One area often overlooked when managing a distressed sale or bankruptcy is the need for an outside security consultant to ensure the security of physical assets, security of personnel and security of information. This is particularly true in situations where assets are located in multiple countries, jurisdictions or regions, each with their own culture, laws and nuances. During these cases, an outside security consultant with international experience brings tremendous value to the proceedings.
In a recent case in which we were retained to assist, a bankruptcy was to be filed in a U.S. court for a company with physical assets in multiple countries, plus the U.S. One of the countries in particular, where the company was initially founded and where the majority of the physical assets and personnel were located, maintained a hostile relationship with the U.S. government. The fact that the country was losing a major player in the industry was bad enough. But that the bankruptcy be filed in a U.S. court added insult to injury.
The company had several thousand permanent and eventual employees, and operated in multiple locations throughout the country. All of these physical and personnel assets needed to be safeguarded throughout the bankruptcy process.
In anticipation of the bankruptcy filing, which was kept confidential from the local employees, an on-site security review was conducted of the most important assets that could be affected by the announcement – affected by internal personnel, third-party suppliers or individuals or criminal organizations preying on the situation. A plan was put into action that included the deployment of additional outside security assets to reinforce those already in place, as well as to manage the overall security of the facilities and personnel during and following the announcement.
Once the announcement was made, the plan was rolled out and additional security personnel were immediately deployed to safeguard the assets. We worked closely with the local security chief to ensure that all assets were covered. Despite the shock to both the local industry and the government, not a single building, employee or merchandise was compromised following the announcement and subsequent phases of the bankruptcy.
There are additional advantages of having a dedicated security component during a bankruptcy proceeding or a distressed sale. One of these is operational intelligence. Security teams on the ground are able to report back on the reactions to the decisions made by the interim leadership – how the workers and management are responding to these decisions, the effects on the suppliers and partners and the reaction of the local market and authorities. More importantly, these teams are able to provide intelligence that helps drive the decision-making process.
In a case a few years back, the security team on the ground overheard a group of employees organizing to take actions against the company. The group was overheard throwing out ideas for blockading the entrance to the company or otherwise disrupting the company’s operations. One employee even suggested vandalizing or outright stealing of the company’s property. Still another suggested taking hostile actions against employees cooperating with the company. The security team was able to identify those involved in organizing the group and reported this to the interim security leadership, who acted quickly to meet with these individuals and diffuse the situation.
Experienced security advisors can also be a valuable asset in other areas. As part of normal business operations, international security consultants develop and regularly maintain contact with diplomats and law enforcement personnel stationed at U.S. and other embassies worldwide. They also develop relationships with local Chiefs of Police and high-ranking members within the local governments, which can aide when requiring contacts within a specific country. On multiple occasions, our contacts have directly resolved a variety of pressing issues such as the relief of fines and penalties, the political persecution of an employee, and even on one occasion, the release of a barge that was being held by the government.
In other cases, the security consultant will act as an advisor to the company regarding issues related to the local security laws. As an example, in one case that we were retained to support, interim management was concerned about the potential occupation of the company and whether local law enforcement would support the company in the event of an employee occupation. In this case, we advised that law enforcement would only provide support against employees attempting to forcibly enter the company’s property. However, all employees already on company property were the sole responsibility of the company. So, if the employees arrived for work and were admitted into the company premises, and then decided to simply not work or leave, the police would not intervene. With this knowledge, we worked proactively with interim management to devise a rotational plan where only a limited number of essential employees were on the premises at any given time, reducing considerably the risk of an occupation.
The value of a good security consultant during a bankruptcy proceeding or distressed sale can be significant and should not be overlooked when putting together a transitional or interim management team.