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Security Grounds the CEO Agenda

(originally published by Booz & Company)

While United States chief executive officers are confident about the ability of their companies to continue serving customers in the U.S. and abroad, the September 11 attacks and their aftermath will permanently change the way they operate.

The findings are part of a Booz Allen Hamilton survey of Fortune 1000 CEOs conducted during the last two months of 2001. Undertaken by RoperASW, the study also found that most CEOs have heightened security concerns.

Seventy-two CEOs from firms with more than $1 billion in annual revenues responded to the Booz Allen survey, which examined how the September terrorist attacks, the anthrax mailings, and the aftershocks of both events had affected CEOs’ view of security in their own firms, their organizations’ operations, and their companies’ relationships with federal and local government authorities.

The survey suggests that CEOs are paying closest attention to internal operations. More than three-quarters of the executives questioned express increased concern for such day-to-day activities as mail processing, travel, and protection of employees. Eighty-six percent of CEOs express heightened apprehension about mail processing, and 85 percent have similar worries about travel. Risk assessment, employee morale, and protection of offices and infrastructure are also among CEOs’ top concerns.

Prior to the attacks, corporate security was a midlevel concern for U.S. CEOs, averaging 6.0 on a 10-point scale, with 10 representing the greatest level of concern. Since September 11, this concern level has increased to 7.5. These results are consistent across industries, company size, and dependence on overseas sales. Those who don’t plan increases in corporate security — including some energy and transportation companies — report that security already was a major concern (7.3) before the raids. The CEOs with heightened concern about security expect this concern to last at least one to two years; half of this group project that this heightened concern over security will continue for at least five years.

Another management priority is a proactive employee-safety measure that will also reduce costs: using videoconferencing to replace air travel. Interestingly, only a few chief executives (7 percent) appear concerned about lowering their own public profile.

Nearly half of the surveyed CEOs (49 percent) are reviewing alternatives to their existing supply chains in case of disruptions; 42 percent are reviewing their suppliers’ abilities to ensure production is safe from sabotage. U.S. businesses lost hundreds of millions of dollars because of supply chain disruptions when U.S. borders and airports were closed following the attacks.

Despite the CEOs’ increased sensitivity to their companies’ operational vulnerabilities, participants in this survey appear confident in their ability to maintain quality of service for their U.S. customers. Most of the respondents agree that corporate security is unlikely to make customers uneasy. Nearly three-quarters of CEOs (72 percent) believe that the quality of corporate security is no more important now for customers than it was prior to September 11, and that customers’ willingness to purchase from their companies will not be affected. However, chief executives of nonfinancial firms are more concerned — more than a third believe that the quality of their corporate security is now a more important factor in customers’ willingness to purchase their products and services.

Globalization strategies have been largely unaffected by events of the recent past, including the terrorist attacks and protests in Seattle and Genoa, according to these CEOs. Half of those questioned believe that any new barriers to previously open borders, both in the U.S. and abroad, will have either an insignificant impact or no impact on their companies. However, CEOs of the smaller Fortune 1000 firms believe that the aftereffects of September 11 will hinder their competitiveness. A third of the surveyed chief executive officers believe that any new barriers will have a moderate or very significant effect on their companies.

Three-quarters of CEOs (74 percent) believe that recent events will not change their companies’ relationships with federal and state authorities. Of those who do believe these relationships will change, most expect changes to involve coordinating protection of physical locations within the U.S.

Any additional costs for new corporate security should be shared by government, shareholders, and customers, according to two-thirds of those CEOs who believe such additional security costs are possible. A third of the CEOs surveyed believe that new security costs will not be substantial.

Mark Gerencser,
Mark Gerencser is a vice president with Booz Allen Hamilton in Annapolis Junction, Md. He has 20 years of engineering and consulting experience resolving communication-systems, information-security, and technology-insertion challenges. He is coleader of the firm’s strategic security initiative.

DeAnne Aguirre,
DeAnne Aguirre is a vice president in Booz Allen Hamilton’s San Francisco office. She has 18 years of organizational and technology strategy experience serving multinational clients. She is coleader of the firm’s strategic security initiative.
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