Business and Security: Who Will Pay the Price?
October 10-12, 2005, Prague
Coming off a successful 2004 PASS Conference on “Energy and Security,” in 2005 we decided to focus on key developments shaping the crucial nexus between global security and corporate governance.
The interaction of the business and security communities has traditionally been confined to matters of arms trade, defence acquisitions and export controls. In the 1970s, however, the adequacy of energy supplies has been recognized as a universal concern of governments and private utilities as well as companies responsible for critical infrastructure. In fact, private companies share many of the same risk, considerations and threats as individuals and governments. As a result, the intersection of global business and security-related concerns is increasingly frequent, often resulting in downward pressure on share values and corporate reputations. The 2005 PASS conference was designed to explore the connectivity between business and security considerations and to analyze the attendant risks for each side. At the conclusion of the conference, we developed voluntary, security-minded corporate governance principles – the first of their kind.
The 2005 conference entitled “Business and Security: Who Will Pay the Price?” concentrated mainly on the benefits and limitations of economic sanctions and other policy tools, emerging geopolitical threats that are most relevant to business interests and the international capital markets and implications for such markets. These concerns are particularly relevant to assessing a new category of business and shareholder risk in the post 9/11 era, namely “global security risk,” and the prospects for forging a security-minded partnership between private corporations and governments. Due to ongoing concerns about energy security, we included a special “follow-up” panel that revisited the conclusions of last year’s conference. Recent developments in oil prices as well as Russia’s recent “gas diplomacy” have reinforced the validity of PASS 2004 “Prague Principles” on energy and security.
The participants of the conference took the note of the fact that business executives are facing a new array of security challenges in an increasingly interconnected global marketplace. Corporations with international business operations periodically experience security-related disruptions (e.g., export control or sanction violations, adverse geopolitical developments, etc.) The conference participants discussed the limitations of economic sanctions and other policy tools. Alternative measures, such as sectoral embargoes or smart sanctions, were likewise discussed to achieve a better balance between engaging and isolating countries of concern. Companies, particularly publicly traded firms, are increasingly having to cope with the transfer of “dual-use” equipment and technology and compliance with international and national economic sanction regimes as well as the special risks associated with doing business in terrorist-sponsoring states.
Terrorism and proliferation-related concerns clearly represent a growing menace to the global economy and business. In the post 9/11 era, a key sector that has often born the brunt of security-related clashes is the international insurance industry. Participants from the insurance sector attempted to delineate the responsibilities of government versus the private sector in managing global security risk. It was judged important that companies cooperate more fully with their respective governments in the international effort to guard against these increasingly malevolent threats. Accordingly, special attention was paid to the potential role of NATO and other international institutions in bringing business and governments together in a more coordinated and effective fashion.
We are grateful to our keynote speakers who addressed the major issues on the agenda as well as to authors of policy papers published on the occasion of the conference. We are confident that the conference report, and the recommendations it contains, will help build a more harmonious, predictable and mutually-reinforcing relationship in this vital new policy field.
