Dig­i­tal cri­sis for Dixons

Daily Mail - - City & Finance - Alex Brum­mer

THE re­cently in­stalled chief ex­ec­u­tive of Dixons Car­phone, Alex Bal­dock, must have had bet­ter days. When he took over ten weeks ago the main com­mer­cial con­cerns were dol­drums in the smart­phone mar­ket and the threat from on­line elec­tron­ics and white goods sales from dig­i­tal cham­pi­ons Ama­zon, AO and Ar­gos.

As an im­port from dig­i­tally as­tute Shop Direct, among Bal­dock’s first ac­tions was to start a re­view of all of Dixons’ IT sys­tems and on­line ser­vices, in­clud­ing se­cu­rity lev­els.

It was as a re­sult of this ex­er­cise that a hack of fi­nan­cial and per­sonal data, in­volv­ing an as­ton­ish­ing 5.9m cus­tomers glob­ally, emerged.

Learn­ing from past cor­po­rate IT fail­ings, no­tably at TSB, Bal­dock is tak­ing full re­spon­si­bil­ity for the mess by apol­o­gis­ing pro­fusely to cus­tomers.

Hav­ing dis­cussed mat­ters with pay­ment pro­ces­sors, he be­lieves that the 5.8m cus­tomers us­ing chip-and-pin to pay for goods, whether in shops or on­line, should be largely pro­tected be­cause of the se­cu­rity built into the sys­tems. An­other 105,000 cus­tomers, per­haps Amer­i­cans who were shop­ping with Dixons Car­phone at air­ports, are more vul­ner­a­ble.

The Dixons hack does not ap­pear to have been the re­sult of com­puter geeks play­ing silly games or seek­ing to ex­tract a ran­som. All the in­di­ca­tions are that the mo­tive is fraud, al­though thus far no cases have emerged.

The group is en­gaged in a mas­sive com­mu­ni­ca­tions ex­er­cise de­signed to re­as­sure cus­tomers and alert them to pos­si­ble swin­dles.

None of this is very help­ful to Bal­dock, who was brought in to try to halt a share price slide of 35pc against a ris­ing mar­ket in the past year.

But it un­der­lines why re­tail­ers are po­ten­tially doomed if they don’t have the best-in­class on­line shop­ping ex­pe­ri­ence and se­cu­rity. Hav­ing pol­ished up in-store ser­vice and ad­vice un­der the lead­er­ship of pre­de­ces­sor Seb James, no one now wants to see Dixons Car­phone join Maplin, Comet, Zavvi et al on the scrapheap of his­tory.

Next leavers

THE WPP detox is just start­ing in the wake of the com­pany’s AGM.

Chair­man Roberto Quarta may have sur­vived the ef­fort to dis­lodge him over a lack of open­ness over l’af­faire Sor­rell, but soon af­ter a new chief ex­ec­u­tive is in­au­gu­rated then share­hold­ers will move on to de­mand Quarta’s scalp.

In the in­terim, pay chair­man Sir John Hood (vet­eran of the Helge Lund pay scan­dal at BG) should be pack­ing his bags af­ter a whop­ping 30pc of in­vestors failed to back the com­pany’s re­mu­ner­a­tion re­port.

Hood seems to think run­ning a pay panel is a li­cence to print money for di­rec­tors.

As for Sor­rell, he is ru­ined goods. A hand­ful of share­hold­ers felt that he has been harshly treated and would have liked to hear a glow­ing trib­ute.

But an­gry WPP board mem­bers are de­ter­mined that he should not be al­lowed to rise Lazarus-like on the back of busi­ness con­nec­tions nur­tured at WPP.

Num­bers crunched

BY THE stan­dards of Bri­tain’s fee­ble au­dit reg­u­la­tor, the Fi­nan­cial Re­port­ing Coun­cil, the fine of £10m im­posed on PwC for sign­ing off the ac­counts of BHS be­fore it was sold to for­mer bank­rupt Do­minic Chap­pell must be con­sid­ered a tri­umph.

It was de­liv­ered within two years and is big­ger than any­thing in the past. It is amaz­ing the dif­fer­ence it makes if a reg­u­la­tor is be­ing pushed hard by a Com­mons select com­mit­tee and the sub­ject of a re­view by for­mer mandarin Sir John King­man.

Given that PwC’s fee for the BHS au­dit was £355,000, it has been treated rather harshly. The penalty was cut to £6.5m be­cause of the co-op­er­a­tion of the firm with the in­quiry. Sim­i­larly, the £500,000 fine, cut to £325,000, for au­dit part­ner Steve Deni­son to­gether with a 15-year ban also looks harsh.

Up to a point, Lord Cop­per. The PwC au­dit of BHS was a frac­tion of the work which the au­di­tor did for Philip Green’s empire. As for Deni­son, no one could ar­gue that a 15-year ban from his pro­fes­sion is a light es­cape. But the fine is equiv­a­lent to just half the av­er­age an­nual earn­ings of a PwC part­ner.

The real vic­tim is the loss of trust in au­dit­ing. PwC may have es­caped cen­sure for its au­dit of Tesco but, like KPMG, its rep­u­ta­tion is in tat­ters. The bell tolls for the oli­gop­oly of the Big Four au­dit firms.

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