Guard your business secrets Featured

7:00pm EDT December 26, 2007

There could be a lot more information about your company in the public domain — readily accessible to your competitors — than you may think. How your competitors might try to analyze this information in order to predict your next move is of obvious concern. There are many ways that business secrets and strategy can be leaked, sometimes in inadvertent ways. It’s important your employees — everyone from the receptionists to your salespeople to top management — are instructed about when, how and what they can and cannot discuss with company outsiders.

“When you have a strategic game plan, timing is critical,” says Harry Cendrowski, CPA/ABV, CFE, CVA, CFD, CFFA, the president of Cendrowski Corporate Advisors LLC. “You don’t want your competitors knowing what you are planning or it will leave the door open for the ‘me too’ factor. That is why it’s important that everyone in your organization is on the same page.”

If your competition makes an announcement of an initiative which is similar to yours both in substance and in timing, the result will be that you will lose any opportunity you once had at being unique in having a distinguished plan or strategy.

Smart Business asked Cendrowski about some not-so-commonly thought of places where clues about a company’s strategy might be found and how companies can more closely guard their business secrets.

How much information about a company’s activities can actually be obtained through public records?

There is a wealth of information in the public domain. Experienced information gatherers know where and how to obtain it quickly. Some Web sites offer information for free; others provide it at varying degrees of cost. Good business intelligence is available at public sites such as the U.S. Securities and Exchange Commission Web site, www.sec.gov.

Lawsuits also offer a plethora of information about corporations, individuals, fraud schemes, etc. Public access to the U.S. Court Records in real time can be found at: http://pacer.psc.uscourts.gov. This is an electronic public access service that allows the public to obtain case and docket information from Federal Appellate, District, and Bankruptcy courts. The information available for a nominal fee consists of case related information such as cause of action, nature of suit, dollar amount, Appellate court opinions, Judgments, or case status as well as imaged copies of documents. In addition, comprehensive fraud resources can be found at www.fbi.gov as well as www.ic3.gov/crimeschemes.aspx. Both of these Web sites are funded and supported by the FBI. Information that is technically unpublished and not readily available on the Internet [e.g., civil filings, hearings, certain documents] can still be found at the local level in various databases that are connected to the Internet. Those adept at data mining can easily retrieve this information.

What other sources could reveal information indicating a company’s strategic direction?

In general, organizations leave information as they go about their business. Companies reveal information in their marketing materials, on their Web sites, at trade shows, while interviewing job candidates, while exploring opportunities to form joint ventures, etc. Another example is the company directory, which might list key employees with their job titles, locations, which can provide clues about what the company is doing overseas. Information is also present in publications, such as the Encyclopedia of Associations, National Organizations of the U.S., and Regional, State, and Local Organizations, and is available through providers of market intelligence, such as Standard & Poor’s. Activities with industry associations, suppliers, vendors, customers, etc. can also provide clues into a company’s direction, so employees should be cautious about what they do and say while participating in such activities.

How can companies avoid inadvertently disclosing too much?

Continually monitor the way your employees communicate information about your company’s trade secrets and initiatives. Monitor the information that makes its way to your Web site and to other places on the Internet, as well. Even if your competitors don’t have the specific details about an initiative, just knowing that something is about to happen can hurt the long-term success of your strategic plan. If you are a private company exploring a possible merger or sale with another private company, make sure the documents are not made public. If the company is public, work to control the timing of the disclosure. Timing is critical in regard to products and services. Disclosure by a party — even if it says there is a nondisclo-sure or confidentiality agreement — still indicates that something is going on. Develop a standard, pat response that everyone in the company should be instructed to use. Communicate on a regular basis with your employees. This not only assures everyone is on the same page, but it also serves as a mechanism whereby employees will more readily alert you to efforts that a competitor may use to obtain your company’s secret information.

HARRY CENDROWSKI, CPA/ABV, CFE, CVA, CFD, CFFA, is president of Cendrowski Corporate Advisors LLC, Bloomfield Hills, Mich. Reach him at (248) 540-5760 or cs@cendsel.com or the company’s Web site at www.frauddeterrence.com.