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Why businesses must prepare a strategic response to corporate sabotage.

Terrorism and sabotage aimed at domestic and multinational corporations continue at a frantic pace. While such acts are often politically motivated, industry remains a chief target of its perpetrators. At a time when much of the world is working towards regional and even global consensus on economic and social issues, terrorism and sabotage remains an frightening, often ignored aspect of industrial operations.

Based on an analysis of acts of terrorism and sabotage aimed at corporations between 1981 to 1991, the following conclusions can be drawn. Acts of terrorism and sabotage tend to be:

Intentional -- Terrorism differs from accidents, such as was the case with the Union Carbide gas leak at Bhopal. Kidnapping of executives from large, well-known organizations such as IBM, General Motors and other firms is often directly correlated not to the wealth of individual victims as much as to the wealth and power of their employer. Sabotage is rarely random; disgruntled employees and customers are most often responsible for serious damage inflicted in cases of damage to computer systems, according to a 1989 survey.

Methodically targeted -- Terrorism differs from a gunman who rushes into a restaurant and randomly shoots customers. When George Hinnard killed 23 people on October 16, 1991 at Luby's Killeen, Texas restaurant, police believe he did so without a preconceived plan -- there was no apparent "ax" to grind. This differs considerably from the January 1992 murder of a Japanese university president who was murdered in his Boston, Mass. hotel suite. Police suspect that the victim, who was Japanese, was specifically targeted, although the reasons remain unclear. Between January 1 and May 20, 1992, at least 10 Japanese executives were murdered while working abroad

Motivated by a cause -- In some cases, organizations and executives who are planning to operate a new plant in a foreign country find that local extremists do not want "capitalists" invading their territory. In other cases, a terrorist strike against an American, British or Canadian firm is seen as a "statement of independence" by guerrillas attached to any number of organizations.

Often planned and executed by trained individuals who are insensitive to the victims they have targeted, terrorists and saboteurs may act because:

* They seek a change in the operations or leadership of an organization;

* They seek to politicize the plight of their cause by targeting a popular individual;

* They believe that violence, even against a third party, may bring needed publicity to one struggle or another;

* They seek to undermine public confidence in a company, organization or country by assassinating a leader or injuring a company's reputation; and

* They use calculated means to make it seem as if another party were responsible for the harm they inflict.

Corporations are susceptible

As surprising as it may seem, virtually every multinational organization and its visible management team is at least theoretically susceptible to terrorist attack, though relatively few will ever be actual targets. Terrorists use fear to intimidate, and their weapon is often surprisingly successful. According to World Trade, the NBC Television Network was extremely worried about North Korean activists seeking to murder network executives or guests during the 1988 Seoul Olympic games. NBC reportedly paid Virginia consulting firm Fairfax International some $1.5 million to protect managers and equipment during their one-month journey.

When a terrorist or saboteur strikes, it is most often through means that may include telephone bomb threats, a letter or package bomb, kidnapping or assassination. Many times the threat of action is as potent as an act itself, since the uncertainty associated with a mail or telephone threat can cause disarray for an entire organization and all levels of the workforce. One leading researcher of the hospitality and casino industry reports that virtually every one of some 240 casinos that he visited or consulted with in Atlantic City, Iowa, Las Vegas, Lake Tahoe, Louisiana and such foreign capitals as London and Seoul have all received multiple, violent threats to life and property.

The gaming industry is hardly alone. For this reason, the mail rooms of many large corporations that receive numerous packages each day have either installed sophisticated devices that help trace an explosive or incendiary device, or they refuse to open suspicious packages that have no recognizable addresses. In other cases, companies send their executives who are likely to be traveling in unstable regions of the world to "terrorist boot camp" training programs where they are taught specific means to protect themselves and their families in foreign capitals.

Security expert Edward Badalato, a former assistant U.S. Secretary of Energy and Marine Commander, notes that manufacturers and utilities are especially vulnerable because of their exposure to those with abhorrent behavior. He argues that companies that fail to prepare a strategic contingency plan for terrorism or sabotage are acting irresponsibly; stockholders and employees could later have sufficient grounds in a potential lawsuit, he believes. Today, Badalato serves as CEO for a leading security firm that protects electrical, water and nuclear power facilities called Energa Technologies Inc. of Fairfax, Va.

Terrorism has been growing at an annual rate of between 15 to 20 percent per year since 1980, and the level of sophistication used by terrorists against their targets has become frightening. Shinichiro Tomioka, a terrorism and sabotage expert with Japan's largest security consultant, SECOM Ltd., estimates that of the 2,072 recorded international attacks on U.S. citizens and property from 1970 to 1980, 32 percent were aimed at business and industry.

In the 1990s, it is not uncommon for numerous manufacturing and distribution firms that have laid off workers to find themselves receiving threats or damage to property. While the vast majority of these threats go unreported, and most do not result in actual damage, the mere existence of such threats underscores the need for preventative measures.

Many industries are targets

Although corporate managers are reluctant to talk about terrorists for fear that it may inspire copy-cats, consider these cases of terrorism and sabotage in recent years:

* On September 28, 1989, a British man was jailed for trying to extort money from British supermarkets and manufacturing concerns; he sent Proctor & Gamble shampoo bottles containing broken glass and hair remover and threatened that if not compensated, he may use AIDS-infected blood in the future.

* In 1984, an extortion attempt was made on Safeway Stores; the terrorist threatened to poison food products sold in the supermarket with weed killer and arsenic.

* When William Niehous, manager of Owens-Illinois' Venezuelan subsidiary, was held hostage by terrorists for over three years, his family sued Owens-Illinois. In their lawsuit, family members asserted that the company had mishandled attempts to secure Niehous' release. When the executive was finally released, the lawsuit continued and was only dropped after he was promoted to corporate vice president.

* Several stockholders of Exxon opposed the company's 1973 decision to pay $13 million in ransom to secure the release of one of its executives who had been kidnapped by Argentine terrorists; their lawsuit against Exxon's board of directors claimed that the payment was a "gift" from corporate funds.

* In 1989 a former policeman, Rodney Whitchelo, was arrested for contaminating Heinz baby food with "all kinds of nasties, including caustic soda and razor blades."

A number of prominent terrorist attacks have inflicted death and injury on tourists, including the Achille Lauro cruise ship hijacking and the bombing of Pan Am Flight 103 over Lockerbie, Scotland. Several years of intensive research by Interpol, FBI and other criminal investigators constituted the largest criminal investigation in human history -- and led to perpetrators within Libya. With no extradition agreement between Libya and both the U.S. and Britain, terrorists seemingly go unpunished for their acts. An unfortunate byproduct of the Lockerbie incident is the fact that in the aftermath of the crash, Pan Am's appeal to travelers was severely damaged; the airline declared bankruptcy in 1991.

Despite the visual impact of innocent victims being injured or killed, most terrorist attacks occur against businesspersons traveling in politically unstable countries such as Columbia, Uganda, Sudan and elsewhere; sometimes these are calculated attacks meant to warn off an American or other foreign entities not to pursue further investment, but sometimes they do not appear to be part of any orchestrated or "message-oriented" campaign. Leftist groups, rightist groups, pro-independence groups--the entire gamut of political or religious causes appears to inspire terrorist activities as much as greed and psychological disorders.

The new elite

American companies are not the only ones susceptible to an organizational crisis caused by terrorism. With increased operations, investments and visibility abroad, Japanese firms have also been increasingly targeted by terrorists. Figure 1 offers insight into just some of the more prominent cases that Japanese firms have faced in recent years.

Japan's Tomioka argues that Japanese firms are not accustomed to violence in their own country and thus have greatly underestimated what resources are needed to protect themselves when working or traveling abroad. His warning is borne out by budget estimates he has made after extensive comparative research between U.S. and Japanese firms: he estimates that Panasonic, with investments in 134 countries, spends between $1 to 2 million annually on security management; IBM's uses could reach as high as $100 million to protect its worldwide team and corporate property interests.
SELECTED ACTS OF TERRORISM AGAINST JAPANESE CONCERNS
Targets Date Acts
NEC 1985 Kidnapping, Iran
Hitachi 1986 Two engineers wounded, Iran
Bank of Tokyo 1987 Bombing
Sony 1989 Repeated bomb threats, worldwide
Japan Air Lines 1989 Blackmail in Beijing, China office
BCCI/Japan Units 1991 Telephone and mail threats
Japan University 1992 President murdered in Boston, MA


Being targeted

Risk International, a Virginia-based consulting firm specializing in assessing potential terrorism against corporations, estimates that 85 percent of all terrorist acts involve the bombing of property. Although people may be maimed or injured, their research indicates that property destruction is the actual intent. In recent years terrorists have increasingly targeted computer systems, because the value of lost data through manipulation or falsification can be immense.

Another organization, the American Society for Industrial Security (ASIS), boasts over 25,000 members in some 200 local chapters throughout the U.S.; many major corporations send their executives to ASIS meetings and training sessions and disseminate the group's newsletter to various departments on a routine basis. Certainly the expense related to the launching of security programs, although initially high, may be modest in comparison to the costs of a terrorist attack on a company or its officials.

Business risk is influenced by a variety of factors. By strategically selecting where to do business, an organization can reduce its exposure to potential terrorism in the future. One security expert, writing in the Site Selection Handbook, asserted that of the 200 nations recognized by the United Nations as members of the world community, "fewer than 50 are currently secure enough to receive serious and consistent consideration as investment locations by free-enterprise ventures."

The U.S. State Department's Overseas Security Advisory Council (OSAC) is actively consulted by business managers interested in operating abroad and concerned about appropriate locations due to the potential for a terrorist crisis. A number of private consulting firms also offer advice on assessing country risk.

Steps management can take

It is important to remember that terrorism and sabotage, whether orchestrated by one individual with a vendetta against a specific organization or self-proclaimed patriots targeting random nationals from any particular country, can create havoc for any organization. Managers who believe their employees or their physical plants could be targeted for terrorist attack should take action steps, including:

Make decisions based upon the political landscape -- It is important to read area newspapers and regularly review various databases offered by security management and risk assessment firms as well as the U.S. Department of State. In many cases, a terrorist strikes smaller targets first and, breeding upon that success, seeks publicity by pursuing more prominent targets for attack or extortion.

Understand the rules of terrorism -- If your company is operating in Iraq, Chile, the Philippines, Cuba and a number of other politically volatile countries, you should know in advance the rules about paying ransom or other form of extortion. Established relationships with area law enforcement authorities could help or hurt; only by evaluating the specific situation in that region in advance could you best determine the most prudent action.

Prepare for the worst -- Fortune magazine recently examined terrorist crises faced by American businesses and used two simple examples to drive its point home: "A shoe company operating in Latin America brought in an autocratic Dutchman to make improvements in a factory a few years ago. An auto company did the same thing in Italy. In both instances, after the newcomers had ordered a few layoffs, they were kidnapped." Because cultural and language differences can be so pronounced in various parts of the world, managers need to assess whether local individuals with better sensitivity to native customers and traditions would not be more effective in carrying out certain functions.

Purchase kidnap insurance, but do much more -- A number of insurance companies in the U.S. and abroad now sell insurance to protect multinational companies whose officers may be at high risk for kidnapping. Despite the high costs associated with such policies, corporations should consider purchasing this protection. The prevention of kidnappings via educational campaigns or terrorism camps is practical. In addition, corporations should provide extended information and training for the families of vulnerable executives as to the realities of living and working in a potentially hostile environment.

In recent years there has been a proliferation in the number of firms offering kidnap and ransom insurance, called K&R by insurance specialists. These policies cover losses incurred by ransom paid and for salaries for hostages while they are being held against their will as well as covering costs associated with an international crisis management firm. For an extra premium, corporations can also cover themselves against the costs associated with lost net profit triggered by product recall, negotiator fees, legal costs and ransom paid to kidnappers. In addition, companies such as Citibank provide wallet-sized cards to remind its tens of thousands of managers and branch employees of specific steps to take in the event of a violent threat such as a kidnapping. Figure 2 outlines some of the steps that can be helpful in the evaluation process for both kidnapping vulnerability and other terrorist threats against industry.

Kidnapping is a particularly hateful form of terrorism in that a number of innocent victims, particularly family members, share in the burden of the crisis. Henry Revzan of Johnson & Higgins, a Chicago-based security firm, noted in Business Horizons that the U.S. ranks sixth in the world in the number of money-demanded kidnappings (after Colombia, Italy, Lebanon, Peru and the Philippines). His company, like many others, provides three basic levels of service: intelligence gathering and risk assessment to reduce exposure to kidnapping, preventative advice on training bodyguards and other needs, and actual negotiations if and when an incident takes place.

Specialists in security management and terrorism offer one sound conclusion: if a firm is susceptible to terrorism because it has a high profile both at home and abroad, or if it is involved in politically controversial contracts, product development or shipments, it could be targeted.

Similarly, if an organization is quickly synonymous with a particular religion, ethnic group or political cause, a security firm that specializes in terrorism should be engaged to conduct an audit of areas of vulnerability. It is only then that management can fully assess what steps, if any, the organization may wish to take to avert a potentially deadly encounter with crisis.

For further reading

Barton, L., Crisis In Organizations: Managing and Communicating In The Heat of Chaos, Cincinnati: SouthWestern, 1992.

Barton, L., "The Use of Scenario-Based Planning For Management Executives," Industrial Management, November/December 1991.

Lee, S., "Crisis and Conscience," The Dallas Morning News, January 5, 1992.

Sullivan, A., "Disappearance of Exxon Executive Continues To Baffle Police and Family," The Wall Street Journal, May 13, 1992.

Thompson, W., "Security, Sabotage and The Casino Industry," working paper at University of Nevada, Las Vegas, 1991.

Tomioka, S., "Terrorism and Security Issues For Business," presentation to Western Academy of Management International Conference, Shizouka, Japan, August 1990.

SECURITY MANAGEMENT IN THE 1990s

Questions that identify industrial vulnerability

How visible is the company?

How well-known is the company?

What physical assets may be of interest to criminals?

What security currently protects personnel/facilities?

How many attempts have there been to penetrate our security?

Does current insurance protect all potential acts of crime and breaches of security?

Have security checks been run on all employees at least once every three years?

What patents, secrets or computer data would competitors want/need to know?

Questions that can save lives

Have all personnel received training on personal protection, both at work and on-site?

Are training films readily available in the company library regarding personal protection?

Is all computer data backed up daily and relayed to a distant location to protect confidentiality?

Have we conducted a security audit of all physical systems protecting the property in the past year?

Have we conducted a scenario and role playing event to determine how to protect ourselves in the event of a crisis?

Collaborators in the process

Have we convened a meeting of security analysts, MIS personnel, public relations and other strategists to prepare for a terrorist incident?

Have our company librarians or researchers checked all available sources to determine what acts have been committed in our industry in recent years?

Laurence Barton is associate professor of management at the University of Nevada, Las Vegas. He is the author of Crisis In Organizations: Managing and Communicating In The Heat of Chaos, and he has served as a strategic consultant for Arthur D. Little, the Internal Revenue Service, Serono Laboratories Inc. and other organizations.
COPYRIGHT 1993 Institute of Industrial Engineers, Inc. (IIE)
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Barton, Laurence
Publication:Industrial Management
Date:Mar 1, 1993
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