Your Jitters Are Their Lifeblood
The terrorism of September 11, the anthrax scares of 2001, wars in Afghanistan and Iraq, and heightened security alerts don't exactly provide an environment for business success stories. Unless, of course, you happen to be a company like Kroll Inc. (KROL )
For Kroll, the nation's largest "risk consulting" company, and for hundreds of smaller consulting firms that help businesses prepare for possible terrorist attacks, these are boom times. Security consultants credit Washington's confusing terror alerts with sending an unintended wake-up call to Corporate America: Stop waiting for government direction and get prepared. Sales of security services to the private sector are growing smartly -- from an annual rate of 8% to 12% before September 11 to 20% today, according to Alexandria (Va.)-based Security Industry Assn. Says Kroll President Michael G. Cherkasky: "All this uncertainty is a natural driver for us."
And how. This year, Washington will send an estimated $50 billion to state and local governments for homeland security, and much of the money will fall into the hands of private contractors, reckons Bruce Aitken, president of the Homeland Security Industries Assn., a Washington group that is itself less than a year old. "There is a beehive of activity in consulting," says Aitken, "and every week consulting companies are forming new homeland security divisions."
For the past decade, security companies have made most of their money by guarding against such run-of-the-mill problems as employee theft. They've also trained bodyguards in evasive driving techniques, taught executives traveling to hot spots how to stay out of trouble (take that card with your name and title out of the limo window), and helped arrange ransom payoffs in Colombia and Mexico.
Now, however, the contracts are bigger and more strategic. Consultants are securing computer networks, creating business evacuation and continuity plans, and locating backup corporate headquarters. "Companies are starting to see they need disaster-recovery capabilities," says Steven Kuhr, managing director of Kroll's Emergency Management Group. The cost for a midsize company: up to $12,000 for a vulnerability and threat assessment, plus a verbal report, all of which might take several days. The price for large international companies: $1 million or more.
Few companies have benefited as handsomely as Kroll. Struggling in mid-2001 with growing losses, it has been transformed by terrorism and now forecasts 80% earnings growth for the current year. Kroll won't reveal its client list but claims it works for 350 of the largest 500 corporations.
The field is also lucrative for entrepreneurs. Ex-cop Ray N. Bordes had his fill of investigating drug and gambling cases for the state of Tennessee and set up his own security consulting firm, Bordes Group, in Orlando. After September 11, "We saw a tremendous increase in the size of the jobs," he says. Bordes has doubled his staff and now is designing a $35 million security system, among other projects.
By most accounts, U.S. companies have plenty to learn about securing operations. Among the most common mistakes: putting just one person in charge of making decisions about evacuations, bomb threats, and relocation. Another common error is giving temporary employees a password and access to the company's computer system.
The call for beefed-up homeland security has grown to such a fevered pitch that some companies are pushing suspect products such as parachutes for jumping from skyscrapers and personal radiation detectors. "There are a lot of Johnny-come-latelys [with] a fancy new label -- homeland security," says James W. Morentz, a vice-president at Science Applications International Corp., an engineering company that has branched out to homeland security. Yet as long as fears of another terrorist attack remain high, companies will probably go right on buying.
By Paul Magnusson in Washington