Disaster Due Diligence February 20, 2009

Economic crisis

HEADLINE: Financial Crisis Called Top Security Threat to U.S.

SUMMARY: The current global economic crisis is viewed as the prime security threat to the United States. While terrorism remains a constant threat, an increased refugee flow to the United States and a questioning of American economic and financial leadership in the world are short-term security concerns. Rising unemployment and reduced welfare spending are leading to political instability in many countries, with a growing risk of civil unrest and violence.

STORY LINK: http://www.reuters.com/article/companyNewsAndPR/idUSN1246924120090212

ANALYSIS: The world has changed. Change Creates Risk. Every business has been impacted. Every crisis is a human crisis. OSHA has identified workplace violence as a known hazard. The current economic crisis has resulted in an increase in workplace violence, absenteeism, supply chain risk and theft. The political instability caused by the economic crisis has several countries close to collapse, including Mexico and Pakistan. Existing corporate continuity plans must be updated to reflect the current economic crisis and increased exposures.

-- Jim Satterfield, Firestorm President/COO

Food safety

HEADLINE: Peanut Corp. of America Files for Bankruptcy

SUMMARY: Peanut Corporation of America sought bankruptcy protection last week after a salmonella outbreak was traced to one of its plants. The outbreak has led to one of the biggest product recalls in U.S. history. The salmonella outbreak has sickened 600 people.

STORY LINK: http://news.yahoo.com/s/ap/20090213/ap_on_bi_ge/salmonella_outbreak_bankruptcy

ANALYSIS: As the economic and health problems mount due to salmonella in peanut butter processed and shipped by Peanut Corporation of America, the U.S. food industry is gearing for more congressional action that could profoundly change how U.S. food and food imports may be examined for safety. Litigation is certain against Peanut Corporation of America, and companies that utilized products from the firm may not be immune from civil action. 

This massive recall should again remind companies that they need to be proactive in assuring their food ingredient and packaging suppliers, whether domestic or foreign, are in compliance with federal and state food safety laws and have appropriate good management and manufacturing practices in place. Companies can no longer rely solely on third-party auditors or certifiers to assure safety. In order to protect your brand name and provide a safe product, a more hands-on and in-plant review may be required.   As an example, the Chinese processors found to adulterate milk with melamine were in fact certified as following all appropriate processing standards.   Companies will be under extreme pressure from shareholders and government officials to institute laboratory testing procedures and management oversight of outsourced ingredients.

Congress will use this latest food safety problem to strengthen FDA and USDA oversight – at a cost to food processors. Secretary of Agriculture Vilsack has gone farther than any previous Secretary in stating he is in favor of a single food safety agency. The industry should be prepared for greater oversight, fees for inspection, mandatory recall laws allowing USDA and FDA to force companies to trace and recall product, and possible strengthening of criminal and civil statutes against those who knowingly sell adulterated foods.

-- Richard Fritz, Firestorm Expert Council member

Communicable illness

HEADLINE: The Hidden Outbreak

SUMMARY: Bird flu was revealed to have killed another woman in China recently, raising questions about its prevalence in poultry flocks. China slaughtered more than 13,000 fowl in its northwestern Xinjiang Uighur autonomous region after 519 dead birds were confirmed to have contracted the H5N1 strain of bird flu, the state news agency Xinhua quietly disclosed last week. Measures were taken, birds were killed, and the epidemic had been brought under control, Beijing's official mouthpiece said in a 75-word article. The report, citing the Ministry of Agriculture, provided no details on when, where and how the virus had spread.

STORY LINK: http://www.forbes.com/2009/02/13/china-bird-flu-markets-economy-0213_asia_05.html

ANALYSIS: This appears to be more of the same old lies that the local officials in China are told to say. This official probably got into trouble even mentioning this outbreak. I say this because all the other regions are keeping quiet and we know the following facts: The eight human cases are widespread; birds are sick and dying in northern Vietnam; and dead birds are washing ashore in Hong Kong.

You have to have ears on the ground to determine what is truly happening inside China. With the economic crisis and the problems in the regions next to Tibet and along with Tibet Buddhists taking ground all around China, I think the Chinese just want to bury this problem. 

-- Dr. Steve Cunnion, Firestorm Expert Council member

Climate crisis

HEADLINE: World Bank Warns of Climate Change in Andes

SUMMARY: Global warming threatens the complete disappearance of the Andes' tropical glaciers within the next 20 years, putting precious water, energy and food sources at risk, according to a World Bank study on climate change in Latin America. Glacier retreat could devastate the supply of drinking water and agriculture in the Andean nations, it said, while also hurting hydroelectric power generation that makes up 50 percent of energy production in Bolivia, Ecuador and Peru. World Bank staffers said that if nothing is done to reverse the trends, there could be profound social and economic effects.

STORY LINK:

http://news.yahoo.com/s/ap/20090218/ap_on_re_la_am_ca/lt_peru_climate_change;_ylt=Ag1W21.2WvRY0uHnGAMzSOFvaA8F

ANALYSIS: Change Creates Risk. Climate change has created a food and water crisis in many countries. Millions face starvation. The economies of these countries are in a death spiral. The resulting breakdown of political structure can lead to collapse and chaos.  These impacts lead to a significant increase in exposure in supply chain, production and distribution. As food and water shortages occur, demand for traditional goods and services fall exponentially. Continuity plans must be updated to reflect the changing exposures.

-- Jim Satterfield, Firestorm President/COO

Political instability

HEADLINE: Drug Violence Spins Mexico Toward 'Civil War'

SUMMARY: Mexico, which shares a nearly 2,000-mile border with the United States, is undergoing a horrifying wave of violence that some are likening to a civil war. Drug traffickers battle fiercely with each other and Mexican authorities. The homicide rate reached a record level in 2008 and indications are that the carnage could be exceeded this year. It is recommended that those intending to visit U.S.-border areas affected by drug-related violence, where incidental and direct risks posed by crime are heightened, seek expert itinerary- and profile-specific advice prior to travel.

STORY LINK:

www.cnn.com/2009/WORLD/americas/02/18/mexico.drug.violence

ANALYSIS: This is a continuation of the earlier reports of the potential collapse of the police, judicial system, and infrastructure in Mexico. Last week, a retired Mexican general was killed by a drug cartel in Cancun. There are multiple forecasts of the imminent collapse of the Mexican government and occupation by the U.S. military. Travel, production, distribution and supply chains are at risk in Mexico. U.S. cities bordering Mexico are experiencing the violence first hand. Does your business continuity plan have contingencies for employees and critical business functions based in Mexico?

-- Jim Satterfield, Firestorm President/COO