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THIS WEEK'S ARTICLES
'Game of Threats' Teaches Executives Cyber Readiness Through Game Play
New Report Finds a 'Diversity Dividend' at Work
Patriots' Belichick: 'No Knowledge' of Deflated Footballs
Fraud-Prevention Company Stopped Providing Bank Verification to Payday Lenders

'Game of Threats' Teaches Executives Cyber Readiness Through Game Play
by: Steven Norton
Jan 21, 2015
Click here to view the full article on WSJ.com

TOPICS: Business Ethics, Cybercrime

SUMMARY: Acme had just been hit with a cyberattack that brought down some of its systems. Three company executives, fearing that corporate data may already have been compromised, debated the next response. Invest in a data loss prevention system? Immediately rebuild servers? Hire a PR firm? Too late. The damage was done, but the participants left the event wiser, and hopefully better prepared for the next cyberattack. The scenario, fortunately, was not real, but one provided by consulting firm PwC in "Game of Threats," an interactive role-playing game that lets participants gain experience honing their cyberdefense by participating in scenarios designed to mimic real-world attacks. The game underscores a practice becoming more common in the business world: assessing cyber readiness. "What do firefighters spend most of their time doing? Training, so when a fire does occur they know what to do," says Caleb Barlow, vice president of IBM Security, a group within International Business Machines Corp.'s software business. "It is muscle memory. We need to think about cybersecurity in the same way." The game, which PwC says it has shown to about 30 companies and plans to show to a group of bank CISOs in the coming days, splits participants into two teams, the company and the threat actor. Those teams then play a series of 60-second turns, during which they can do things like invest in security personnel, launch phishing scams, purchase breach detection software or hire an incident response firm. At the end of 10 or so turns, the game reveals who won, along with a full breakdown of how each turn affected the outcome. At the end, PwC reps go through the process turn by turn, talking with executives about best practices and how their decisions might translate to the real world.

CLASSROOM APPLICATION: Well-known cyberattacks on companies such as Sony, Home Depot, Target, and Staples, has created the need for companies to better prepare for a potential data loss prevention system. PwC has developed the "Game of Threats" as an interactive role-playing game that lets participants gain experience in their cyberdefense. The game is similar to what firefighters do in preparing for a crisis situation. Companies need to think about cybersecurity and gain experience in how to deal with various scams and other types of cyber misconduct. For example, the game includes a situation where employees attempt to combat a phishing attack.

QUESTIONS: 
1. (Introductory) Will game play help executives prevent a cyberattack?

2. (Advanced) What are the obligations of a company to protect consumers by not only practicing the prevention of cyberattacks but developing defense systems?

3. (Advanced) Will those who seek to foil companies' cyber prevention always be able to find a way around security?

Reviewed By: OC Ferrell, University of New Mexico


New Report Finds a 'Diversity Dividend' at Work
by: Joann S. Lublin
Jan 20, 2015
Click here to view the full article on WSJ.com

TOPICS: Business Ethics, Diversity, Dividends

SUMMARY: A new study of 366 public companies in the U.S., Canada, U.K., Brazil, Mexico and Chile by McKinsey & Co., a major management consultancy, found a statistically significant relationship between companies with women and minorities in their upper ranks and better financial performance as measured by earnings before interest and tax, or EBIT. The findings could further fuel employers' efforts to increase the ranks of women and people of color for executive suites and boardrooms - an issue where some progress is being made, albeit slowly. McKinsey researchers examined the gender, ethnic and racial makeup of top management teams and boards for large concerns across a range of industries as of 2014. Then, they analyzed the firms' average earnings before interest and taxes between 2010 and 2013. They collected but didn't analyze other financial measures such as return on equity. Businesses with the most gender diverse leadership were 15% more likely to report financial returns above their national industry median, the study showed. An even more striking link turned up at concerns with extensive ethnic diversity. Those best performers were 35% more likely to have financial returns that outpace their industry, according to the analysis. The report did not disclose specific companies.

CLASSROOM APPLICATION: Once again, a highly respected study has found a statistically significant relationship between companies with women and minorities and their financial performance. While a number of academic studies have found similar results, this study was conducted by McKinsey and Co. that has considerable credibility in the business world. While progress is being made slowly, women still represent a small percentage of CEOs, board members, and C-level officers. Some of the reasons that highly diverse companies excel financially relates to increased employee satisfaction, improved decision making, as well as a more customer-focused culture.

QUESTIONS: 
1. (Introductory) Why do you think diversity in organizations creates better financial performance?

2. (Advanced) If you were CEO of a major corporation that seemed to be deficient from a diversity standpoint, what would you do?

3. (Advanced) What are the ethical and social responsibility ramifications of diversity yielding better financial performance in organizations?

Reviewed By: OC Ferrell, University of New Mexico


Patriots' Belichick: 'No Knowledge' of Deflated Footballs
by: Kevin Clark
Jan 22, 2015
Click here to view the full article on WSJ.com

TOPICS: Football, Business Ethics, cheating

SUMMARY: New England Patriots head coach Bill Belichick said he is "shocked" by the NFL's investigation into deflated footballs during the AFC championship and flatly denied involvement in the alleged actions. "I had no knowledge whatsoever of the situation," Belichick said in a news conference on Thursday. He added: "In my entire coaching career I have never talked to any player, staff member, about football air pressure." The NFL said that its investigation into the matter was ongoing. The Patriots, who won the game 45-7, will play the Seattle Seahawks in Super Bowl XLIX in Glendale, Ariz., on Feb. 1. Belichick said that quarterback Tom Brady 's personal preference on football inflation is something Brady can get into in greater detail.

CLASSROOM APPLICATION: Some people in the sports world believe that anything that you can do and not get caught is acceptable. In this case, Super Bowl bound New England Patriots have been entangled in a scandal over the deflation of the football used in the AFC championship game. Head coach Bill Belichick claims no knowledge about how the footballs became deflated, making it easier for Patriot quarterback Tom Brady to grip the ball. Obviously, someone intentionally deflated the footballs and the head coach should set the tone for appropriate conduct. In the final two championship games, Belichick used many little-known substitution rules to confuse the defense by making offensive linemen eligible to receive a pass. While this may have been within the rules, it appeared to be taking advantage of a loophole in the rules. If the Patriots are found to have been using a pattern of manipulative activities to gain an advantage, then their integrity could be questioned.

QUESTIONS: 
1. (Introductory) In sports, is it fair to take advantage of the rules in order to gain a competitive edge in winning the game?

2. (Advanced) What are the responsibilities of a head football coach to make sure that his team obeys all rules and practices appropriate conduct?

3. (Advanced) Do you believe Belichick when he says, "In my entire coaching career, I've never talked to any player, staff member, about football air pressure."

Reviewed By: OC Ferrell, University of New Mexico


Fraud-Prevention Company Stopped Providing Bank Verification to Payday Lenders
by: Alan Zibel
Jan 21, 2015
Click here to view the full article on WSJ.com

TOPICS: payday lender, Banking Industry, Business Ethics

SUMMARY: A fraud-prevention company owned by five major U.S. banks stopped providing bank account verification services to payday lenders last year, according to people familiar with the matter, as banks exit the business of working with riskier clients. Until last year, Early Warning Services LLC had been used by payday lenders as a way to check whether borrowers' bank accounts are valid and not overdrawn. Hundreds of financial institutions around the country exchange information on a data clearinghouse run by the Scottsdale, Ariz.-based Early Warning Services to prevent fraud such as forgery and fraudulent loans and to validate whether customers' accounts are in good standing. But Early Warning stopped working with payday lenders last year amid broad concerns in the banking industry about the risks of working with payday lending clients, the people said. Several payday lenders that operate online have been accused of fraud by federal officials, and some lack state lending licenses, instead operating through Indian tribes that claim sovereign status. Early Warning is owned by Bank of America Corp. , J.P. Morgan Chase & Co, Wells Fargo & Co. BB&T Corp. and Capital One Financial Corp. The banks either declined to comment or couldn't be reached for comment. Officials at the Consumer Financial Protection Bureau are working on a proposal that would require payday lenders to make sure customers can pay back their loans, The Wall Street Journal reported earlier this month. "At a time when the CFPB is considering underwriting standards for small dollar loans, it is curious that this product is being denied," said Lisa McGreevey, president of the Online Lenders Alliance, which represents Internet-based lenders. "Consumers are the ones who will suffer the consequences because they will now potentially face additional bank overdraft fees" if they don't have enough money in their accounts.

CLASSROOM APPLICATION: Payday lenders provide consumers very short-term loans, such as two or three weeks, at astronomically high interest rates that are often over 100%. Consumers use payday loans because they don't have an alternative through the existing financial system. Now a fraud-prevention company owned by five major banks has stopped providing bank-account verification services to payday lenders. This is because a number of payday lenders have been accused of fraud by federal officials Since regulators are trying to keep close watch over payment firms that work with certain types of merchants, major banks are refusing to provide needed background checks on payday lenders' financial condition.

QUESTIONS: 
1. (Introductory) Should the five major banks that control bank-account verification services refuse to provide needed information to payday lenders?

2. (Advanced) Is it possible that many consumers will be put in a crisis situation if they cannot borrow money through payday lenders to cover an emergency?

3. (Advanced) Should the Consumer Financial Protection Bureau develop rules that would require payday lenders to make sure customers can pay back their loans?

Reviewed By: OC Ferrell, University of New Mexico


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