Monthly Archives: December 2011

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Talent Shortage: A Top Risk Facing Businesses

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No, it’s not the credit crisis or the looming threat of cyber crime or business continuity during a natural disaster or the overall state of the national economy that keeps American business owners awake at night. It is, according to most, the shortage of talent and skills.

This may seem strange, seeing as were are still experiencing record unemployment numbers — meaning the pool of seemingly qualified employees should be vast to say the least. But in fact, the 2011 Lloyd’s Risk Index found that talent and skills shortage ranked as the number two risk facing American business leaders — shooting up from the number 22 spot in 2009.

“These findings show that talent is now firmly part of the risk lexicon — high levels of unemployment have boosted the quantity of candidates, but employers are still wrestling with the quality. Our own Global Talent Index echoed these concerns and highlighted two factors underscoring this risk: population demographics and skills gaps,” said Kevin Kelly, CEO of Heidrick & Struggles the leadership advisory firm providing executive search and leadership consulting services worldwide.

Are business leaders prepared to handle not only the number two risk on the list, but all 50 in the index? Apparently they are. Respondents said they are more than adequately prepared for 48 out of the 50 risks listed. That is in comparison to 2009, when leaders said they were not adequately prepared for eight of the 40 listed risks. Leaders cited “boosting talent retention” as one of the most overall effective risk management actions taken over the last three years, showing how eager businesses are to retain the staff they have.

Speaking of risk management, when respondents were asked to identify the most effective risk management action their organization had taken over the last three years, they cited the introduction of formal risk management strategies and systems, stating that “risk management is now one of the most important roles in the business community.”

Finally.

It may have taken the collapse of the U.S. housing market, a worldwide recession and the continuous uncovering of massive fraud to push the idea of risk management to the forefront of global business programs, but at least the discipline is now moving to where it belongs.

And it is apparently now focused on retaining the talent and skills that are greatly needed in a business world full of continuously evolving risks.

Charting Supply Chain Risk in China – It’s Worse Than in Japan

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When the earthquake and tsunami hit Japan in March, it was seen as a worst-case scenario.

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In some ways it was. It was the most costly disaster in human history, for example, and the economic toll has been estimated north of $200 billion. Likewise, the meltdown at the Fukushima Daiichi nuclear plant was among the scariest realities that nation could ever face.

The other context in which the catastrophe has been, almost undoubtedly, the worst ever is in terms of supply chain disruption. Toyota, for example, was forced to delay the launch of new wagon and minivan versions of its popular Prius hybrid line of automobiles. Other carmakers and electronic companies were also hard hit by an inability to get crucial parts.

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In hindsight, however, the disruption was not quite as bad as initially feared. Toronto’s Globe and Mail reported as much in June.

While there are shortages of vital parts for cars and electronics – including some computer chips, silicon wafers and batteries – the big surprise is that the March 11 natural disaster wasn’t more of a disaster for the complex and time-sensitive global supply chain.

The system is proving remarkably resilient – in part because Japan is far less connected to the global economy than many other advanced countries. That’s because Japanese manufacturers moved faster, and earlier than most, to lower-wage countries offshore, most notably to China.

The worst-case scenario envisioned after the Japanese disaster, including widespread and lengthy shutdowns of plants around the world, hasn’t happened.

There are two sides to this coin.

On the one hand, let’s all give a round of applause to those who helped make the system “remarkably resilient.” Indeed, later in that article, Garland Chow, a professor and supply chain expert from the University of British Columbia, added that “Ten years ago, this kind of disaster would have been twice as bad because they weren’t ready.”

Then again, if the Japan disruption wasn’t as bad as expected, will it serve as enough of a lesson that a lot of work still needs to be done in terms of improving supply chain resiliency? Will companies become complacent? Will they continue to diversify sourcing options enough to weather the storm equally well if a true worst-case crisis occurs?

A new report by Swiss Re may shed some light on that question.

“China and Natural Disaster – A Case for Business Resilience” offers a simple, concrete, unmistakeable reason why a disruption in China could be much, much more difficult to navigate than the March disaster in Japan.

I’m not a mathematician, but it seems that less than half of North American companies relied on Japanese manufacturers but nearly all of them rely on those in China. Fortunately, more are realizing the vulnerability they have there. In fairness, most of those surveyed by FM Global already were concerned about the disruption potential of a disaster in China. But a full 61% are now more concerned after seeing what happened in Japan.

The below graphic shows how they are reacting.

If you can’t read the mitigation strategies for natural hazard exposures in China listed in the chart below, click here to see a larger image. But the key takeaways come from the top three areas:

  • 70% are considering “increasing alternatives sourcing”
  • 65% are considering “increasing collaboration with suppliers on mitigating risk at their locations”
  • 61% are considering “implementing a more robust risk assessment process.”

“A natural disaster-related supply chain disruption in China would have far-reaching and long-lasting negative economic impact,” said Vinod Singhal, Brady Family Professor of Operations Management at the Georgia Institute of Technology’s College of Management. “It would slow down the global economy because China is not only a major exporter of goods, but also a major importer of goods. It would cause shortages in many consumer and industrial products that could lead to inflation and devastate the share price of companies.
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”

Fortunately, it seems like most companies do plan to improve their resiliency efforts in China. But there are still nearly a third of companies that aren’t. Hopefully, we will never have to find out if “good enough” is good enough.

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Managing Strategic Risk: Yahoo’s Crisis

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All the major tech sector firms have their issues. Apple just lost its transcendent leader. Google’s sprawl, some fear, may be leading it down the same path that Microsoft took as it lost its crown as king of the tech mountain. Facebook, well, really, doesn’t have many real problems considering that its rumored-to-be-coming-soon IPO is expected to take in $100 billion. But privacy concerns persist — so much so that an FTC investigation led the agency to mandate the social network to undergo 20 years of privacy audits and obtain consent from users before sharing their personal information.

But such issues pale in comparison to the crisis Yahoo faces, something that is enticing some firms to make a bid for the former tech giant.

http://www.bloomberg.com/news/2011-11-30/alibaba-led-group-said-to-prepare-bid-for-yahoo-web-portal-s-shares-jump.html

Primarily, the company is suffering from a lack of diversification of its revenue stream. To remain healthy, it likely needs to find ways to make money that aren’t related to email, as the chart above from Business Insider shows. As the publication notes, “For all of its success, at its core, Yahoo is still an email business. People use Yahoo email and then from there land on its other properties. The rise of smartphones and iPads is a problem for Yahoo. On those devices, email is a native application that doesn’t encourage people to checkout Yahoo’s pages.”

We highlighted this threat — which, at least in part, prompted the company to fire CEO Carol Bertz in September — in our annual “Year in Risk” look-back at previous 12 months.

The CEO of Yahoo, a company that helped define the internet as a revolutionary means of communication, found out the old-fashioned way that she had been fired: over the phone. Carol Bartz’s uninspiring two-year reign atop the firm came to end as the company showed little ability to adapt its business model to thrive in either advertising or content creation after partnering with Microsoft in hopes of preserving its original core business — internet search. Yahoo’s stock has yet to recover after cratering in late 2008, leaving many tech analysts to wonder if the company has a future.

It’s hard to say what the company will do to revamp its long-term strategy.

But it is becoming increasingly clear that the current route may be a path to nowhere.

The Risks of Social Media: Spam Attacks Q&A

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In mid-November, Facebook became the target of spam attack that infiltrated user’s profile pages on which it posted disturbing images. The attack caused an uproar due to the nature of the violent and sexually explicit images. Facebook chalked it up to a “security bug in an internet browser.” But this was not the first (or, most likely, last) spam attack on the social media site. Over the Thanksgiving weekend, the Facebook community forum was flooded with spam messages that advertised links for streaming sporting events. And just today it was announced that a new worm spreading on Facebook is aiming to infect users with a data-stealing virus. Though not considered a spam attack, it is just another example of the risks of social media.

With questions on this topic, I turned to Dr. Hongwen Zhang, co-founder and CEO of Wedge Networks.

Facebook has been the target for several recent aggressive spam attacks. What makes the site so popular for spammers?

Spammers are moving their efforts away from email and towards social media, exploiting the ability to create fake profiles for free while quickly gaining a massive online presence across various platforms such as Facebook. In addition, hackers/spammers are capitalizing on the popularity of social media by manipulating end-users into downloading malicious content or browsing malicious sites. Studies conducted by security vendor Kaspersky Labs, show that social networking sites are 10 times more effective at delivering malware than previous methods of email delivery. This is a result of social media sites, such as Facebook, where development is based on human relationships and the ability to quickly and easily connect, creating a perfect breeding ground for malicious code and spam.

What were the implications of the recent Facebook spam attack?

With such a large online community, the increasing amount of spam and malware affects Facebook’s operations as well as their users. While the most recent spam attack isn’t new, the violent and pornographic nature of November’s attack upset users more than usual, who went to their blogs, Twitter or Facebook accounts to discuss the outbreak. As of October of this year, Facebook said that spam represents less than 4% of content shared on the social networking website and affects under 0.5%, or 4 million users, on any given day. This is still a large number of people who are being affected on a daily basis and I suspect that this number only includes spam that Facebook catches, therefore it’s not 100% accurate.

Have there been any recent spam attacks on other social networking sites, such as Twitter or LinkedIn?

Twitter and LinkedIn both have faced similar attacks as Facebook, although we have not seen any published information on these attacks as large of a scale or as organized as what we saw in November with Facebook’s stream of spam messages on user profiles and on their help forum. However, most social media sites follow the same principles of user-generated content on trustworthy sites and as such, hackers and spammers can quickly and easily publish their attacks on all sites and expect a similar effect. For example, there have been many documented cases of spam and malware on multiple sites at once, such as the Starbucks themed attack that used both Facebook and Twitter concurrently in November. According to Sophos, spamming on social networks rose in 2010, with 67% of people surveyed receiving spam messages, up from 57% at the end of 2009 and 33% in the middle of that year. Phishing and malware incidents were also rife, with 43% of users spotting phishing attempts and 40% receiving malware.

How can these spam attacks affect businesses who use social media for marketing purposes?

Twitter, Facebook and LinkedIn have entered the IT security landscape — bringing both advantages and dangers to your business. Organizations continue to utilize social media services for marketing and its employees utilize social media for personal usage. IT departments must balance use with control in order to protect a business in the social media world. It becomes a two-fold job:

1. Stopping Outbound Malicious Spam:
Proactively controlling outbound content mitigates the risk of disclosure, ensures appropriate information is being sent and stops the network from sending out spam or malware from your organization. Organizations need to take measures to ensure that its corporate accounts are safe. This includes limiting passwords, staying up-to-date on industry trends and providing education to staff that are managing social media accounts on behalf of the organization. In addition, outbound malware and spam threatens business relationships with customers and negatively impacts the reliability of the brand. Companies must use content protection strategies to strengthen their brand by preventing the distribution of bad outbound content, including spam and malware from their corporate IP or account.

2. Protecting You and Your Employees from the Dangers of Social Media:
Organizations must also protect their networks and assets from employees who use social media sites. With high click through rates, spam being sent through social media can damage corporate assets as well as cost organizations time and money while they clean infected devices. Inline real-time threat protection and malware analysis of all content, including hidden injected malware attacks and downloads, is necessary to efficiently analyze web traffic for malicious attacks against all endpoints. This provides organizations with the comfort of knowing they are protected, even if their employees have been tricked.

What can businesses do to prevent, or at least minimize, the attacks?

Prohibiting employees from accessing social networking sites like Facebook, Twitter and LinkedIn is no longer realistic. Blocking and application control policies are becoming inefficient with dynamic user generated content and cross-site, drive-by attacks on good websites. Combined with access through multiple endpoints (mobile devices, PDAs and tablets), old approaches are no longer effective. Security solutions with the ability for deep content inspection give organizations the advantage of utilizing all social media, while guaranteeing compliance mandates are met and the organization is protected, regardless of what the end-user is accessing. The solutions provide visibility of the application content and the aptitude in which to apply flexible policies over users, applications and protocols based on the real-time understanding of the applications’ intent.

It seems individuals and companies will always be one step behind when it comes to preventing such attacks. Hackers and spammers are just more sophisticated in terms of technical expertise. Do you agree?

I agree with this as many companies and individuals are struggling to protect themselves against attacks, especially when conventional approaches, such as blocking web access according to the reputation of the URLs, are used. However, there are innovative solutions out there that go beyond simply checking on the reputation of a link and go deep to make sure that the actual content is not malicious. These deep content inspection based solutions are effective tools to prevent the spreading of malicious content in social media use.