandrashekar are in touch and are exploring the possibility of creating an anti-terrorist force—a veritable private army. “If we pool in our resources,” says Mazumdar-Shaw, “such a force can get common training from an international training agency from Germany or Israel.” CEOs are fast learning the combat language. (‘You have to stay one step ahead’- Alan Orlob, Marriott International)

In New Delhi, Nasscom, the $64 billion Indian IT services and business process outsourcing (BPO) industry’s representative body, immediately started work on evolving a roadmap to address counter-terrorism. “We have been talking to members, have met as an industry at the executive council level and are now meeting across cities,” says Vice-President Sangeeta Gupta. “Counter-terrorism has not been a priority so far.”

Now it is. Corporate India has just realised how vulnerable it really is. And it is terrified.

It has never had such a close encounter with terror, at least not since 1993, when bomb blasts shook the length of, what was then called, Bombay. When terrorists stormed the Taj Mahal and the Oberoi-Trident hotels last month, Yes Bank Non-Executive Chairman Ashok Kapur was felled, the entire board of Unilever was trapped for a few tense hours, and several CEOs heard the sound of bullets whiz past them for the first time in their lives. A few businessmen saw the terrorists face-to-face, and fortunately lived to tell the tale. Yesterday, none of these shots were specifically aimed at them. But tomorrow, they may be deliberately targeted.

We can put together a corpus that will support measures local authorities need to take for better security Pramod Bhasin, CEO, Genpact

Terrorists are growing in intelligence and sophistication, and have access to greater resources—both cash and weapons. Simultaneously, governments are building better security at public places—airports, embassies, government offices, etc. And as terrorists search for new and vulnerable ‘trophy targets’, companies and business establishments could soon come in their line of sight. The current state of corporate security—a few bored-looking unarmed guards, mock checks on visitors and a few surveillance cameras with cobwebs on them—is totally unprepared for the next strike.

Grenade in the boardroom

Rude shocks are sometimes good for business. The war-like violence in south Every city needs a crisis management centre to coordinate with agencies that combat terrorism Kiran Mazumdar-Shaw, CMD, Biocon

Mumbai—guns reverberating through the night, grenades exploding, choppers hovering menacingly close to the buildings, fires raging and truckloads of soldiers—all in the heart of the city’s business centre, has yanked managements out of their old notions of security. Without this shock, companies would have been unwilling to give up many outdated ideas and embrace the new, advanced mindset needed to counter terrorism. “This attack is unprecedented and unsettling,” says Infosys’ Pai. “There is a definite need to re-look security, both at a national and corporate level.”

Earlier, company security meant hiring an ex-service man who would also double up as the facilities manager. “They can make your company very secure, it’s just that you can’t do business anymore,” says Bob Hayes. Managing Director, Securities Executive Council (SEC), a Washington DC-based organisation for security and risk professionals that develops research-based solutions to help companies evolve security programmes. Slightly evolved companies may appoint a security agency, a flourishing business these days. But corporate security needs specialised skills. “It is more useful to provide an overall secure environment without creating a panic situation,” says Mahindra SSG’s Raman. “Companies have to bring security into their DNA, and this can only be done through human re-engineering.”

Many senior executives were trapped for many hours. Some like Tata Sons Executive Director Alan Rosling (in picture) spent a lot of time on ground zero, anxious to know the fate of those held hostage inside
The spotlight is now on the need for a chief security officer (CSO). “Companies need a CSO in a powerful position,” says Nitin Bhatt, Partner, Advisory Services, Ernst & Young. If there was one learning American companies absorbed after 9/11, it was the role of a chief security officer. In India though, this is a glaring gap in the security apparatus of even large corporates. Only about 10-20% of companies in the so-called vigilant BPOs and banking and financial services sectors have CSOs, says a consultant who wished to remain anonymous. But even they don’t have enough authority or access to the CEO.

Typically, such CSOs reports to the CFO. That is perhaps not the best model. But exceptions are rare. “I report directly to Anand Mahindra, and there is a briefing with the top management every month,” declares Raman. Abroad, though that is the norm. “I have personally seen CEOs extensively engaging in security discussions in European companies,” says Navita Srikant, Partner & National Leader, Fraud Investigation & Dispute Services, Ernst & Young. “That sets the right tone.”

It is important that the CSO has a dotted line relationship with the CEO. Equally For many CEOs, Mumbai is their den and the Taj Mahal Hotels their lair, Never had they imagined that it could be stormed and almost destroyed. Nothing could have driven home the need for security better
important is that the board needs to make security a routine agenda, including assessing the cost of security and its impact on profit margins. None of that happens now. Says Hayes: “The process that your companies (in India) need to go through is risk and threat assessment, develop a mitigation strategy, align the strategy with the rest of the business partners, provide the security options that you can choose from—guards, electronic surveillance, etc—and then calculate the cost to do that and manage the residual risk.” Also, it is not enough to have all of this on paper. Much of it would need to be tested, monitored and perhaps re-drafted all over again many times till it is near perfect.

It’s time to redefine the role of security. “All these years, security was considered as a support function,” rues Ravindra Kishore Sinha, CMD of Security and Intelligence Services (SIS), which provides security solutions. “Now, managements have realised that security is an important mainline function just as marketing or finance.” SIS claims it has about 3,000 clients, 35,000 employees and revenues of Rs 1,600 crore. (Read R K Sinha interview: Government will have to trust private security agencies)

Finally, counter-terrorism has to be embedded into every business process. Entry and exit of employees is one example. “Background checks on employees will become more stringent,” says Infosys’ Pai. But there is more to it. Private airlines have retrenched hundreds of employees at all levels in the past few months. Have they considered the possibility that former staffers—jobless, disgruntled and broke—could be a source of vital inside information on airports or even a probable source of unauthorised entry into them? Post-employment or post-layoff follow-ups are unheard of in India. (Read The Power of Practice)

Many such basic fears are now beginning to gnaw at CEOs. The IDMA, for instance, Security costs are going to eat into already declining profit margins. But companies can’t cut corners. It is better to be safe than sorry

is worried about even basics such as ensuring that harmful ingredients don’t enter the drug production line at the raw material procurement stage. It would seem elementary that most pharmaceutical companies would have attended to this as a matter of process, rather than as a security issue that needs to be addressed now. Or take the instance of Toyota-Kirloskar, which has 50 expatriates on its rolls but beefs up security arrangements only when overseas visitors travel to the company’s premises. “That should begin now for all our key personnel. We have very little in place,” admits Vishawanathan.

“In Israel, it is compulsory for all buildings to have bomb shelters,” says Vicky Kapoor, a security expert who trains special forces and heads the Indian Krav Maga Foundation. “How many Indian companies can claim to have one?” Perhaps none, except one—Reliance Industries. It has a bunker at its Jamnagar refinery (capacity of 33 million tonnes per year) that can withstand a nuclear attack. “It is big enough to host key individuals. Critical parts of the plant can be controlled from there,” says a source who has worked closely with the company for many years. “It is nothing like you have ever seen before.” Not all companies need to build nuclear shelters, but there are several small counter-terrorism measures they need to integrate into every corporate activity.

The price of safety

This attack is unprecedented and unsettling. We need to re-look both national and corporate security TV Mohandas Pai,
Director­-HR, Infosys

“If you had done a poll with CEOs two weeks before the attacks and asked them two questions: one, is security a board issue? Nine out of 10 would have said, yes,” guesses Raman. “Then, ask them the second question: what is the biggest hurdle to security? Nine out of 10 would have said the budget.” When IT services and consulting firm Capgemini India deputes employees on assignments to the Middle-East, it puts them through a three-hour programme imparted by its security partner, International SOS. It trains staffers on how to react in emergencies, including terror attacks. The cost: Rs 1 lakh per head. That’s how expensive even basic security resources can be. “You can’t measure the cost. It is compulsory,” says Pramod Bhasin, CEO of Gurgaon-based BPO firm Genpact. Alkem Laboratories, a Rs 1,200 crore pharma company that currently spends a few lakh on security, expects spends to increase anywhere by Rs 1.5 crore to Rs 20 crore depending on the steps it decides to take now. “Security costs may go up to 0.5-2% of sales,” says managing director, BN Singh. That will eat into its net profit margin of about 8%.

The IT-BPO industry, possibly among the highest spenders on security in terms of It will be disastrous if terrorists find a way into our production lines. Security costs may go up to 0.5-2% of sales BN Singh,
President, Indian Drug Manufacturers’ Association

disaster recovery plans and business continuity, apart from data and information security, doesn’t yet have an estimate on how much it would incur in additional costs for physical security.

Also, given the fact that such costs would need to be woven into the business plan of the company, firms would need to factor in the impact on profitability over a long term, perhaps a 8-10 year period. Slowdown or not, this is one area where companies can no longer cut corners on.

We encourage large companies to help mentor smaller businesses in the area of security planning Erin Streeter, Director, Ready, Department of Homeland Security, US “Our security budget is in crores…and this (the Mumbai attacks) will increase it further,” says Biocon’s Mazumdar-Shaw. “Though the actual numbers and percentage would vary from company to company, many MNCs are set to double their security allocation in 2008-09),” adds SIS’s Sinha, who works with firms like Coca-Cola and Volvo.

Another lesson from the post-9/11 environment is working effectively and So far, security was a support function. Now, managements realise that it is mainline like marketing or finance Ravindra Kishore Sinha, CMD, Security and Intelligence Services proactively with government agencies. “This has been a very serious wake-up call. Every city needs to have a crisis management centre, which would coordinate with security agencies that are involved in carrying out operations of combating terrorism,” says Mazumdar-Shaw. Most companies realise they cannot counter terrorism on their own, and having armed guards is not the easy and simple answer. “We’re prepared to put together a corpus that will support any measures that the local authorities need to take to ensure better security,” says Genpact’s Bhasin.

More than a fortnight after the last of the crazed gunmen was eliminated at the Taj Mahal Hotel, CEOs are still outraged at what happened in Mumbai, a city they consider to be their den. But they are also afraid that companies could be the next target. That fear is not such a bad thing. It will ensure that companies build their defenses, whatever be the cost. Fast.

(With inputs from Snigdha Sengupta, Ashish Gupta, Kunal N Talgeri, Sebastian PT, Rajiv Bhuva, Sudipto Dey and Dhruv Rathi)

Source : http://business.outlookindia.com/ (http://business NULL.outlookindia NULL.com/article NULL.aspx?101773)

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