Amcham-kroll 2009-2010 Survey on the Impact of Security on the Corporate Environment in Mexico

8/8/2019 Amcham-kroll 2009-2010 Survey on the Impact of Security on the Corporate Environment in Mexico

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Methodology

AmChAm has 2,000 corporate members, comprised o both national

and oreign businesses.

AmChAm Security Committee designed a comprehensive question-

naire (modeled on that o 2008), which was sent to members oAmChAm Monterrey, AmChAm Guadalajara, AmChAm Mexico City,

OSAC and the Japanese Chamber o Commerce. A total o 2 886

questionnaires were sent, via e-mail, o which 286 questionnaires

were completed.

The questionnaires were elded between November 15, 2009 and

January 15, 2010.

The broad base o the conducted survey resulted in a very com-

plete and comprehensive study, representative o the opinions o

participating members on the impact o current security issues.

The study holds a condence level o 95% with a margin o error o

+/- 5.5%.

In addition to the survey, Kroll Mexico conducted secondary re-

search and analysis in order to put the survey into context and

bring value to the interpretation o the obtained data.

The ollowing slides represent a compilation o the results ob-

tained throughout the various methodologies used.

Objectives

The Security Committee o the American Chamber o Mexico City

(AmChAm), in conjunction with key partners, conducted a survey in

order to assess the impact o the security crisis on oreign busi-

nesses.

Key elements touched upon include:

1. The greatest security concerns or companies

2. Geographic areas causing the greatest preoccupations or

companies

3. Causes or the rise in insecurity

4. Areas most vulnerable to security breaches

5. Security budgets

Security survey conducted byAmChAm members

The impact of security on thecorporate environment:

For a culture o prevention

2nd edition


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The study in its context

Average x rate during the rst three days o December 2009 was

o M$ 12.77 / US$, compared to M$ 14.39 in Q1.

The appreciation o the peso is being aected by the worldwide

market orces that have pushed the cost o a dollar down.

Desperate scramble or liquidity and very low interest rates that

encourage investors to invest in stocks and currencies. Neverthe-

less, the economy will be better in 2010. FDI should exceed the cur-

rent account decit, which should be a comortable 1.8% o GDP.

Economic volatility in 009

The global economic slowdown which began in Q3 2008 had a se-

vere impact on businesses in 2009, both domestic and oreign.

Despite countercyclical measures being adopted, the orce o the

global slowdown (and specically that o the U.S.) had a strong im-

pact in Mexico.

Amidst the economic downturn, the Mexican Peso was able to stabi-

lize rom the 2008 devaluation, reaching 13.07 Pesos/US$ at year end.


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Security: cause or concern

Within a ew days o taking the presidential oce, Felipe Calderondeclared a War on Drugs. Since then, national security strategies

have ocused on retaking control o various locations in the coun-

try which have been the most impacted by organized crime.

At least six national drug cartels operate in Mexico (Sinaloa, Golo,

Zetas, Tijuana, Juarez, Familia Michoacana) with the support o lo-

cal, secondary groups. While some create temporary alliances,

most work with the support and collaboration o heavily armed

groups.

It is hypothesized that such issues impose high costs or oreign

companies who must deploy additional security to protect per-

sonnel and inrastructure.


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Survey results

Security concerns: the proessional andpersonal align

Security concerns remained stable rom 2009 to 2010. Facilities is

the only area where executives demonstrate a lesser concern in

2010 than in 2009. Security heads and business leaders place a

clear priority on the personal beore looking at the material.

This is consistent rom 2009 to 2010 results as respondents determine

the priorities on a personal as well as on a proessional level. Respons-

es are indicative that security issues are not just a proessional con-

cern, but permeate to the personal issues at hand, including amily

and home.


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The mood o respondents growing senseo insecurity

The economic crisis (ewer job in Mexico and abroad), the lower

remittances, the unemployment rate and the oreign exchange

rate are some o the elemental actors which contribute to the

mood o the nation.

The recent events o 2009 are still upon us and are still being elt.

The combination o these actors resutls in that nearly 60% o re-

spondents eel a growing sense o insecurity around them. Again,

this directly relates to the importance o personal security.


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Respondents note DF as an increasedconict zone

Respondents indicate that the states representing the greatest se -curity risks or their operations are those o the North (Baja Calior-

nia Norte, Chihuahua, Durango, Sinaloa y Sonora). While Mexico

DF has historically been noted as a confict area, the 2010 study

denotes heightened concern or this area o the country.

According to security experts, these states have amongst the

countrys highly incidence o: Kidnapping and extortions, robbery,

daily violence events as score settling between gangs.

Other high risk states include Tamaulipas, Veracruz, Guerrero, Es-

tado de Mexico, Michoacn, and Tabasco.


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Impact o conict zones on businesses

There is consistence between 2009 and 2010 results in that confictzones appear within the interior o the republic. Organized crime

is moving rom the Northern border toward the coastal and even

center states in order to gain control o entry points into Mexico,

along the coasts, as well as gaining access to key distribution points

within cities).

Companies perceive such actors as jeopardizing not only the busi-

ness operations, but also the personal lives o employees and ex-

ecutives.In certain cities, narco related crimes have seeped rom

being almost exclusive to drug gangs to now include the popula-

tion at large. Additionally, analysts believe that the 2009 economic

crisis has contributed to a two-old rise in crime:

By setting the stage or an increased crime environment,

with less employment.

By increasing the prevalence o corruption.


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How companies perceive security in 009 vs 00

Companies are equally divided between those who eel more se-

cure, those who eel equally secure and those who eel less secure

in 2009 vs 2008.Actions and occurrences both on the external as

well as on the internal ronts surely have had an impact on crating

these responses.


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A greater eeling o security can be attributed toinvestment in the feld

While there is no clear trend as to whether companies eel more orless secure than in years past, there is a clear polarization amongst

respondents, in which 1/3 o the companies eel more secure in

2009 than in 2008 and 1/3 eel less secure during the same time

period.

O the companies that report eeling more secure in 2009 than in

2008, 3/4 attribute this to their personal endeavors in the security

eld (compared to 1/4 who attribute it to the work o authorities).

As in years past, companies who eel less secure in 2009 than in

2008 attribute this to the strengthening o organized crime groups

and urther impunity in the judicial process. Other actors, such as

drug tracking and socio-demographic elements play a smaller

role in these responses.


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Most common causes leadingto internal insecurity

Corruption, Impunity in the judicial processes and inormationthet still top the chart as the most common causes leading to in-

ternal insecurity within companies.While this is congruent with

results rom the 2009 study, there is a clear shit in the order these

are presented.

There is a clear shit in the opinions o respondents rom the busi-

ness community rom 2009 results to those o 2010.Corruption has

clearly outranked Impunity and Inormation thet as the leading

cause or internal insecurity.

Security experts conrm a growth o corruption in 2009, acceler-

ated by the economic crisis o that year. Corporate governance

processes do not appear to have moved as quickly as the increase

in corruption.


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9% o companies witnessed rising insecurity as a resulto the economic crisis

Inormation thet was the third most important cause leading to

internal insecurity within rms, denoting the value o inormation

(vs that o tangible goods).

In the 2009 survey results, 30% o companies surveyed indicated

that they witnessed or were expecting to witness an increase in

raudulent activity as a result o the dicult economic situation. In

the 2010 survey results, 59% o companies surveyed indicated that

they elt rising security threats due to the economic crisis.


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Operations, Finance and Saety & Security are the mostprepared areas to deal with external threats

Areas less prepared to deal with external threats include Purchas-

ing (where many supplier rauds can hide) and Sales (where cor-

ruption may be rampant).

Security experts denote that Purchasing and Sales departments

are oten the ones that have most contact with the external envi-

ronment and thereore are most exposed to external threats .

Operations and Finance (where the tangible and nancial goods

are) are some o the most prepared areas to deal with external

threats.Saety & Security, where the human capital is, is also well

prepared. That said, it is interesting to note that all three o these

areas are on the same level o preparedness when it is clearly noted

that personal security is the largest preoccupation amongst re-

spondents.


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0% o companies report aggression or threatsagainst employees

The most common threat to have appeared in 2008/09 is aggres-sion or threat against employees reported by 50% o companies.

Attacks against Transport and Logistics was also rampant, reported

by 37% o respondents.

Inormation leaks and internal raud were reported by over 25% o

companies surveyed.

These gures denote the importance o improved security both on

the macro (country) level as well as on the micro (company) level.

Improving security must be a joint eort between government

and industry in order to succeed.

Security experts believe this is consistent with companies through-

out Mexico. This is specically true o express kidnappings in De-

cember and organized crime activity in Polanco and Santa Fe.That

said, security experts also note that companies and employees

have benetted rom reporting crimes to authorities.


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Business preparedness

Security experts indicate there is a clearly positive message incompanies having business continuity plans in place, especially i

these are put into practice. This could be a direct result o the N1H1

fue outbreak and the corporate need or heightened preparation.

While companies generally appear to be ready or unoreseen

events (with business continuity plans and contingency plans),

much ewer companies have risk prevention tools implemented,

such as employee screening, manuals and training.

Furthermore, security experts indicate that while many companies

have such policies in place, ew reinorce them or update them,

leaving a wide eld o action or raudulent employees to work the

system.


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Mexican security budgets: in line with the resto Latin America

As per the 2009 results, respondents indicate that their companyspends, on average, 3% o their operating costs on security. Hal o

respondents indicate that their company spends less than 2% o

their operating costs on security.

This is in line with the rest o Latin America, but considerably below

the US where up to 7% o operating costs are spent on security.

Latin American ideology prevails and no change in this regard has

been perceived during 2009, in that that executives are hesitant to

spend on preventive security. This is in part due the culture, judi-

cial process and enorcement measures.Nevertheless, the act that

security budgets have not been cut in light o the economic slow-

down may be interpreted as a sign o the importance o security

within corporate operations.


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Indications o a maturing security industry

Corporate investments in the security eld plan to remain relative-ly stable in the upcoming years. This is in line with responses rom

the 2009 results there does not appear to be any big shit in in-

vestments or security in this regard.

O the respondents who plan to increase security investments in

the upcoming 2 years, the primary areas o ocus will likely be

Training, CCTVs and Access controls.

Training, at the top o the list, is a dramatic change rom 2009 re-

sults and a possible indication o a maturing security industry.

27% o respondent companies have reconsidered investments in

Mexico due to security issues.

Over 1/4 o respondent companies have reconsidered investments

or growth plans in Mexico due to security issues. Additionally, se-

curity experts indicate that 52% o companies that have not recon-

sidered their investments or growth plans in Mexico have likely

taken additional precautions in order to mitigate the inherent busi-

ness risks that Mexico poses.


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Security: seen as a necessary cost

Given a preamble o rising insecurity, corruption and impunity, it isnot surprising to see that a majority o respondent companies see

the security issues as a necessary cost, rather than a good invest-

ment.

While this corporate opinion has been prevalent or many years, it

will be interesting to see i this changes in years to come.Experts

indicate that investing in security is a necessary cost due to securi-

ty culture, climate and education in Mexico. While in other coun-

tries security is a common good, in Mexico it is one that must be

purchased.

Polarization as to improvementswithin Mexicos security context

2010 results indicate that the events o 2009 have polarized re-spondent views on the possible improvements o Mexicos security

context. 39% respondents believe it will take more than 5 years to

see improvements in this area, compared to 22% a year ago.

Meanwhile, more respondents believe there is possibility o im-

proving Mexicos security situation and at the same time that 2010

will be a year in which Mexicos security improves.Experts indicate

that the ewer responses o Never translate into ewer people

being atalistic. However, the growth o the Dont know answers

indicate a certain degree o skepticism and insecurity in respon-

dents.


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Conclusions

Personal security (employees and executives) remain the primary

concern or Security executives. Business continuity (such as trans-

portation o goods, distribution, etc.) are secondary concerns.

Northern states and Mexico DF are the ones which cause the great-

est concern or security experts. While this is consistent with 2009

data, Mexico DF appears to be a growing concern.

There is a heightened sense o insecurity as nearly 60% o respon-

dents elt less secure in 2009 as they did in 2008. That said, when it

comes to their business, respondents are equally divided as per

the security issue (1/3 eel more secure, 1/3 eel equally secure and

1/3 eel less secure).

As actors o improvement o security, continued private invest-

ment (75%) and improvements rom authorities (25%) are the main

actors. As or actors o deterioration, strengthening o organized

crime, corruption and impunity are the main actors mentioned.

59% o companies witnessed an increase in insecurity as a result o

the economic crisis.

Operations, Finance and Saety & Security are the most prepared

areas to deal with external threats, while Sales and Purchasing are

the least prepared.

Aggression or threats against employees is the most reported oc-

currence within companies, at 50%.

84% o companies mention having business continuity plans in

place, a solid and high number.

Percent o operating costs spent on security are consistent in 2008

and 2009, in line with the rest o Latin America at 3%.

27% o respondent companies have reconsidered investments in

Mexico due to security issues.


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Demographics


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Responsible or the study

Thomas GillenPresidente del Comit de Seguridad

Director Regional de la Prevencin de Prdidas en el Transporte de Carga,Chartis Insurance

[email protected]

Roberto CastaedaVicepresidente del Comit de Seguridad

Gerente de Proteccin de Marca, Nike de Mxico

[email protected]

Sergio DazMiembro del Comit de Seguridad

Managing Director and Country Manager, Kroll Mexico

[email protected]

David RobillardMiembro del Comit de Seguridad

Managing Director, Kroll Mexico

[email protected]

Molly K. PuglisiMiembro del Comit de Seguridad

Business Development Director, Kroll Mexico

[email protected]

Amy GloverDirectora Nacional de Relaciones Externas y Comits,

AmChAm

[email protected]

ngeles De GyvesGerente de Comits y Proyectos,

AmChAm

[email protected]

Susana Padilla

Representante del Comit de Seguridad,AmChAm

[email protected]

Contact inormation

Marina TavaresRelaciones Pblicas, AmChAm

[email protected]

Documents

Amcham-kroll 2009-2010 Survey on the Impact of Security on the Corporate Environment in Mexico