Landmark White considers sale as cash runs out. The reputational effect of data breaches.
June 25, 2019 |
The focus of reporting on data breaches is on the personal information which is taken, potentially to commit fraud and the distress that others have that information without permission. What is less reported is the potentially catastrophic effect data breaches may have on an business’ prospects, if not survival.
In the United States Retrieval – Masters Creditors Bureau filed for Chapter 11 bankruptcy protection after it suffered a data breach in March. The fallout from the data breach has been described as creating a “cascade of events” with led to the bankruptcy. In Australia the Australian Financial Review (AFR) has reported that Landmark White is considering a full or partial sale of its business as it suffers a liquidity crisis caused by its second suspension by its lender clients. In both cases the reputational damage caused by the data breaches affected the core business of the companies and a lack of confidence by their clients. This potential outcome is not properly understood by many businesses in Australia where the attitude is to deal with a data breach quietly and hope for the best. While there is a good chance that the ineffective regulator, the Information Commissioner will do nothing about any breaches of the Australian Privacy Principles that led to the data breach, the market may be less forgiving. Businesses which are driven by data are particularly susceptible to reputational damage.
The AFR article provides:
Landmark White is running out of cash following its second suspension by the majority of its lender clients, and the troubled valuation firm has told staff it is considering a sale of “the whole or parts” of the business.
Reinstatement by its major lenders was not likely “immediately” and, having used up a significant portion of its cash reserve during its first suspension, which led to a near three-month halt in trading of its shares, the second suspension was having “a major impact on the business and its viability”, acting chief executive Tim Rabbitt told staff in an email on Thursday.
“Without an immediate reinstatement from our clients, the business is likely to be in trouble in the very near term,” Mr Rabbitt said in the email seen by AFR Weekend.
“The company is still working on reinstatement, but the Directors (as is their responsibility to do now) have to consider alternative options for the business including the potential sale of the whole or parts of the business.”
Landmark White has been unable to convince its lenders, which include three of the country’s largest banks (with the exception of Westpac) to turn work back on in the wake of a second theft of information that has seen a range of documents posted to file-sharing site SCRIBD.
It has taken an increasingly desperate tone since the second incident, at one point warning lenders that if they cut off its lines of work it posed a threat to the viability of the valuation industry as a whole. That earned a swift rebuke from its own industry body, distancing the company from other valuation firms.
Subsequently the company blamed its own clients for leaking news of the second data theft to the media.
Landmark White chairman Keith Perrett on Friday said he was proud of his staff for the commitment they had shown the company in the wake of the second information theft.
“Our management team is working closely with staff across Australia to ensure they are informed and supported as we work through the challenges the business currently faces,” he said.
“We’re communicating with our employees on the state of the business every day, and will not apologise for being open and transparent about the incident and impact on our business.”
The company was working to ensure the company stayed in business.
“LMW has been a successful business for almost 40 years, one that employs more than 450 people across Australia including in regional and remote areas,” he said.
