Protecting Your Company

Keeping your company's proprietary information safe.

A few weeks ago, one of our facilities experienced a break-in by burglars. Fortunately, the would-be thieves triggered our alarm, and they were scared off. As a result, they were not able to actually steal anything and we had zero losses. I’m guessing that many of you have probably experienced theft of one form or another in the course of your business. Like us, you have then had to figure out how to prevent something similar from happening in the future.

And while theft of personal property is, of course, bad, other types of thievery can be equally damaging to your business. Our company’s insurance broker points out that, for most businesses, the biggest risk of loss is not from a burglary like the one we nearly had. Rather, it’s actually from a company’s own employees. Further, he says, the type of property that’s most subject to theft is not a shop’s personal property, but rather its proprietary information and trade secrets.

What are these types of losses? Your company’s proprietary information and trade secrets can include customer lists, credit-card information, financial information, your customers’ intellectual property, production processes, and any other valuable information that creates a competitive advantage for your company. And, of course, there’s the embezzlement of corporate funds and fraud, something I’ve previously covered in this column (February 2011). It’s important to keep in mind that these types of losses generally come from people within your organization who are in positions of trust.

An ounce of prevention
Yes, alarm systems, surveillance cameras, security personnel, and the like can help discourage personal-property theft. But they’re not much help when it comes to proprietary information and trade secrets.

Instead, the answer is to initiate corporate policies that are clearly understood by everyone in your organization –and for you to then enforce them. For example, at our company we have each staffer sign an employee agreement when hired. This agreement specifies the terms of their employment, and it documents some standard policies of our organization. We also have everyone sign a confidentiality agreement.

Here’s an example of the type of language our agreement contains: “Employee agrees that, during the period of employment by Ferrari Color and following termination of employment for any reason, the employee shall hold confidential and not use, reveal, communicate, divulge, or disclose to any person or entity outside Ferrari Color, or use for any purpose other than the employee’s work for Ferrari Color, any of Ferrari Color’s confidential information.”

Our agreement later specifies what type of things that the company considers to be classified as confidential information: “Any information relating to Ferrari Color’s operations, processes, know-how, techniques, designs, drawings, equipment, test data, analytical methods, research and development projects, future developments, operating or production costs, product or market information, distribution system, customer information (including customer identity), financial reports and data supplier information (including volume and source of supply), project bids, business negotiations with third parties, the terms and conditions which Ferrari Color deals with customers, information and/or materials Ferrari Color received from customers or others which Ferrari Color is obligated to treat as confidential or proprietary.”

Your company’s attorney can help you with verbiage that you feel comfortable with and that you believe can hold up in a court of law.

Additional preventative measures can be taken as well. One good idea is to regularly discuss with your employees about the importance of confidentiality in our industry. Hit on this topic in your annual reviews and revisit the subject a few times each year during all-staff or departmental meetings. It’s also important to make sure employees understand that if they break their agreement, the company will take the appropriate action – whether that be firing them or, if the infraction is severe enough, even prosecuting them. You must ensure that everyone in your company understands that sharing this type of information with people outside of your organization is, in fact, regarded as stealing from your business.

Moving forward
It’s also important that you have proper insurance in the event of theft to your company. Standard property and crime insurance will cover theft of personal property. Any theft of proprietary information and trade secrets, however, is excluded under most standard insurance forms and must be obtained separately. My advice is to work with your insurance professional to determine what type of coverage you might need to prevent extensive corporate losses.

The chances are pretty good that, at some point in your company’s lifetime, you will have something stolen from you. Take the appropriate measures to do everything you can to prevent this, and make sure you have the proper insurance coverage to help you if and when it does occur. This will enable you to quickly put the event behind you and move forward with your business.

Marty McGhie is VP finance/operations of Ferrari Color, a digital-imaging center with Salt Lake City, San Francisco, and Sacramento locations. The company offers high-quanlity large- and grand-format photo, inkjet, fabric, and UV printing.

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