Hack at­tack Lib­erty CEO David Munro’s big­gest test yet?

Loss of clients’ data de­rails drive to build trust

Sunday Times - - Business Times - By PER­I­CLES ANETOS ane­[email protected]­day­times.co.za

At­tempts by the Don­ald Gor­don-founded fi­nan­cial ser­vices firm, Lib­erty, to change its al­most decade-long nar­ra­tive of shrink­ing mar­ket share in a highly com­pet­i­tive in­dus­try were set back this week as it reeled from the news of a hack of clients’ e-mails and other data.

Lib­erty, founded by the le­gendary busi­ness­man in 1967 and ma­jor­ity-owned by Stan­dard Bank, has largely un­der­per­formed its ri­vals on the do­mes­tic front as it failed to re­tain and at­tract new clients. On the rest of the con­ti­nent, it has canned ex­pan­sion plans that con­tributed to the ax­ing of its for­mer CEO, Thabo Dloti, last year.

Over the past five years, Lib­erty’s shares have re­mained stag­nant, in­creas­ing by just 1.22% com­pared to Dis­cov­ery’s 92.84% climb, San­lam’s 71.5% rise and Old Mu­tual’s 38.74% ap­pre­ci­a­tion, spurred by the in­surer’s planned re­turn to its Jo­han­nes­burg head­quar­ters.

This week’s hack seem­ingly sets back re­cently-ap­pointed CEO David Munro’s plans to win back in­vestor con­fi­dence so that it can re­gain lost mar­ket share do­mes­ti­cally.

In re­cent months it seemed that Munro had at least been win­ning back faith from Lib­erty’s par­ent com­pany, Stan­dard Bank. In an in­ter­view on Clas­sic Busi­ness, Stan­dard Bank CEO Sim Tsha­bal­ala said there was a smile on his face in the sense that Lib­erty was start­ing to see some green shoots.

The ques­tion whether the data breach will un­der­mine those shoots re­mains open. There is a lot of trust in­volved in de­cid­ing which in­surer to take.

War­wick Bam, an in­sur­ance an­a­lyst at Av­ior Cap­i­tal Mar­kets, said per­cep­tion was im­por­tant and in look­ing at what the hack could do to the prospects for Lib­erty, it was un­doubt­edly neg­a­tive.

“There is ba­sic per­sonal data that you share with [Lib­erty] just to trans­act with them, but ide­ally they want to col­lect more than that. Lib­erty’s data breach is a les­son for all in­sur­ers that cy­ber-risk needs to be close to the top of their risk regis­ter.”

Bam said the key strat­egy for Lib­erty and other in­sur­ers was to use trust to col­lect cus­tomer data, which would as­sist with risk man­age­ment and prod­uct de­vel­op­ment.

The fi­nan­cial ser­vices firm has col­lected vast amounts of data on its clients over the years.

Bam said Lib­erty’s cus­tomer-cen­tric ap­proach couldn’t be achieved with­out col­lect­ing cus­tomer data and for that there needed to be trust be­tween Lib­erty and its clients.

Munro said it was too soon to say what im­pact the hack would have on the progress he made at Lib­erty since his ap­point­ment just over a year ago.

“Lib­erty and its man­age­ment to­tally un­der­stand its cus­tomers’ con­cerns, and we deeply re­gret the pos­si­ble im­pact of this act of crim­i­nal­ity.

“At this stage there is no ev­i­dence that cus­tomers have suf­fered fi­nan­cial losses,” he said, adding that the group’s pri­or­ity was to re­build the trust of its cus­tomers.

The pri­or­ity to re­build trust will un­doubt­edly take man­age­ment’s at­ten­tion off Lib­erty’s stated ob­jec­tive to re­gain mar­ket share in South Africa.

Early this year, in a show that Lib­erty’s pri­or­ity was firmly rooted in South Africa, Munro over­hauled Lib­erty’s strat­egy and can­celled the group’s R160-mil­lion plan to ac­quire a 75% stake in a Nige­rian long-term in­surer.

Bam said it was now a wait-and-see ap­proach for the mar­ket as the full ex­tent of Lib­erty’s data breach re­mained un­known.

It was a dif­fi­cult week for Lib­erty, with its shares fall­ing sharply.

Rahima Cas­sim, a fund man­ager at Ash­bur­ton in­vest­ments, said the speed at which a com­pany re­acted to a cri­sis like the one Lib­erty suf­fered was a strong driv­ing force be­hind pos­i­tive con­sumer sen­ti­ment to­wards the com­pany.

Lib­erty was alerted to the in­tru­sion into its net­work on Thurs­day last week, in­form­ing clients on Sun­day.

“Rep­u­ta­tional risk is a strate­gic risk, so cri­sis-man­age­ment prepa­ra­tion and re­sponse is im­per­a­tive.

“Pro­vid­ing colour to stake­hold­ers around the con­trol of cy­ber risks within the broader strat­egy and busi­ness plan, along with board over­sight and ac­count­abil­ity of these is­sues, would be a good start to lim­it­ing the dam­age,” said Cas­sim.

She said while the per­cep­tion was neg­a­tive for Lib­erty, it could mit­i­gate the dam­age by pro­vid­ing clients and po­ten­tial cus­tomers with an as­sur­ance that this is­sue would not re­oc­cur in the fu­ture.

She said con­sid­er­ing that the busi­ness was in a turn­around phase, now would be a good time to be­gin im­ple­ment­ing strate­gic changes to limit cy­ber crime.

Lib­erty has in­di­cated that it is in the process of up­grad­ing its legacy IT in­fra­struc­ture, which is one of the ini­tia­tives pushed for by Munro. An­a­lysts in­di­cate that Lib­erty is at a base-level rel­a­tive to some of its peers like Dis­cov­ery and San­lam, which have a few years’ head-start on the group.

A se­nior ex­ec­u­tive with more than a decade of ex­pe­ri­ence with Stan­dard Bank told the Fi­nan­cial Mail this week that “no­body [at Lib­erty] takes IT se­ri­ously”.

Cas­sim said Lib­erty should con­sider hold­ing it­self ac­count­able for any losses to clients that might oc­cur in fu­ture from the leak of per­sonal in­for­ma­tion. Such ac­tion would cre­ate an im­age of trust and in­tegrity, which is what an in­surer like Lib­erty needed for longer-term growth.

Munro said: “The data that was stolen is largely un­struc­tured. With this ex­pe­ri­ence, many oth­ers, in­clud­ing Lib­erty, have learnt the hard way and we will take all nec­es­sary re­me­dial ac­tions once the in­ves­ti­ga­tion is com­plete.”

At this stage there is no ev­i­dence that cus­tomers have suf­fered fi­nan­cial losses David Munro

Lib­erty CEO

Graphic: Nolo Moima Source: Bloomberg

Where there is smoke Share price close Fri­day June 22 R120.29 June 2013 - June 2018

Pic­ture: Robert Tsha­bal­ala

Lib­erty CEO David Munro faces an up­hill strug­gle.

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