Category Archives: Blog

Keep Your Early-Stage Company on Track

New ideas are thrilling. So many of us are great at starting things; the genesis of an idea, the moment the lightning strikes, that flash of inspiration is pure joy. Taking your first steps into a start-up business are some of the most exciting steps. You are moving at break-neck speed to set up your platform for success.

But, as with all the greatest success stories, eventually, a wall is hit. Nothing worth having ever comes easy, and when it comes to start-up businesses, that struggle often comes in the form of early stagnation. The vision is in your head, the picture of the palace you are going to build is set firmly in your mind’s eye; now you have to go through the potential mundanity of building it brick by brick.

The unfortunate fact is, the majority of new businesses fail within their first year of trading. These failed start-ups are usually victims of common mistakes and misconceptions. Here we have some tips on how to ensure that your early-stage company becomes the success it deserves to be.

Track Your Metrics
On the face of it, this seems like an obvious thing to mention. However, new businesses, especially when low on cashflow, tend to focus mainly on profits and revenue. These are hugely important of course, but there are other data that you should be paying close attention to in order to get a rounded view of performance. Keeping an eye on the following will also ensure that you catch potential pitfalls before they happen…

Customer Acquisition Cost: How much does each new customer cost you? This can be easily assessed by dividing your total marketing and sales costs by the number of customers you have had within a specified time period. How do those figures look against your projections and business plan?

Customer Retention: Retained customers are vital for reputation and cashflow. How good are you at retaining business? Is there anything you could be doing to improve customer experience?

Return on Advertising Spending: Is the revenue you gain as a direct result of advertising sufficient for your investment? Advertising is not cheap and is always a gamble. Divide total sales by advertising spend in order to see what kind of return this investment generates.

Profit Margin: Profit is everything in the end. You must keep a very close eye on the bottom line.

Traction and Momentum
Getting things moving is widely regarded as one of the hardest things to do; getting noticed, getting talked about and getting a great reputation out there. It is a grind, but you have to keep the faith; keep pushing forward. You might have to take it one customer at a time, but, as Mother Teresa once said, “the ocean is made up of drops.” Keep pedalling and the breakthrough will come.

Momentum and passion are tough things to keep hold of on your own. Make sure you have other people around you who are happy for you to bounce ideas off them, and who will inspire fresh ideas and enthusiasm. When you are grafting away on your own, it is vital to have input from people who understand the difficulties of the process.

Delegation
As your business develops, so will your workload. You need to recognise when this workload is too much for you on your own. There is no use in running yourself into the ground before your venture has even left it! To avoid this, take a look at the workings of your business and break them down into separate roles. This could be delegated to interns, or even employees if you are in a position to afford them.

Invest Effort in Talent
When a fresh venture is your baby it is really hard to take parts of it out of your hands and into the hands of others. But this transition must be made in good time. It is essential to invest real time and planning into hiring the right people. Do not wait until it is too late and get into a situation where you have to hire fast; this way you will most likely end up with employees that are the wrong fit for your company.  Make hiring the right talent a priority well ahead of when they are required so that you can put the focus, but not stress, into the task.

Under Promise and Over Deliver
This is a good rule of business in general. This rule not only helps you to gain a great reputation but also takes a little pressure off. An example of this is always promising a later completion date on some work than you intend to deliver so that when you do deliver, earlier than quoted, the customer is happy. This also buys you time if the demands of a start-up slow down a project or task for some reason.

Self-Promotion
Don’t work in secret. Many new companies fail because they are too timid, self-deprecating or fear apparent over-confidence in their product or service. With social media being in its heyday, self-promotion is easier than ever, go for it! Also, if you are planning a publicity event or advertising campaign, don’t be afraid to ask for things. Perhaps you can get a free venue for your launch if you promise to promote the venue. The worst thing they can say is ‘no’!

The bottom line is ‘make some noise’. You might have invented the greatest thing known to man, but all you will hear is crickets if the only living thing that knows about it is your cat!

Don’t Overwork Yourself
This is so easy to do. You have to relax a little; tension has never benefitted anyone or anything. We are told from a young age that the harder you work, the bigger and better the results. This just isn’t the case. It is an attitude that will grind away at you over time, extinguishing the flame that once was your initial idea. Many studies over the past decade have proven that sleep, rest and a healthy work/life balance are essential to wellbeing and success. Take breaks, delegate, keep to sensible working hours, eat properly and keep fit.

In conclusion, perhaps the most important thing to do to keep your business on track is to look after yourself first. Keep that positive vision in your head by keeping yourself healthy, happy and inspired.

What to Expect in the First Week of Your MBA Course

Starting a new MBA course can be a daunting prospect.  Most courses appreciate this and begin with an orientation week so that students can find their feet and prepare to get the most out of their course. Writing for the Financial Times, former MBA student Mehul Ruparelia recalls her first week:

“After the first weekend, we had orientation week, also popularly known as disorientation week. This was a week organised and run by alumni from the outgoing class, full of parties, team-building activities, organised sports, treasure hunts, presentations and more parties. The aim of orientation week was to let people get to know each other and to become more familiar with the campus and the surroundings. Orientation week culminated in a talent night where groups got to showcase their collective and individual talents in front of other students, faculty and alumni.”

Evaluation and preparation
Your first week of an MBA course is your chance to evaluate what your strengths and weaknesses are, and what you hope to achieve through study. The course itself, regardless of which institution you attend, is often described as a ‘sprint’, requiring an enormous amount of work. This first week is a chance to really reflect on what you need to improve in order to succeed.

You cannot achieve a goal without knowing what it is. That means your first week should also include time spent identifying what your life goals are, and what you require in order to reach them. Where should the focus of your study be? Who do you need to meet in order to learn what you need to know? These are the questions you need to be asking yourself because it will be difficult to take a step back and be objective once the course really gets up and running.

Meeting and networking
In the first week of your MBA, you are likely to meet many of the students you will be learning alongside, most of whom come from varied backgrounds and have different levels of experience. Many MBA students find that their fellow classmates are almost as interesting and useful as the course itself, so it is important to use the first week to try and get to know them. Think about what you are offering, too. What are you bringing to the table? Dig deep.

Don’t hold back
The first week on many MBA courses is about pushing boundaries. Students who learn to break the mould are much more likely to succeed in the world of business, which is why courses often include leadership courses and seminars alongside imaginative team-building exercises. There might be some trepidation at first, particularly with regard to the more physical challenges, but it is a great idea to ignore any jitters and fully take part in all the activities that interest you. It will also make it easier to learn other students’ names, something that will come in handy over the course.

Your first week on an MBA course will set the tone for the rest of your time studying. It’s vital to get things off on the right foot.

An SMF MBA Scholarship Awardee says…
In 2017, Kofoworola Agbaje (MEng, Imperial College London) was awarded a £30,000 SMF Scholarship to study for an MBA at Wharton business school.  Asked about her first impression of business school, she said: “I’m surrounded by amazing people and amazing opportunities. I have classmates that have climbed the highest peaks in the world, visited over 60 countries, speak five languages, worked in the FBI, started multiple businesses, sold their start-ups etc. The course is very extensive, a lot more work than I expected but the classes are very interactive and I get to learn from both my professors and other students. There is so much to do and a lot of activities to get involved in, I have joined seven student-run clubs and every day feels like a stretch experience.   I’m loving the experience and taking it one step at a time.”

Read more about the SMF scholarship winners’ first impressions of their business school:
Will an MBA really make a difference to my career? Part 1
Will an MBA really make a difference to my career? Part2
USA or Europe – where to study for your MBA?
Searching for the right post-MBA job
Reflections on the start of my MBA journey

Learn more about the SMF MBA Scholarship.

Photo:  Grace Madeline on Unsplash

Mental Heath in the Workplace: Changing Attitudes

A hard-nosed businessman struts into the heart of the city for work. He works long hours away from his family, his job is everything! Working lunches, high targets, oppressive corporate bosses and hard-won deals; none of this bothers him because he is bulletproof! No tough work environment can penetrate his hard exterior; he is successful therefore he is happy.

This is a stereotype many of us will recognise.  This image is not only outdated, but it was always a work of fiction.  Because of such images, we have struggled to talk about mental health. They are part of the reason women have had to fight so hard for success and inclusion in the global workplace, and men have not been encouraged to express struggle or emotion. A work regime like the one described above may soon be a thing of the past, as companies are now recognising the importance of good mental health and wellbeing in the workplace.

How Does the Workplace Affect Mental Health?
Mental health issues brought on by the workplace are extremely common. The impact, of course, cannot solely be measured by its financial impact. However, this statistic illustrates the extent of the issue quite well: Research shows that last year (2017), 70 million work days were lost to poor mental health. The cost of this to employers in the UK was around £2.5 billion. If that is not an incentive for companies to invest in good mental health practices, we don’t know what is.

“Work is at the very core of contemporary life for most people, providing financial security, personal identity, and an opportunity to make a meaningful contribution to community life.”  Source: Nations for Mental Health, 2015.

How can our work life not affect our mental health?  It’s the place where we spend most of our time; it’s not a part of our life that is easy to ‘write off’ if it is working against our mental health.  When a workplace has no provision or recognition for mental health issues, the culture and atmosphere of the business can become toxic; entirely results driven, and not employee satisfaction driven.  The most successful companies in the mental health arena have one simple thing in common; they have specific resources and rules in place to deal with mental health. They have made it a priority. These provisions often include:

  • Means-Tested Flexibility. Some companies have started to offer flexible hours and responsibilities to those whose work-life balance requirements are more specific.  For example, single parents or carers. 
  • In-House Mental Health Services. Many companies have councillors and other mental health professionals on hand to deal with cases of poor mental health. 
  • Open Door Policy. This is an old idiom but often does not mean what it says. A genuine ‘open door policy’ invites employees to feel comfortable about coming to employers with problems.

Even if, as an employee, you never find a use for these provisions, their presence reassures staff that their wellbeing is being considered. 

The Shift in Attitude
During the last few years, companies have awoken to the importance of prioritising mental health in their businesses. Studies, such as the ACAS Mental Health in the Workplace report show that good employee wellbeing boosts productivity and profit.  Happier people are nicer to each other, meaning a more positive workplace, and staff who tend to go the extra mile to make valuable contributions to their organisations.

How to Implement Mental Health Provisions in Your Workplace
Implementing these practices is not a small task, it is something that your business will have to commit to and spend significant time on.  The process has many intricacies, but when stripped back, it can be illustrated as a four-stage procedure:

  1. Analysing the workplace mental health needs: You will need to take a look at what issues your employees typically face. Are there any common problems? Do these problems stem directly from their work environment?
  1. Developing a policy: You will need to decide on a vision; what do you want your mental health stance to look like? What are your values? You will also need to define your objectives, what you want to achieve, in order to liaise with and convince your stakeholders.
  1. Strategies to implement policy: Once you know what you want to achieve you simply have to work out what to do in order to achieve it! Will there be changes in workplace rules? Will you invest in a social element for your workplace? Which mental health professionals should you get on board?
  1. Implementation and evaluation: This step will be constant. You should regularly be evaluating the effectiveness of what you have put into place and be open to change if needed.

To learn more about these stages, and for any other advice on implementing mental health policies, take a look at this comprehensive document from the World Health Organisation: Mental Health Policies and Programmes in the Workplace.

Thankfully, mental health is gradually becoming de-stigmatised and recognised as an essential part of staff welfare.

The Unlauded Benefits of Soft Skills

Too often, graduates from higher education and business schools are not taught to acquire soft skills before going into the workplace. Their focus is typically on training and education, alongside job preparation and technical skills.  However, without the appropriate soft skills, their work is an uphill challenge that comes with a steep learning curve. In this post, we take a look at the soft skills graduates need to begin learning, and why.

Communication
Writing for Salesforce, Stuart Leung explains the problem:  “Despite the supposed ‘disconnect’ of the digital age, humanity is still a very social species, and unless we as individuals understand how to communicate, cooperate, and coordinate with others, we are at a significant disadvantage – especially in the workplace.  In fact, according to Mark Murphy (author of Hire for Attitude), 46% of new hires fail in the first 18 months, and of those new hires, 89% fail for reasons associated with attitude.”

Clearly, employers are going to be looking for candidates with soft skills like communication, especially if it curbs an alarming 46% fail rate.  Attitude problems are perhaps harder to predict in a new graduate, but a good communicator is likely not going to suffer from these as severely.  Conversely, companies that have a glut of effective communicators are far less likely to lose key employees.

Learning the intangible
Rosemary Haefner of CareerBuilder (@haefner_r) says: “Saying that you’re a team player is not enough; you have to show it.  Provide an example of how you worked on a team to accomplish a particular goal.  Provide an example of a high-pressure situation that you handled with ease.”

Teamwork is just one of several soft skills that employers are looking for.  They’re also after responsibility, leadership, problem-solving skills, decisiveness and adaptability.  The truth is that many of the desired qualities in candidates are intangibles, unknown before introducing an employee to the working environment.  And the problem with these intangible skills is that they are notoriously difficult to teach.  Attributes like decisiveness, cultural awareness and emotional intelligence are hard to acquire; they are often innate talents, rather than learned ones.

In most instances, it is a challenge to develop soft skills through study alone – it is something that progresses over time, with experiences of both success and failure.  The Director of HR at the Lawn Tennis Association, Vicky Williams, argues: “Most things can be taught, other than passion – people are either born being passionate or they’re not.  That’s an innate skill. But if you take teamwork as a leadership competency, while somebody cannot go from completely unskilled to being A-starred, their leadership journey equips them to be better than when they started out.”

Value
There is no question that employers value soft skills.  In surveys, qualities like “team player” and “good communicator” are always high on the list.  However, soft skills are terribly difficult to teach directly.  The best thing employers can do is create an environment that facilitates the learning of soft skills, and giving their employees a firm grounding in what competency in these skills should look like.

The Pitfalls of Peer-to-Peer Lending

According to Bloomberg, the Financial Times and a handful of other newspapers, peer-to-peer lending could be headed for a collapse. What began as a new, innovative way of lending capital may have become a ticking time bomb.

The Chief Executive of Bibby Financial Services, David Postings, notes that the signs are negative:  “We are seeing signs of overheating in the small and medium-sized business lending market. Credit terms are stretched and pricing is down. It has all the hallmarks of what happened to personal credit pre-2007. There will be a crash sooner or later. Peer-to-peer is unproven through a credit cycle. The platforms are not at risk but the people who put the cash in could lose everything. If you put your money in a bank the shareholders take the hit – they are the ones taking the risk.”

Peer-to-peer
At its core, this form of lending is a more individual form of finance. It allows interested investors to loan money to inventors, business owners and entrepreneurs, based on a pitch.  Interest on the loan is set by the investor, but an attractive project or opportunity will likely receive several different loan offers, forcing potential investors to compete with each other.

As Postings has argued, interest rates may already have become too low, hinting a crash may be imminent.

For several years, however, peer-to-peer lending has gone from strength to strength.  In 2015, the market peaked at $12 billion in loans. In the majority of cases, these were unsecured loans. Another problem is that investors in many instances knew little about the businesses they were loaning money to, and no understanding of the risks they were facing.  There is also the question of the time and knowledge it takes to read the information provided by a company, and the ability to exert shareholder control. Listed equities are governed by extensive disclosure rules and rights that protect minority investors.  Peer lending does not offer these kinds of controls.

It is common for banks to face criticism that they are reckless with their risks, or even abusive to customers. However, banks have the benefit of experience. They’ve seen many financial cycles, as well as weathered frauds and catastrophes. Although a big enough crash could bring them down, they’re generally diversified enough to prevent it. Peer to peer does not offer this kind of security.

There are several peer-to-peer lending platforms. The UK’s leading platform is Zopa, which has facilitated the lending of almost £3 billion since 2005. According to their website, 60,000 investors have lent an average of £13,000 to businesses and startups.

The Case of Rebus
Rebus was a company that primarily dealt with clients who had been mis-sold financial products. Through Crowdcube, a peer-to-peer lending platform, Rebus was able to raise over £800,000 from small investors. Over a hundred people had lent money to Rebus, with amounts ranging from £5,000 to £135,000, with the promise of gains between 6.4 and 10.6 times their investment.

The fall of Rebus would be the largest equity crowdfunding failure in the UK. Investors lost their money.

Julia Groves, of the UKCFA noted: “We should be in no doubt that there will be failures like Rebus [but]…the question is whether people understand the risks they are taking.”

The case of Rebus should be a reminder that all investments can fail, all investments can result in losses. The key difference between small-time lenders that use peer-to-peer platforms and larger scale investors is a diversity of portfolio. It is vitally important for prudent investors to manage risk by spreading investments – something that amateurs will not be aware of, or be able to afford. It has made peer-to-peer appear more and more like gambling, rather than as a needed source of finance to spur innovation and small businesses.

It’s likely that peer-to-peer lending in its current form does not have long left before a crash. However, the concept of lending to small businesses will continue. Large financial institutions are starting to see the benefit, and they can protect themselves much more effectively than small-time lenders.

Is it Possible to Repair Reputational Damage?

According to Aon’s 2017 Global Risk Assessment Survey, reputational damage features in the top five risks for almost every industry.  Product recalls unethical behaviour, supply chain failures, business interruption and cybercrime are all precursors to reputational damage.  It warrants heightened vigilance from businesses, especially since reputational damage can subsequently lead to legal challenges, increased competition and even share price fluctuation.

It is clear that businesses should take this risk extremely seriously, and incorporate it into business risk analysis. If reputational damage has already occurred, the question is not about prevention, but about repair and the response to the issue/crisis will influence how the company is perceived, its reputation and long-term survival.

McDonald’s Response to Supersize Me
In 2004, filmmaker Morgan Spurlock released his now famous documentary about McDonald’s, Supersize Me.  It followed Spurlock as he attempted to spend a month eating nothing but McDonald’s food, with emphasis drawn to the ‘supersize’ option offered to customers at the time. The film became very popular and McDonald’s suffered reputational damage as a result, particularly due to the health problems endured by Spurlock as a result of his experiment.

The fast-food chain responded in a variety of ways, its strategy often depending on the country in which it was deployed.  In several countries, McDonald’s paid for advertising time in the trailers shown before Supersize Me at cinemas.  As a Campaign article noted in 2004:

“The calm, rationed approach contrasts strongly with McDonald’s response to the movie in the US.  While the UK advert describes the film as “slick” and “well-made”, McDonald’s in the US called it “a gross-out movie” and responded with an aggressive PR campaign.”

Although McDonald’s tried to respond to the film, ultimately it helped to push the fast food industry in a healthier direction. The ‘supersize’ option was phased out, even as spokespeople insisted the film and connected health concerns played no part in the decision.  It made little difference. The damage to the reputation of McDonald’s and the wider fast-food industry invited a wave of competitors to join the fray.  Even as recently as 2015, the chain was arguably still suffering as a result.

Uber Loses CEO
The ride-sharing app has come under increased scrutiny in recent months, with several aspects of its business suffering reputational damage.  From sexual harassment scandals and the revelations of a toxic workplace culture to public concerns about unethical business practices and exploitation, we have seen Uber’s brand tainted.  And, like McDonald’s, the reputational damage has opened the door to competitors to take market share. In this particular instance, rival business Lyft has raised half a billion dollars to capitalise on Uber’s pain.

Uber responded by opening an anonymous tip line for employees, as well as holding ‘listening sessions’ with its workforce.  However, such is the scale of the issues facing the company that CEO Travis Kalanick had no choice but to resign.  Unlike the previous combative nature of Uber to negative press, the new CEO Dara Khosrowshahi had these words for employees:

“While the impulse may be to say that this is unfair, one of the lessons I’ve learned over time is that change comes from self-reflection.  So it’s worth examining how we got here. The truth is there is a high cost to a bad reputation.”

It remains to be seen whether an ‘attitude reset’ will actually be able to turn around serious reputational damage, considering the number of issues currently facing the company.

The Knock on Effects
As we’ve seen from these two cases, the knock-on effect of reputational damage can be painful in the short-term.  However, it is the long-term effects that can make recovery and repair much more difficult.  Reputational damage makes the job of positive PR an uphill battle, and once public trust is lost, it can be elusive to regain.

We can’t always predict where the next crisis will come from. However, with a strong ethical direction that maintains the balance between shareholders, staff and customers, it makes it easier to survive reputational damage intact.  If the wider public has faith in your business, they will be more inclined to forgive a mistake – so long as the resolutions to the crisis situation is sincere and robust.

MBA Scholarship Awardees Share their Experiences

£300,000 of SMF Scholarship Awards Help 10 Talented Engineers Attend Top Business Schools

Wharton, INSEAD, Kellogg, Stanford and LBS are welcoming 10 awardees of the Sainsbury Management Fellows MBA scholarship.

The awardees each received £30,000 towards their study costs.  They are Kofoworola Agbaje who chose Wharton; Nicholas Asselin-Miller, Qiang Fu and Andrew Glykys are attending INSEAD; Mukunth Kovaichelvan is studying at Kellogg; Imogen Rye is at Stanford, and the other four awardees – Benjamin Banks, James Diaz-Sokoloff, Matthew Dixon and David MacGeehan – all chose to study at London Business School.

The SMF Scholarship scheme is run by Engineers in Business Fellowship (EIBF) which helps young engineers fulfil their aspirations to become business leaders by supporting them financially in gaining business skills including leadership, strategic thinking, marketing, economics and finance.

The value of Sainsbury Management Fellows awarded now totals £9 million.  During this time the scholarship has helped over 300 engineers forge outstanding careers in diverse areas including the corporate sector, social enterprise, charity, healthcare and education.

The success of the scholarship scheme is measured not only in terms of the career achievements of the SMFs but in their contribution to society.  For example, 153 SMFs have founded or co-founded businesses valued at £4.6 billion, creating 18,000 jobs; 265 SMFs support and mentor young engineers, helping them with career or entrepreneurial goals and 122 SMFs are actively involved with charitable organisations.  Several SMFs teach business and innovation as visiting professors at universities, including the EIBF President, David Falzani.

After graduation, the scholarship awardees become Sainsbury Management Fellows and become SMF Alumni.  Many say that the Alumni is, perhaps, the most rewarding part of winning a scholarship, because of the lifelong support. The Fellows benefit from ongoing career and entrepreneurship mentoring which can often lead to important collaborations and high-level networking via SMF, the Royal Academy of Engineering and other leading institutions.

Commenting on the purpose of the SMF Scholarship David Falzani said, “The world is changing at an unprecedented rate, creating new challenges for UK businesses, these include globalisation, cross-culturalism, the rise of the Asian markets and flux in international politics, the economy, technology and environmentalism.  The need for multi-skilled engineers is actually increasing.  The SMF scholarship expands the pool of business-minded engineers available to employers.  The more SMFs we nurture, the more they can help boards make sound strategic decisions and deal with the challenges arising from new paradigm shifts.”

New Applications Invited
The SMF scholarship is open to engineers with the potential to gain leadership roles early in their careers, who have a clear vision for their MBA study and career aspirations.  Candidates submit a written application and shortlisted candidates undergo a panel interview with members of the Royal Academy of Engineering and Sainsbury Management Fellows.    Find out more about making an application.

To learn directly from 8 of the successful awardees, click the grey panels on the right and read their Q&As.

Risky business: why you need risk analysis for your business

Even if you have been running a successful and secure business for years, problems might still arise unexpectedly that put the operation in jeopardy.  Companies are at risk of all types of potential threats, from force majeure to cybercrime to whistleblowing on an internal problem. Knowing about your company’s exposure to problems is vital, therefore risk analysis should be an integral part of your corporate governance.

Attention to detail
Risk analysis can be a complex task as it requires information on a variety of topics right across the business. Project plans, security protocols, financial data and marketing forecasts can all be used to build a picture of the challenges a business faces. The first step is to identify threats through a detailed analysis of the risks faced by the business. This work will highlight potential threats and their implications, and enable the board to identify and rectify any weaknesses and, at the same time, develop crisis contingency plans to manage any emerging crisis if a risk becomes a reality.

A threat might be a human one – for example, illness, injury or the loss of a key employee might cause significant damage to a business. ‘Key man insurance’ is an example of one strategy to address the financial implications of this particular risk.

Other threats can be classified as operational, reputational, procedural, political and structural. These example categories help you to define where the major risks to your business are and why your business is vulnerable.

External threats
It is also important to think about potential external shocks that could cause disruption to the business. Although an extreme case, you may recall that in 2013, a helicopter collided with a crane on a construction site in London – it left two dead, twelve people injured, caused damage to nearby local businesses, stopped London traffic and led to round-the-clock media coverage. External incidents can harm infrastructure, data and bring day-to-day business to a halt.  As part of the risk analysis process, it is important to consider external factors that could disrupt the business and how it would continue to operate in such an eventuality. Companies need plans to protect transactions and their reputation from unforeseen crises.

Prepare to communicate in a crisis
It is imperative that there is consensus on crisis contingency plans. All managers should be fully apprised of the plans and know their roles and responsibilities in advance.   Also, a communications plan needs to dovetail with the crisis and business continuity plans – If an incident occurs, staff, clients and the wider public will need to be informed, reassured and kept updated.

With this in mind, it is advisable to set up and test in advance, an information gathering system so that nominated staff can easily gather and collate data and share it with the relevant people.  Finally, the likelihood is that some staff will need training on the response plans and their individual roles. It is up to senior management to identify those who can carry out tasks and provide the necessary training. The faster, more coordinated and effective the response (both to the incident and communications), the less damaging the impact will be on day-to-day business and the long-term reputation of the business.

Whistleblowing
Sometimes a problem will not be a visible one. If there is a persistent issue that management has failed to act upon and is of relevance to the general public, employees may resort to whistleblowing.  The government protects corporate whistleblowers, and any gag order or non-disclosure agreement will not apply if the case is deemed to be of interest to the public at large. A whistleblower is completely protected when reporting on health and safety dangers, damage to the environment, and miscarriage of justice – when a company is breaking the law or if someone has attempted to cover up wrongdoing.

A problem that the board fails to uncover in its governance, or the risk analysis process, that is later revealed to the public by a whistleblower can be hugely damaging to the business. In terms of reputational damage, it may be a very expensive mistake to repair, if indeed it can be repaired. If the whistleblower reveals criminal activity, it might also lead to an investigation.

However, whistleblowing should not be feared as destructive in of itself. Companies that have the right system in place to deal with concerns and complaints should actually benefit from them, as it gives management the opportunity to put things right.

Employees should be made aware of a company’s whistleblowing policy and what they can expect in terms of actions and results when a complaint is made.  Once the system is in place, however, it must be allowed to run without the interference of management.  A recent case of an attempt to identify a whistleblower has shown that companies require a culture that encourages employees to speak their minds when they have a concern and that attempts to remove anonymity can badly taint that culture of openness.  Employees who know their welfare matters will be more willing to come forward. The ideal scenario is for employees to feel assured enough in their standing that they can submit complaints without anonymity and without fear of censure.

Risk analysis is an essential part of strategic business management and should be a top priority for the board.  If the issue is constantly moving down the agenda in your company, RiskNet’s article on the Top 10 operational risks for 2017 might galvanise you into action!

NGOs and healthcare sector least prepared for cyber attacks

photo: Solarseven

Non-governmental organisations (NGOs) and the healthcare sector are the ‘least prepared’ and most at risk of cyber attacks according to a new poll by the Sainsbury Management Fellows (SMF) business research panel – 25% percent of respondents named NGOs while just over 22% identified the healthcare sector.  The next highest at-risk sector named was agriculture/agribusiness with 16%.

It is perhaps not surprising that healthcare ranked highly given that just a few months ago the NHS was given a dose of vicious ransomware sent via its email systems. This fooled some staff into opening attachments which spread a virus across some parts of the network.  This attack raised a heated debate about the robustness or otherwise of NHS computer systems, though a government spokesperson said that 97% of the NHS was unaffected.

If the SMF panel’s view that the agriculture/agribusiness is a high-risk sector, it doesn’t bear thinking about the consequences of a breakdown in the food chain.  An attack on the complex and interwoven food production processes, from growers to production and retail, could lead to food shortages in just a few days, impacting consumers directly as well as major institutions, such as schools and hospitals, which feed children and patients respectively.

Many organisations don’t feel the need for greater security
The majority of the SMF panel agreed that many organisations don’t feel the need for greater cybersecurity because they believe they have bigger problems to worry about, or that they are too small, too large or too important to be affected.

If the panel’s perception is accurate, these organisations need to be mindful of the findings of a leading security report which recently warned that ‘financially motivated criminals continued to innovate in 2017.’  The Flashpoint ‘Business Intelligence Report’ 2017 mid-year update identifies heightened threats from cybercriminals as well as ‘severe’ and potentially ‘catastrophic threats’ from China, North Korea, Iran, Russia and Jihadist Hackers. The report defines a catastrophic attack as:

‘Having the potential to cause complete paralysis and/or destruction of critical systems and infrastructure. Under such circumstances, regular business operations and/or government functions cease and data confidentiality, integrity, and availability is completely compromised for extended periods.’

According to Flashpoint, a notable trend in 2016 was cybercriminals targeting of healthcare organisations as a means of obtaining sensitive and exploitable personally identifiable information. Business email compromise is an area of rapid growth, with newly-released statistics finding that the various iterations of the scheme have led to some $5.3 billion dollars in losses globally. Overall, cybercriminals have continued to evolve in order to circumvent additional protections and new technologies designed to reduce fraud, such as EMV chips in payment cards.

Best Prepared Sectors
Perhaps unsurprisingly, the poll identified the military/defence and computer/technology sectors as the best prepared to deal with potential cyber attacks.  Over half (56%) chose the military, with 16% of the votes going to computer/tech and 13% opting for the financial services sector.  No other sector scored more than 4% of the total vote.  Almost one-third (31%) said that they felt that organisations in these three sectors recognise that cybersecurity is important and are ready to deal with such challenges because they believe that lives depend on it.

Value of Organisation/Corporate Data  
Almost two-thirds (66%) of those polled believe that most organisations don’t understand the value of the data they hold, making them vulnerable to serious attack and consequential future loss for their business.

 

SMF Panel Commentary 
These comments highlight concerns:

  • “Most companies don’t organise their data well and therefore fail to see its value, especially to others who do.”
  • “Companies that don’t monetise the data they hold don’t understand the value. Some may hold a lot of data but don’t exploit it for commercial gain so are not aware of its potential value.”
  • “The value depends on how the data is used. A lot of data that is not seen as valuable by companies could be very valuable to a malevolent party, for example, personnel records.”
  • “The data one company holds might have a lot of value when combined with another company’s data.“
  • “Data-mining can make mass data useful as opposed to individual or the data one company holds might have a lot of value when combined with another’s [data].”

Panel member David Bell from Rolls Royce points out that as cybercrime is a relatively new phenomenon, it is taking some time before organisations act to tighten up their data security.  He said, “Awareness of cybercrime is on the rise; many organisations are yet to fall victim of an attack, targeted or otherwise, and so are under-prepared and vulnerable. Shareholder pressure can cause organisations to focus more on revenue-generating activities and less on cybersecurity as, until more recently, there has been little cause for concern. Many organisations are only coming to understand the value of their data if it were to be subject to a ransomware attack.”

One panellist who felt that organisations do understand the value of their data still highlighted problems of preparedness: “Most companies do understand the value of their data, and in the last couple of years have realised they are potential targets for attack. However, it is not only the technical defences but also employee awareness and education that need to be put in place.  These take many years to develop and build in large organisations and require regular and systemic support and understanding.  The technical proficiency of many UK leaders/boards is quite low so they have been very slow in reacting and developing policies around this area.”

SMF James Raby agrees on the latter points: “There is indeed a learning curve for most organisations but the increasing number of high-profile and debilitating attacks across a diversity of organisations, from telecoms companies to the NHS, means that all organisations must make cybercrime a top priority.  This requires senior management commitment together with technical experts who can develop appropriate and evolving anti-cybercrime strategies.”

Another panellist said, “The cyber landscape is rapidly evolving and bringing with it new data technologies, risks and opportunities.  In this context of complexity, the value of organisational data is often not well understood. This has significant implications for cyber attacks – companies are often failing to protect their most valuable data or leverage data that can support cyber defence. In order to understand the value and take appropriate action companies need to invest in a cyber ambition, strategy, roadmap and culture that builds appropriate data ownership, capabilities and processes.”

The overriding perception from the SMF business research panel is that most organisations are simply not doing enough to protect their operations from cybercrime at the moment and are in danger of ‘closing the stable door after the horse has bolted’.  One panellist summed it up nicely saying, “Information is the lifeblood of a profitable business; like the air we breathe, one takes it for granted until it’s gone.”

If you would like to join the SMF Business Research Panel, please email the SMF Office with your details. 

 

AI: A threat or opportunity for UK businesses?


SMF President, David Falzani,  explores the challenge AI poses to business and wider society.

The hypothetical outcomes of AI for business have ranged from utopian to hysterical among commentators, with many focusing in particular on the implications of AI and automation for work – and the risk of redundancies. The Bank of England estimates that 48% of human workers will eventually be replaced by robotics and software automation.  ArkInvest meanwhile predicts that 76 million US jobs will disappear in the next two decades.

Daniel J. Arbess, writing for Fortune magazine, goes as far as to argue that “the accelerating penetration of job-displacing software presents maybe the most serious (and still underappreciated) socio-economic challenge to market economies in generations, both in our own country and abroad.” Jobs, it seems, are the biggest worry. “Applied software technology reduces costs and prices, taking fewer consumption dollars a longer way. We’re starting to hear a lot about this, because entrepreneurs, investors and shareholders of companies will be enjoying epic financial rewards from the AI economy–but what about everyone else?  People still need jobs.”

Meanwhile, Professor Stephen Hawking raised the stakes somewhat in 2014 saying “The development of full artificial intelligence could spell the end of the human race.” whilst Elon Musk warned that AI is “our biggest existential threat”.

AI is, then, conveyed as a threat to business, employment, and even existence, sometimes by people who don’t understand how the technology is currently being used, sometimes by the science and technology community. At the same time, it’s floated as the basis for a universal basic income and the new Industrial Revolution, as well as massively increased efficiencies across all industries. So is AI a threat or an opportunity for UK businesses?

Blake Irving, the CEO of GoDaddy, a global web hosting company, explains that “the AI that’s real today is known as ‘Narrow AI’.” Rather than worrying about super intelligent Skynets wiping humanity off the face of the earth, Blake argues we should instead focus on narrow AI as “what’s actually changing everything.” Citing Rand Hindi, who defines narrow AI as “the ability for a machine to reproduce a specific human behaviour, without consciousness… a powerful tool to automate narrow tasks, like an algorithm would”, Irving argues that narrow AI will replace or transform any job where information gathering and pattern recognition drive a volume business. “That’s not just labourers. That’s accountants, traders, estate agents, lawyers, software developers, and on and on.”

A good example of this ‘narrow AI’ can be seen in eBay’s introduction of personalised homepages and a ‘ShopBot’ for its users. “Using structured data – a transformative step to drive discoverability of our vast inventory, insights into supply and demand, pricing trends, among other things – and artificial intelligence, we’re creating a shopping experience that is tailored to each eBay user’s interests, passions and shopping history,” CEO Devin Weing explains. “With more than one billion items … we’re making shopping on eBay all about you, instead of a one-size-fits-all approach.” This is massively increasing sales conversions for the company and its traders.

Irving goes on to examine three categories of ‘AI insulated jobs’: those which require meaningful creative interactions with other people; those that won’t be replaced due to the limitations of robotics but will be transformed side-by-side with Narrow AI tools; finally, entrepreneurial roles, which can encompass such a diversity of work as to be difficult to automate. Irving uses these categories to argue that the ‘end result’ of AI displacing jobs will be the need for a population better educated to manage or interface with AI. It will, in other words, incentivise skills-based specialist technology education and ultimately spur a demand for creative thinking and skills, the things that narrow AI cannot provide.

The structuring of data that narrow AI affords us isn’t so much abolishing old skills and roles, then, as it is creating a demand for integrating new capabilities into the modern business plan. If anything, it is actually increasing the demand for creative entrepreneurs, whose skill sets are more valuable than ever while productivity and efficiency shoots up across the board thanks to AI. A similar increase in productivity was seen in the 1990s due to the implementation of MRP and MRP2 that saw skilled and semi skilled roles replaced with algorithms.

It might be worth considering that every threat is an opportunity because it forces change. The exploding volume of literature on the so-called AI revolution suggests that these technological developments may offer massive efficiency improvements, and radical changes to how businesses get things done. Are you able and willing to turn AI into an opportunity to radically overhaul skill sets and workplace practices to keep ahead of the curve, or are you not in a position to invest in this fledgling technology yet, and at risk of falling behind? The answer depends largely on the kind of organisation you run, to what extent it has information gathering and pattern recognition centred tasks, and how open it is to change, as well as how well you grapple with the reality of AI technology as it currently stands.