WASHINGTON DC

Regina Abrami, Global Program Director writes,

Week two of our U.S. immersion we headed to Washington, D.C. with the goal of introducing students to the business of government, regulation, lobbying, lawyering, and information security – the stuff which crosses any c-level executive’s desk on a regular basis.  In addition to what’s listed below, we were also fortunate enough to have a tour of the National Defense University, including a visit to the place where Abraham Lincoln’s assassinators were tried (and executed).  Mary Surratt was among them. She is also the first woman to have been executed by the U.S. federal government (for more on her case, see: http://womenshistory.about.com/od/civilwar/ig/Mary-Surratt/)

Toukam Ngoufanke, GP Class of 2015, offers a nice synopsis below.  He writes,

Perhaps in the recent past you’ve tried to log onto your online bank account and couldn’t do so. The login page never loaded, delivered error messages, or servers were so slow you gave up out of frustration. It cost you time. It costs banks billions. In cyber-security parlance, such attacks are called denial-of-service attacks. It’s a form of hacking. It has become good business. Hacking is also on the rise. Increasingly passé are the old days when industrial secrets used to involve physical intrusion of safes. In the digital age where most things, including industrial secrets, are digitized, cyber intrusion (to put it politely) is the new normal.

In the U.S., recent targets include certain U.S. government agencies and corporations. In response, U.S. corporations are increasingly pressed manage cyber attacks and cyber warfare risks as they do any other kind of traditional risks (e.g. financial or operational risks): pro-actively rather than reactively. In a two-part lecture, we learned that high-level officers specifically tasked with creating and implementing intelligence-led IT systems are no longer rarities.  When they fail, they bring our guest lecturer in, a former Air Force officer who held leadership positions in the Air Intelligence Agency and the Air Force Information War Center before moving into the private sector. 

In D.C. where we had our immersion in the world of cyber security, government is everywhere too. A great part of this leg of the immersion was spent meeting and engaging with a wide swath of D.C. players. We wanted to understand the relationships between government and business.

At the SEC we learned about the role of regulations in the financial domestic and international financial markets in trying to contain moral hazard and promoting integrity. At the FCC, our hosts provided us with insights into the FCC’s role in fostering/preserving competition in the telecommunication and media sectors. We discussed certain aspects of the FCC-blocked merger between T-Mobile and AT&T.

Meeting with lobbyists yielded unique insights into the way businesses help shape legislation as well as the connections between think thanks, the private sector and government. Visits to two very successful Washington based think-thanks (the World Resource Institute and Oxfam U.S.A.) supplemented these insights.

At the Export-Import Bank of the U.S. (ExIm), we learned of the U.S. government’s role in supporting export activity via export credits. A prime beneficiary is Boeing, America’s largest exporter. Many of Boeing’s clients obtain competitive loans from ExIm to finance their purchase of planes. While the purchases are collateral for the loans, the program is an incredibly powerful way for Boeing to do business; any defaults on the loans are handled by the ExIm with the full backing of the U.S. government. It’s like having the U.S. government show up to collect on you. Besides credit-worthiness, it is perhaps one of the reasons borrowers have practically never defaulted on their sizeable loans.

At the Overseas Private Investment Corporation (OPIC), a U.S. agency which reports directly to the White House, we learned about the use of investments as a form of soft power. The agency effectively acts as the government’s investment bank. In support of U.S. foreign policy goals, OPIC provides debt-only funding for start-up businesses across the globe from Haiti via Ghana to Afghanistan. Remarkably, the projects need not originate with U.S. Citizens or permanent residents, but must be tied to at least one of these two groups.  Rather to our surprise, we learned that OPIC also provides political risk insurance, which it pioneered, for qualifying projects.

For most of us, the OPIC experience was perhaps the most thrilling part of the D.C. experience. It was good to see a “good Samaritan” business side of government.  Not only is it supporting business start-ups across the globe, it’s also doing so at no cost to the tax payer. It’s turned a profit for over 35 years.

Emilie Esposito, GP Class of 2015, considers below not just the implications, but the business opportunities (legal, that is) from the rise of cyber attacks.  She writes,

One may think that being a cyber criminal is a very profitable profession, but it remains an illegal activity and who knows what the consequences may be……

We discovered during the lecture on Warfare in the Cyberspace that other players are benefiting from the rising cyber warfare, in a perfectly legal way. Cyber crime led to cyber security, hence to the development of a whole business community offering products (e.g. antivirus) and services (e.g. consultancy) to minimize the risk of being harmed by cyber attacks. These new players can benefit from a booming market, as long as they manage to compete successfully by continuously updating their products with cutting-the-edge IT content and by gathering knowledge on increasingly sophisticated threats. If I were a geek I may consider this career, but unfortunately my attempt to learn how to model did not go beyond codeacademy.com!

What if another industry, far away from IT and tech, could generate considerable profits on the back of cyber criminals? Despite all the efforts a business can put in place to protect its intellectual property, its confidential and sensitive data, its online platform and – more broadly – its operations, the risk of suffering a considerable loss following a cyber attack still exists  and could be worse than that of a manufacturing company victim of a tsunami.

Such a risk should not be ignored by a responsible management team, and I believe the insurance industry has a considerable business opportunity ahead as this risk is shared by virtually all companies as long as they rely on an information system linked to the Web. Some insurance companies have already issued several products covering cyber risks, however these often represent a partial cover only. This reluctance to offer full coverage in general insurance policies seems to be linked to the fact that the debate on how to evaluate cyber risk from a comprehensive standpoint is still on-going.  Some questions include, how to evaluate the magnitude of damages potentially suffered by different types of companies in terms of size and industry, and what the likeliness of these damages is, particularly taking into account potential responsibilities towards third parties (customers, employees..)?

Finding and implementing an adequate framework to insure cyber risks would allow insurance (and reinsurance) companies to issue a new generation of insurance products – and they would benefit from the growing cyber warfare in a perfectly legal way --- a good business  unless there new IP is also a victim of a cyber attack.

So are there any career opportunities for MBA’s in Washington DC?  Stephenson Cherng, GP Class of 2015, offers some insights below.  He writes,

No company can do business without understanding policy and how the government works. The weight of this statement increases exponentially in the city of Washington DC, where we visited June 9-15, 2013. The city, known for its national monuments, free museums, and fabulous crab cakes, is also where public officials and their staffers shape entire industries through policies.  As a by-product, there are companies that have created a business out of servicing this system.  One of them is McKinsey & Company where we visited.

Unbeknownst to many, one of the largest consulting firm in the world has been and pledges to continue expanding their presence in the public sector. Although McKinsey had always held interest in government, exponential growth did not occur until the Clinton Administration, when members in the government recommended Nancy K, an ex-associate of McKinsey at that time, to revitalize the U.S. Treasury Department.

Nancy eventually re-joined McKinsey after the conclusion of the assignment and the company moved on to complete several large-scale projects for prominent public institutions ever since, including renovating the 15-year old IRS filing system and improving the organizational efficiency of the FBI. Its presence is also growing internationally, tackling public issues with government institutions in foreign countries such as China and Malaysia.

Now, the public sector has grown to 15% of McKinsey's total business revenue. There is much to be learned from its success despite its status as a private organization. The key element is gaining trust from its clients, which leaders at McKinsey achieve by working with the government on employee clearance, keeping employees motivated, and establishing separate offices dedicated to the public sector. Next time you see a McKinsey 'G' office, keep in mind that it’s dedicated to serving the government!

Here we go! Toukam Ngoufanke, GP Class of 2015, writes,

Next stop: China, the land of the dragon to gain insight into the economic behemoth’s ability to innovate, behemoth-government-style.