A new study from Deloitte Research shows that security is increasingly becoming a focus for directors of corporate boards who view it as a strategic investment that can reap measurable benefits. Estimates for the loss from a security breach of one shipping container alone can amount to US$1 trillion, the study points out. The cost of cyber attacks against companies worldwide reached US$12.5 billion in 2003, and a case of mad cow disease in 2002 cost the Canadian beef industry US$2.5 billion, according to reports cited in the study. Read the full report or executive summary below or read the full press release.  Also see our related report Moving Targets: Tightening Security in the Transportation Industry.

The Essence of Security
For companies security has expanded from primarily protecting assets and people to sustaining business no matter what type of interruption might occur, from a sudden spike in interest rates or the spread of a computer virus, to an act of terrorism. As a result, the study finds, a new “secure economy” is evolving characterized by greater vulnerability to business disruption, increased awareness of threats, regulatory compliance, and an expanding ability to respond rapidly to change.

Deloitte says that a secure economy is defined by five new realities:

• Rapid change. The global business climate has been nothing if not tumultuous in recent years.
• New regulatory requirements. Businesses now find themselves confronting a host of new government security requirements around the world.
• Heightened threats and greater uncertainty. Companies remain unclear about what kinds of threats warrant the greatest concern, how they would be affected if particular kinds of attacks occurred, what marketplace conditions would follow, and when the heightened threat will pass.
• Complex and interdependent risks. For all the advantages of the extended enterprise and its interdependent supply chains, this organizational model also puts businesses at greater security risk due to the multiple partners and handoffs involved in production and distribution.
• Globalization and the 24/7 news cycle. Globalization and the 24/7 news cycle mean companies now have only minutes—not hours or days—to respond proactively to a security incident before risking possible damage to brand.

According to the study there are many opportunities to disrupt a global supply chain in an interconnected global economy. Companies must therefore move beyond compliance with local government security measures to ensure that their full range of operations continues without disruption. A secure economic environment results in measurable business benefits:

• Cost reduction. Security investments can drive efficiency into the supply chain. For example, one major private-public supply chain initiative generated cost savings of between US$378 and US$462 per shipping container.
• Enhanced revenues. New technologies such as RFID (radio frequency identification) tags track the location of containers and products at any point along the supply chain and help to reduce costly excess inventory.
• Better risk management. Proactive security policies help firms better manage operational and information technology failures from security incidents, including loss of life.
• Brand protection. Security investments protect a brand, the most valuable asset for many companies, against a crisis such as product tampering.

The report outlines the challenges organizations face if they are to thrive in today’s security-conscious environment and suggests a new approach to traditional risk management, which would provide companies with the strategic flexibility to address potential security breaches. Governments also have a role to play in working with the private sector to secure critical networks and to facilitate the transition to the Secure Economy.

Sign up for alerts from Deloitte Research

About Deloitte Research
Operating through a network of research professionals, senior consulting and accounting practitioners, academics and technology partners, Deloitte Research delivers innovative, practical insights companies can use to improve their overall business performance. Through its in-depth publications, surveys, reports and commentary, Deloitte Research identifies, analyzes and explains the major issues confronting businesses today and shaping tomorrow's marketplace.

Return to the Deloitte Research homepage.