Protecting proprietary information. (Risk Management).

You don't have to be in sophisticated technology or military supply businesses to be at risk for loss of critical information. Business plans, customer lists, technology and other strategic assets are often lost or severely compromised without the company knowing it until long afterward, if ever. Have you ever wondered how your foreign competitors suddenly "got so smart" or why they "seem to know every move we make"?

As industrial espionage increases, companies must find new ways to keep their information out of competitors' hands. Interestingly, a recent report out of the United Kingdom placed France on equal standing with Russia as an intelligence threat for industrial espionage. Most companies appear to believe these threats only apply to military, space or ultra-high technology markets. Not so!

A related problem is unwitting violations of U.S. export law. Whether companies are transferring technical information to a joint venture partner in a European country or shipping a computer CD to an overseas client, they are potentially putting their own interests at risk. The penalties for such errors are daunting, and ignorance of the law is not a defense. For a mere administrative ("civil") infraction, the penalty is up to $100,000 per occurrence. Intentional misdeeds, of course, are accorded criminal penalties. Such are the dangers of operating in a global environment.

Few business executives realize that these laws apply to a far wider range of products and technical information than the obvious -- military armaments. Computer software, including off-the-shelf commercial office programs, is in many cases subject to export controls, as are many other seemingly commercial items having a potential dual use.

Is there a practical answer, short of a paranoia, that inhibits proprietary information loss among customers, competitors and suppliers alike? There is. Each company needs certain policies that keep its information from suddenly appearing in the wrong hands. These include written policies regarding:

* The exchange of technical data between the organization's U.S. and any offshore company owned or representative offices and personnel.

* Employees taking home technical and business data, either hard copy or electronic, or downloading it remotely after hours.

* The types of technical and business data that may be carried on laptop computers and/or downloaded when outside the country.

However, as any executive knows, policies alone are not enough. If they are to have any effect, companies must also educate employees and any independent contractors working in the facility not to disseminate any technical and/or commercial information to anyone outside the organization, except on a need-to-know-basis. This includes everyone from the chairman and CEO to the maintenance staff.

Few companies realize just how much significant information employees reveal at the local watering hole. Merely "hanging out" at the local lunch place or after-work gathering spot is an old but tried-and-true technique that has enabled many competitive intelligence-gatherers to learn critical information. Casual conversations often reveal information such as production problems, order backlogs, customer and supplier names, quality problems, new product developments and strategies, capital expansion plans, hirings, firings, lay-offs and far more.

In addition, companies must brief management, marketing, technical and contracts personnel on applicable government technical data export regulations. This mandatory education should be standard for new hires, as well as reviewed periodically at company meetings, in newsletters and other communications. Finally, the executive team should appoint a single point of contact, with an alternate in cases of his or her absence, who must approve the export of any documentation. This includes data released via hard copy, fax, electronically, verbally or by visit of foreign nationals or during visits to foreign companies or government offices.

Many North American companies underestimate the extent of competitive intelligence-gathering that occurs, as well as the detrimental effects it can have on an organization. When companies make a conscious effort to protect their proprietary secrets, they not only reduce their legal liability, but they also help protect their company's competitive edge.

John Di Frances is Managing Partner of Di Frances & Associates LLC (www.difrances.com) in Wales, Wis. He advises senior executives globally and is a prominent professional speaker on strategic business issues.