Meet the panel
So with everything that’s going on in the world right now. Natural disasters, climate change, cyber crime, industrial, political, coronavirus, businesses failing, wage theft, litigation. There are lots of things that could or perhaps even should be keeping us awake at night. So I’m going to ask the panel tonight to share their wisdom and their insights.
I’m hoping that we’ll get some really interesting stories and examples and food for thought so that when the panel comes around to your tables, you can go, “Wow, I hadn’t thought of that. So what on earth am I going to do about it?” So let’s get started.
Listen to the recording (30 minutes)
Risky Business: The Recording
Read the Transcript
Greg: Well, from a business point of view, I’m involved in technology and I’m noticing how much crime, how much fraud there’s happening in through technology for businesses. So back in the day it used to be a ransomware that would encrypt a businesses files and then you’d have to pay a chunk of money to get your files back. And then the question would be, “Do I pay or do, I don’t?” Now it’s about fraud. So people have deceived somebody who thought that they were dealing with a trustworthy person and they’ve just, they’ve deposited a large sum of money into a bank account that they thought was a trusted person and it’s actually someone on the other side of the world.
Brenda: How do they do that?
Greg: And they lose a tonne of money.
Brenda: How do they do that?
Greg: Well, because we are naturally trustworthy. We want to trust others and we think everyone’s going to be nice to us.
Greg: So we believe when some… So an example of that would be, so the CEO went overseas on a holiday, the person in charge for accounts would receive a request to pay from a supplier that they hadn’t dealt with before. Pay, I think the sum was $16,000, this is a nonprofit organisation as well. And sent an email to the CEO, whose travelling “Should I pay this?”, “Yes.” Email comes back, it’s approved. Three days later they get another invoice from another unknown supplier for $96,000 they then think, “Oh, I think I should call the CEO this time”, interrupted her learning how to Irish dance in some castle somewhere. And it says, “That’s $96,000 correct?”, “No, I’ve never heard of it.” And she said “Oh, I’m so glad I called you and by the way, I’ve paid the $16,000.” and you know, “What do you mean you paid $16,000 I didn’t authorise that.”
Greg: So the CEO’s email had been hacked. And so every email that the CEO received went to a third party, they crafted an attack. They worked out who the accounts payable person was. They wrote a very believable email and away it was gone.
Greg: So it goes from that to actually changing the invoice so that the bank account details on the invoice is different to what it was last month, and the accounts payable don’t notice and they just pay it. So we had someone… So two businesses who used to get along well with each other, like they’ve supplied business to each other for five or six years, that sort of length of time, $50,000 worth of business between the two was done. The larger business paid the $50,000 bill that someone had hacked their email and changed it and so they deposited that money in another account. So this poor company asking for 50K didn’t get it.
Brenda: I got to know. Right now are we insured?
Tim: Those situations are called social engineering in the insurance world and out there. There is an insurance product called cyber insurance and you can insure against episodes like that. It’s probably the most common form of a cyber insurance claim at the moment. And you’ll find most of the insurers, whilst you buy a cyber insurance policy for $1 million cover or $5 million cover, you’ll find they’ll sub limit the social engineering extension to about $50,000, $75,000, maybe $100,000.
Tim: So it is happening and it’s… Those criminals, they don’t go on holidays, there just… We get all this information from insurance companies and especially Chubb Insurance who are very, very experienced in this area. They’ve been looking after cyber insurance in the States for well over 10 years and it’s only reasonably new in Australia, probably going for two or three years. And it’s now grown that insurance companies were pretty scared of it. And there were only, probably when it initially came out, there might have been five insurance companies prepared to take on cyber risks. And now it seems every insurance company out there has got a cyber product. They’re all completely different.
Greg: That’s the thing. That’s the one I would stress is that you can’t tick the box and say I’ve got cyber insurance. It’s like every other insurance. Like “I’ve got house insurance.” Like, does it fit your needs? And the potentials that you have and because you think you know. It’s the thing that… That’s what people hate about insurance. You think you’re covered and you’re not and that’s a lot of risk.
Tim: You need to ask questions of your insurance broker.
Greg: Exactly. You got to work it out.
Greg: And do you bundle your cyber insurance with your existing provider? Or you work with the existing broker? Or do you go for a specialist who just offers cyber insurance? Have you got an opinion on that?
Tim: Yeah, I mentioned Chubb before they are leaders in the area. They’ve got a product called ERM, which is something risk management and it includes professional indemnity, public liability, and cyber insurance specifically targeted for IT professions.
Greg: So my experience is that, I’m in the game of always changing, improving the technology. It really feels like an arms race where whenever we put in certain measures, the criminals are much more invested to improve their measures. And there’s always a race to improve. So it sometimes it feels like you’re losing that race cause they’re more invested to do that. So that’s why insurance, a good insurance, becomes important. Because you minimise from 90% you’re covered to that 10% risk to 5% to 1%, but the, what’s at stake goes up higher. It’s like I might lose a $5,000, I might lose $50,000, I might lose $1 million. So it’s a difficult thing. So professionally that’s… [crosstalk 00:07:32] Keeps me up in terms of thinking about others.
Brenda: I bet it does, yeah. We might come back to you with some… Because I know you had some other things you wanted to talk about.
Brenda: Now in terms of these people who are madly losing money all over the place and sometimes it’s to do with paying invoices that didn’t get paid. So I think that’s a good lead in for you Jeanine. And one of the things that I was interested in that you were talking… That you mentioned the other day was, and I guess this is to do a lot with things like natural disasters and those kinds of things where businesses are actually struggling. And I think you had some case studies with names protected, names changed to protect the innocent. About where you’ve gone to collect debts and the business at the other end is really, really struggling. So do you want to share some of those kind of, some of those kinds of stories? Maybe? Because, it’s a pretty tough environment at the moment.
Jeanine: Sure. It is a very tough environment. And I was actually reading the head of Illion, which is a credit reporting Bureau. He thought the start of this year was going to be fantastic. So, after all sort of the doom of last year 2019 that things were going to pick up. I don’t think he really thought about how long the bushfires were going to go for, coronavirus now that’s been called today a pandemic. So there’s major fear out there, which there are some insolvency people in the room.
Jeanine: As well, you’d be… We do see a lot of that too, that people just… The debtors just give up. In the past they’ve tried to pay people back slowly, perhaps on a payment plan or some sort of arrangement. But they, they’ve got to a point where we’re seeing it, as I said, quite a bit. And since Christmas time as well where they’ve… Are going into liquidation.
Brenda: A huge number of retail businesses have gone into liquidation in the last, yeah.
Jeanine: They are saying, slow payers used to be construction and a few other of the norm industry sort of thing. But now it’s going to be, you know with coronavirus, it’s travel, it’s trade, it’s hospitality, it’s the universities, it’s-
Jeanine: Manufacturing, everything that sort of flows on for that. So we’ll just see, as I said, the fear factor, how that’s going to go with people.
Jeanine: But on a day to day basis, I guess we work with those debtors and you’ve really got to be empathetic to their situation and sort of say to our clients, “You’ve got to be commercial about this.” So you’re going to spend a lot of money to wind them up. Is that going to be the best outcome here? For some people that’s what they want to do because perhaps they’ve heard it for too long.
Jeanine: Yeah. And what Harvey… You know, we’ve had wins before where we’ve just ploughed through the legal process because we’ve sort of thought, “No, this person maybe doesn’t really have those scenarios going on.”
Jeanine: Other times you’ve just got to work with people. And in particular, okay, case study, a plumber came to us at just before Christmas and had $150,000 outstanding and this is a time when they’ve got wages, holidays, everything sort of, he was very stressed out.
Jeanine: Straight away one of the debtors was in liquidation and that was 30 of it. He was sort of hearing in the grapevine that they’re in trouble. So we do a quick little creditor watch search and sure enough they were on the insolvency notices two days before. So that was quite heartbreaking straightaway. And it is, as I said, just trying to find these people, talk to them what’s going on and getting a reasonable outcome as soon as possible.
Brenda: Aiming for a win, win [crosstalk 00:11:21].
Jeanine: Aiming for a win, win. And he who screams the loudest often is going to be the winner there.
Brenda: Harvey, down to your end of the table. I know you’re all about risking, about minimization, but you must see people who come to the… Come after the horses to try and shut the stable door after the horse has bolted. And protecting the names of the innocent of course, but…
Harvey: I’ll be as general as I possibly can. I think what we have to understand is that it’s about risk minimization rather than risk elimination, because you can’t eliminate all risks. So that’s the angle that I come at from and also I handle what’s what I call front-end commercial work. So all of the proactive stuff to stop problems and because business is, often businesses started and it’s about relationships. You know, “Let’s start a business together.” People tend to neglect their documentation and the most important stuff, assuming that you have two or more shareholders, is to have a shareholders or a unit holders agreement. If you are running at a business through those types of entities.
Harvey: And there are a number of reasons for that. One is so that you can clearly define the roles that people have within the company because you have people with different skills. Secondly, that you need to have what’s known as a preemptive right, so if someone wants to get out of the business voluntarily, or they want to just sell their interest, or they want to… Or they breach the contract and you want to get rid of them, there has to be a right for the other shareholders to take over those shares.
Harvey: And thirdly, and perhaps most importantly, is that you need to have evaluation. Because if you don’t, you can end up with a situation where someone says, “Well, I want to get out.” They haven’t got a preemptive right, “They’re no preemptive rights so I’ll just sell it to whoever comes along.” In the end it was someone in the business, and I’ve seen this happen, who’s totally inappropriate, isn’t suited to the business. You know, it’s just an absolute nightmare. Following on from that, you can have another agreement that deals with the situation if you fall off the perch. So if the principle of that shareholder dies or becomes totally and permanently disabled you need to have a situation where you can take over those rights as well. It’s known as a buy/sell option agreement.
Harvey: So effectively what you do is you ensure your lives. Say your value, it’s $1 million each, you insure your lives for $1 million. Some person dies, other person just exercises the option, takes the shares and the insurance policy pays for those shares. So you don’t have to find the cash.
Harvey: But there again, that often doesn’t happen. So you end up with the situation shares might end up with the spouse and I’ve seen this happen. Spouse thinks shares are worth a gazillion dollars and they’re worth a quarter of a gazillion dollars. Litigation, $100-$150,000 later down the track and the Supreme Court, and that’s the kind of thing you need to be avoiding.
Harvey: And it’s not rocket science, people just need to realise that they’ve got to plan these things. And it relates, you know I can go on and on about all the other documentation that businesses should have including basic things like proper terms and conditions or contracts with their customers.
Harvey: All right, Jeanine will be nodding her head and making sure that there’s got to be all those clauses in about recovering all your costs and that type of thing.
Jeanine: They are gold and they’re an investment. A default clause and a personal guarantee obviously.
Harvey: I’ll obviously talk about other issues down the track if you want. But I can move on to other things, but I’m sure [crosstalk 00:14:58] you’d like to hear from someone else.
Brenda: Tim, what are they?
Tim: What keeps business owners up at night?
Brenda: What do you see keeping business owners up at night?
Tim: Well, we touched on the cyber aspect and I might just add on that point that the insurance aspect, it won’t stop the crooks getting into your system, but it will help with the financial ramifications at the end of it. So once the insurers take over your claim, they’ll be able to mitigate any further losses and reinstate your computer equipment back to.
Tim: But apart from cyber, the other things keeping businesses up should be, everyone has their own liabilities. If you’re selling widgets or manufacturing widgets, you’ve got a product liability exposure. So make sure your public liability and your products liability with reputable insurers. If you don’t understand the clauses, that there’s a major, major insurer out there who has an off the shelf public liability policy and in it most good insurance brokers know there’s a clause that renders the manufacturing process, the policy becomes useless. And everyone knows it’s in there, or most insurance brokers know it’s in there and yet people still buy it as an off the shelf product. You’ve got to get advice from, from a good insurance broker.
Brenda: What would that actually mean? If you’re a manufacturing company and you’ve got this not very… Ineffective insurance company what… Insurance policy, what does that actually mean? Can you…?
Tim: Well basically, they’ll pull it out the time of a claim. So if that widget explodes in someone’s face and causes personal injury or property damage, people normally go to their insurance policy and say, “Well, you knew I was manufacturing widgets when we’ve maimed this person, we want you to pay the costs.” And the insurers will say, “Oh, clause number 278 says, we don’t have to.”
Brenda: Oh, nasty.
Harvey: Tim, could I just ask you a question there? So, would it be correct to say that the most important thing, most important person in the whole thing is the insurance broker? And I’m not just [crosstalk 00:17:26] for two reasons. One because they’re going to get, hopefully get you the right product.
Harvey: But secondly, they’re going to follow up with the insurance company when the insurance company almost never to be trusted duck the issue. And can say, “Well look, you’re saying that that clause means this, but in fact it doesn’t necessarily mean this. It’s got a more subtle meaning.” Something like that.
Tim: Yeah, You’re right. I’ve been involved in a couple of cases that have gone to court and it gets back to the intent of the policy as well. So the judge will invariably find out what the intent of the policy was, it was there to cover the widget manufacturer. However, it might get to the stage where one judge doesn’t take the intent of the policy on and makes easy assessment on the contract. The insurance policy is your contract. So if the contract says, no, we’ve got an out here by application of this clause, well it’s to the letter of the law. Yes, you’re not going to get your money. But it gets back to the intent. Yes.
Brenda: So your insurance broker really needs to understand your business processes.
Tim: Oh, absolutely yeah.
Brenda: So it’s not just, I’ll flick a box on one of those things, one of those insurance policies online. It really is making sure that-
Tim: Yes. all this artificial, what is it? Artificial AI [crosstalk 00:19:00] Ah, intelligent. Yeah, that’s right.
Tim: It’s great for all sorts of things. But when it comes to insurance, it’s inherent in us. We always look at the bottom line. I’ve got some of my largest clients, they’ll always turn to the last page and, “What?” And but it’s everything and it’s the meat and potatoes in the middle, that you’re buying our expertise and we’re putting our professional dangling on the line to make sure that you’re covered correctly.
Brenda: Cool. Now one of the things that you mentioned, it’s been mentioned a few times tonight actually, is coronavirus and the implications of that are clearly huge. What about when you, if you’re a manufacturing company or something like that and you can’t get products in or products out. What are your thoughts on those kinds of situations?Just chucking it at you. Anybody?
Tim: From a corporate perspective, a lot of businesses have a corporate travel insurance policy. Again, they’re all different. Some actually state that they won’t cover pandemics and outbreaks like this. Others are silent on the issue, but they’ll issue an amendment come renewal time for those policies that expire December, January, February. They would have had notices accompanying their policy saying we’re excluding coronavirus.
Brenda: Oh, Okay.
Tim: But the majority, a good corporate travel insurance policy, it will cover situations like that.
Harvey: If you’re talking-
Greg: It’s real for me-
Greg: Oh, sorry.
Harvey: Sorry. If you’re talking about suppliers, presumably the answer is not to have one supply.
Brenda: Yeah, yes.
Harvey: That’s a real big business risk. So you can-
Brenda: And you were saying it’s real for you Greg. Do you want to talk about that?
Greg: Oh, it was because I’m actually going to Italy next week. So I booked my flight and the next day I heard the announcement that the coronavirus is in Italy.
Tim: North, yeah.
Greg: So I’m looking at the travellers’ advice. Nothing to worry about. So, well… But that might change. So yeah, so I was a business person. It’s an opportunity and I’m taking a calculated business risk to go. I think it’s worth it. But I might change that. So I’m making that decision right now for myself. And I have a colleague, a business I’m supporting that is in manufacturing and he has two warehouses in China. And the government said to him, “We strongly advise that you send all your workers home. You know, it’s up to you. But we advise that you send all your workers home because if you don’t and they get sick, you’re paying the health bill for them and whoever else gets infected. So, that’s up to you. What do you want to do?”
Greg: So he says, “I’m going to send everyone home.” So that’s one business that has two factories closed and he has to pay the wage in China and he can wear that for a month. But I don’t know if he can wear that for four months and all the factories have been closed. Yeah. So for us here, we are going to feel it in four months time, six months time when there’s no goods for us to buy. So he rushed, he chose to rush to China to sort it out to make other arrangements in terms of doing deals, which were expensive, because the price is premium now for anyone to do anything, to get the goods he needed out the door from another location. So, that was a totally an unexpected hidden risk for him in his business.
Harvey: Which that really does come back to what Harvey said about making sure that you’re not dependent on one supplier. On one supplier in your supply chain, and it still might not have protected that person, but really-
Greg: Well, he might’ve had some options. Definitely. I mean he had two factories, they both shut down, but somehow he had some dealings in the Philippines as well. So maybe that was some sort of redundancy, but it’s hard to think these things through
Harvey: I wonder if I can give you an example. The closing trade for example, tends to spread their risk in that they, a lot of stuff used to be done in China. Now that China is, the Chinese supply market is morphed to a certain extent. They’re getting a bit more, what’s the word, they’re asserting themselves a bit more, so they’ve tended to move into other, Bangladesh, Vietnam, some of those other places where things a bit more flexible, perhaps.
Brenda: Coming back to perhaps more local businesses who may not be directly impacted by all of those things. People who haven’t been directly impacted by bush fires or directly impacted by coronavirus. What are the other things that maybe should be keeping them awake at night? Where they’re going, “Oh, that’s not me right now.” There might be some people in the room who are going, “No, that’s not me right now.” What are, are there any other things from any of you that you’d like to throw in before we wrap up?
Jeanine: Oh, well I guess I wanted to touch on what Harvey mentioned about just your paperwork, especially with your terms and conditions, contracts. Just as I said before, they’re gold and you, if you don’t have them, you need them. And Harvey always scares me about your trademarks as well.
Jeanine: Did you want to go into that a bit more?
Harvey: I can mention trademarks briefly. There’s a common misconception out there that if you have a business name, that you’ve got IP protection. Now that’s not the case. So I mean, honestly, you need a trademark to be registered to protect not only your brand, but certain of your products. So you, and Brenda mentioned the analogy or mentioned the breweries and distilleries and things, so that’s a classic example. You might have a brewery that has a brand name that needs to be protected and it brings out a whole lot of different products which need to have trademark protection as well. And obviously the whole idea of a trademark is to protect your name or product in the marketplace and prevent someone else from trading or for creating confusion in the marketplace and affecting your profits. So, that’s an important aspect.
Harvey: But the other thing that you really need to work on is to make sure that you, following on the thing from dealing with people is your employees because they can be your biggest asset and your biggest nightmare. So you’ve got to make sure that you’ve got proper employment contracts, which deal with things like non-solicitation of if they leave their can’t pinch your other employees, they can’t pinch your customers, et cetera. Obviously confidentiality, but IP and protection as well. But also getting the difference between normal employees and independent contractors right, because they have different entitlements. And there’s a case going back some years it’s somewhere buried in one of my articles on my website, this, of a company that thought they had a whole bunch of employees and the court turn around and said “Nah, these are all independent…”
Harvey: Sorry. They thought they had independent contractors. The company-
Brenda: Oh, and they thought employees.
Harvey: Court turned round an said, “No, these are actually employees and by the way, you owe them the last six years of entitlements.” You’re talking hundreds of thousands of dollars for a fairly small business, so…
Brenda: Yeah, making sure that you are paying your employees correctly.
Harvey: And it’s not as easy as saying, “Oh they’ve got an ABN, so they’re an independent contractor.” You there are a whole bunch of criteria that you need to look at. And yeah, If it ticks the box for eight of sort of 10 main criteria, then that’s the way it’s getting slanted. Fortunately-
Brenda: And for smaller businesses, that’s probably quite a likely one. Where they are they using an independent contractor who may, if that’s their only, the only person they contract to. That pretty much makes them not an independent contractor doesn’t it?
Brenda: It’s one of the criteria.
Harvey: Well yeah. No, the other thing that people need to understand is you can call them what you want, but the courts don’t. The courts look at substance and form rather than, substance rather than form. So you can call them an independent contractor in an agreement, but if they tick all the boxes of an employee, that’s what the court will find them to be, because they are looking at what the real arrangement is rather than what you say it is. Because the old trick used to be, “Ah, call them an independent contractor.” And-
Brenda: Okay. So we’re just about out of time. The desserts are starting to appear. I’d just start to give each of you the opportunity to wrap up with one last thing that you’d like to share. Tim, anything?
Tim: On what keeps-
Brenda: On what’s keeping us awake at night. Because you can talk to them about solutions when you go visit them.
Tim: Yeah, exactly. Oh look, I just reiterate cyber is, it doesn’t discriminate and especially the smaller end of the scale businesses who don’t have a constant, someone searching or someone looking after their IT. We’ve seen a lot of examples where they’ll go after the small business because lack of security basically. And it’s easy to get in to the email systems and perform their social engineering.
Jeanine: Have great processes and if there is a problem, early intervention is your best solution.
Greg: So, someone told me that if a budding business person knew all the risks, they would never start a business.
Greg: So, what are we hell we doing here? So, that’s the question I want to talk to everyone about.
Brenda: I think also that’s really interesting in terms of what we’ve tried to do with bringing together a collective of specialists and advisors and so that you’ve got a collective team of people that you can access.
Brenda: Harvey, did you have a last thing to, and last?
Harvey: Just be proactive? Don’t wait for a crisis to occur before you sort it out, because the crisis can end up costing you $50-$100,000 dollars when if you’d spent a bit of money up front you’ve avoided that. Or if you haven’t avoided it totally at least when you go to court, you’ve got some documentation that’s supports you. Yeah.
Brenda: Okay. Thank you all very much.
Meet the host
CEO and Founder, Synergy48 Group
Brenda has an honours degree in organizational psychology and a Graduate Certificate in training and development and she is an experienced trainer, facilitator and counsellor. She is a firm believer in mutual collaboration combined with a practical, hands on tools, strategies and systems as the most effective way to achieve real results in business.
Brenda has over 20 years of experience training in communication, team work, time management, productivity, organisation and strategic planning in large organisations. She is also the developer of the Business Benchmarking Toolkit used by Synergy48 Group members and clients to identify areas for improvement in their business processes.
Brenda is a sought after mentor, speaker and trainer in the areas of strategic partnerships and networking with a difference. She is passionate about actively giving back to the community. In addition to donating her speaking fees and a proportion of every Synergy48 Group membership to provide microfinance to help women in Malawi to start their own businesses, Brenda has climbed the Himalayas to raise money for Kids Help Line and helped lay a pipeline to supply water to a remote village in Tanzania.