Episode Transcript
[00:00:00] Speaker A: Chris, welcome aboard. So happy to have you on the show today.
[00:00:03] Speaker B: Thanks for having me.
[00:00:05] Speaker A: Chris. We usually deal with digital security.
This is the first time we're talking about physical security risk. Give us a little bit of introduction of what you do.
[00:00:16] Speaker B: Well, sure. Here at the Palatin Group, we also provide some cybersecurity and digital security services. But a majority of our business focuses on the other types of risks. Supply chain security, physical security.
I will call the different types of risk mitigation services that we provide from reputational risk, mergers and acquisitions risk.
You name the risk and we probably address it.
[00:00:47] Speaker A: And keep me honest here. The, you know, one of the first steps you do is really a risk assessment to kind of understand what the lay of the land looks like.
[00:00:54] Speaker B: Correct. So our risk assessment would involve.
And again, it's, it's tailored to the client and tailored to what, what exact service the client is looking for. Many times our clients, because of insurance reasons, they've already conducted some type of security assessment of either their facilities or their operations and things like that. Then they will have identified gaps that they hire our company to help them close those gaps or help test systems and policies and procedures that would put in place to mitigate risks. And we help them identify additional gaps or weak points, give them strategies to close those gaps and then also validate once they've taken actions to close the gaps, validate either through our own type of red team or validate through their own internal way of exercising a certain capability.
[00:02:02] Speaker A: And Chris, I want to kind of boil this down to something very tangible. You are, were working with tech companies in the Ukraine before the war broke out. Would you be so kind to tell us that story?
[00:02:14] Speaker B: Surely so many people know that in Ukraine has a very talented, young, energetic tech talent. And of course, Western technology, Western tech companies that definitely saw this very large pool of talent concentrated in one area and stood up operations there. We had been involved in conducting risk assessments for many of these technology companies in Ukraine and Belarus and Central European region.
And the reason for those risk assessments were a lot of the, at least a lot of the US Companies felt that they had some responsibility to assess risk for their employees, regardless of their nationality, and to have certain safety procedures or plans in place in case of emergencies. So that's kind of why we were brought in, because Ukraine, no fault of their own, they had just gone through some, you know, internal political changes. And, you know, a lot of the safety procedures and processes were not as mature as you would find in United States or in Western Europe. So we tried to Apply some of those methodologies there and started operations there and started to really tell those clients they really should start thinking about evacuation planning or continuity planning in the event of hostilities from Russia into Ukraine.
When that did occur, we had to scramble and galvanize resources to evacuate very large number of staff, their families, their pets. I mean, we were the Noah's Ark of tech people in Ukraine. And getting them across the border during those early months was a challenge, but we were able to do it and get them relocated throughout European Union, United States, things like that. So that was. That was a very fulfilling, I would say, task for our company because we had very grateful clients, let's put it that way. Getting them out of harm's way, contributing to their safety and their family, and when there was a direct threat on their doorstep really made a lot of us feel good.
[00:04:43] Speaker A: There must have been some resistance. I mean, if somebody wanted to come and even though there's a impending war, somebody wanted to take me away from my home. I can imagine some people wouldn't feel comfortable with that.
[00:04:56] Speaker B: Well, that's for sure. We had some people, even American citizens that had gone there and married a Ukrainian local or in a relationship, they didn't want to leave. And we had to, like, convince them that, hey, you know, you're in greater peril than the average Ukrainian. You know, you're an American, you're here near the front line of something, you're going to turn into like a political pawn for certain people that may find it advantageous to use you that way, and you're putting your. Your life and your partner's life in danger.
And so a lot of times we had to convince people. We also had to convince some people that they had relatives that were elderly and they didn't want to leave them there in a hospital to whatever would, if the hospital still had power, things like that. So we did our best to do some medical evacuations as well. But I mean, you know, it was just. It was a very.
You know, as Americans, it's hard for us to imagine a scenario like that, right, where you have to pick up, grab your grandparents, grab your parents, grab your dog and the kids and just move, like in 24 hours and leave it all behind and don't look back. And so maybe for people that have, you know, had grandparents that went through World War II and things like that, they probably experienced a lot of that. But as Americans, and probably anybody under the age of 50 or 60 probably have not experienced that before, at least in the Western world.
[00:06:37] Speaker A: And, you know, we're, we're living in a, in a period of, you know, instability where we're seeing, you know, risk coming from China. We're seeing Iran operating, we're seeing, you know, Russia operating with the pirates. You know, whoever thought that pirates would be a thing. You think that's just a Jack Sparrow thing? But, but no, we have supply chain risk all over the world. We're not, we're not experts at this, that when we're tech companies or hardware companies. What is even the approach for us to learn more about this and identify what our risk is when it comes to supply chain.
[00:07:12] Speaker B: So the interesting thing that we've learned since the beginning of this world, you know, we've, we've advised some companies trying to avoid being on some sanctions lists, you know, for violating some sanctions by their normal daily supply chain operations. So that's one risk we've been working to mitigate. But the other ones come from, as you said, like some of the vital choke points of the world for seafarers and for supplies are dangerous. You know, they're just dangerous places to be even for Western navies to navigate. Especially I'm speaking of the Red Sea and that area with several Houthi, very high profile attacks on shipping and naval vessels. So a lot of, a lot of our clients have come to us, especially not only in the tech sector, but to try to help us evaluate just how secure is their supply chain. And that involves not only your conventional risks, physical risks like from piracy or you know, drone attacks, you know, or anything like that, but from also other risks like political risks.
You know, there's overland risks, there's, there's all type of, you know, corruption, corruption risk to contaminate the supply chain. And if this company is doing business with a U.S. government or NATO government or EU government, you know, there's certain, like anti corruption things they have to be aware of and things like that. And, and some of these companies, to their credit, they do try to be, I would say, honest in their relationships with suppliers. But once you get, the farther away you get from the, the end user, the recipient of the supply chain, the less control you have. So we've worked with some partner companies in Asia, especially in the China, Chinese market in that area where many concerns about how they treat their labor force, how that could be a reputational risk problem for the company buying from that vendor. And down to other issues about maybe the supplier is also a main supplier to, you know, the current situation in Russia. Maybe they're a company that's on A sanctions list and things like that. So these are things that a lot of these companies, they don't think about on the everyday. And a lot of times we're retained for. You know, we had a company that manufactures microwave ovens and refrigerators.
Well, it turns out their supply of chips inside the refrigerator and microwaves were also being used on Russian drones. So, you know, that created like a little embarrassment for the company, especially for the side of the conflict that they were supporting. And, you know, that that's where, you know, companies have to really be on top of their supply chain. Not only from its reliability standpoint, but reputational risk and just in general, being a good global citizen, knowing the sources of your products.
[00:10:42] Speaker A: And it's worth mentioning that if a risk kind of explodes and you need to fix it now, that's almost impossible. But if you can get a lead time of six months, three months, a year, then that just gives you the ability to focus and make those changes in the supply chain in an easier way.
The whole difference is just getting that lead time to change, which is massive, Massive. So this is an incredibly important point when we talk about I'm going to do a sharp shift with your permission.
M&A's acquisitions are a key way that companies grow. We see less of kind of internal innovation, a lot of acquisitions happening in the growth cycle of companies, but we don't always know who we're getting into bed with.
What are the risks that you've seen when it comes to large corporate deals and if you can tell us a story or two of what you've encountered.
[00:11:42] Speaker B: So once we became involved in M and A transactions from our due diligence capabilities, we were very surprised and even gave our feedback to many of the of the financial concerns involved in the project. About everybody was doing very what we felt were large transactions based on simple checklists and, you know, the amount of diligence being done did not meet the criteria that myself, if I was going to invest in a company, you know, whether it's, you know, Google, Apple, Apple or Tesla, I do a little research.
And yes, do I rely on others to do that research for me. And I have to digest the research and trust that it's accurate. I do. And that's what I think a lot of these merger and acquisitions opportunities are for us is that we've been able to successfully show that there has to be something beyond the mergers and acquisitions checklist. And when I say the checklist, the checklist involves the accountants checking on financials, attorneys checking on any pending Legal cases, things like that. But we have been successful in going that next level down.
If you're buying technology, what is the background of that technology? Who's really behind that technology? Are there any patent infringements involved? Are there, are there some dark actors involved? Are there some internal risks? Which one of them that comes to mind is, is the, is the technology you're acquiring, does it really work as advertised in their self, you know, self advertising or some advert, some article that somebody read in a technology magazine and said this is going to change the world. But who's really been able to validate some of those things from some other sources, right? And then the other one becomes who are you? Who are you about to write a check to?
And what we've been retained to do is though I look at the backgrounds of some of the principles on the receiving end of an act of the checks in the mergers and acquisitions process and surprisingly, and that some characters have not been what they purported themselves to be and where their backgrounds were, whatever they put up on LinkedIn and that's the way that people knew them. And when you really look behind the curtain is which what we specialize in, you realize that person really did not graduate from Stanford.
That person really did not work for, you know, Goldman Sachs as a M and a person, you know, and those are little important things and red flags that we present to our clients where sometimes they've still gone through with the deal because there was alternative agendas or reasons for the acquisition and then. But a lot of times our clients thanked us and you know, kind of went the extra level or just terminated the deal because it breached some contract. And that gives us some, some good peace of mind because I'm sure as you are and a lot of people, most investors general, I would say retail investors like ourselves, we trust companies like these that are doing mergers and acquisitions to manage our money and to look out for our money. So whenever I get one of these assignments for my team, I take it to heart because maybe it's somewhere in one of my mutual funds that's some of my money involved in this transaction.
[00:16:02] Speaker A: Yeah, that's right. And we've seen these issues, right? They've come to mainstream media, you know, where we saw the micro blood testing that went awry.
I personally had a company where they were saying they had this AI model. We did the technical due diligence. We found out that they're just calling Google APIs and like, well hold on, where's your AI model? They had no intellectual property. It just went up in smoke when we actually looked in it.
There is a difference between PowerPoints and actually, and you said this the best said trust but verify. That's absolutely right. What are some of the kind of things that you find when you look into the actual human elements and the reputation?
What are the surprises that your team see?
[00:16:47] Speaker B: Sometimes, sometimes we're really surprised to see some of the backgrounds of, of some of the people. And this is not, you know, this certainly is not a indictment in general of a lot of these tech companies, but there have been some that have been kind of eye openening that how a person with a certain type of background would be able to gain access to like this type of capital and to build this facade of a target acquisition or an acquisition target. And you know, we would scratch our heads and be like the, did nobody look and see that this person was arrested for fraud like three times? Like I wouldn't lend the guy a dollar, you know what I mean? Like, and you've got people that are just like, like you said, they probably saw a fancy PowerPoint, maybe got excited about, got caught up in the AI fever and then all of a sudden millions of dollars are getting exchanged and, and like you said, at the end of the day you're buying air. And so that was one surprise. Another surprise we found was the way some of these people when they're acquiring companies.
Yeah, I know if I was buying a company, I would want to ask the employees how they felt about their own company.
And we've done some of that work where we had to do it obviously in a very clandestine manner to not get people in trouble and to not, you know, make people feel uncomfortable. But it just was very interesting to see, you know, you know, what, what's the one? Well, one thing we always say is you're really going to find out about the company. When you sit at the coffee shop in the lobby of the company's building, you're really going to hear everything. And because you're going to see that low level guy talk about the bad toxic culprit culture, how the tech really doesn't work, how they're so frustrated, how, you know, they're just like this, this is something that if I was buying a company, why would I want to buy something in such turmoil when there's a hundred other companies out there? So a lot of times that kind of unofficial intelligence of the atmospherics of a company are important to some of our clients. They want to know, hey, I'm about to buy not only this company because the owners of the company are going to get a check and go sit on a yacht somewhere. But I'm going to buy the actual employees and the intellectual property. And if they, if they feel like, you know, very low morale, low trajectory people, why do I want to buy that? So that is valuable to some of our clients and that's something that we've been very good at. Kind of doing a reality check on the corporate environment, the atmospherics.
[00:19:48] Speaker A: Chris, this has been an absolute delight. I think this is a really important topic that, as you said, this is beyond the checklist. It's not always on our radar. But if we make mistakes here, it really can be catastrophic.
I have a personal question and it's the only scripted question that we have in this show and it's a difficult one at that.
If you had to go back to 20 something year old Chris and give him some career or personal advice, what would that be?
[00:20:18] Speaker B: Well, that's interesting because I graduated from college, my undergraduate degrees, international business and finance. And I wanted to go work on Wall Street. I had an internship at Merrill lynch.
And it just so happened that in 1988, when I was graduating from college, there was, or actually a senior in college, there was a significant economic downturn in the United States and globally, I think. And so that kind of changed the trajectory of my professional life. And I would say one of the. And when I say change trajectory. So I graduated from college, I was at a very good university.
I had top marks, felt good about myself, but I couldn't get a job on Wall street because they were firing everybody on Wall Street. So I got into law enforcement and sometimes, like, you know, certain external factors drive you in a certain direction. And I found it to be a very rewarding career.
I went on to get my MBA while I was on the police department. I retired from the police department. The police department blessed me with many great opportunities and doing things for my community. I mean, I, I was able, I was blessed to be a police officer in the city, in Washington D.C. that I grew up in and that I was born in. And so I really felt a sense of pride in doing something positive for my community. And once I got too old to do that, decided to transition into the private sector and to do some of that. But I will say the one piece of advice I would give myself is, is anyone who says, when they're 21 years old, graduate from college, I've got my career planned out, I'm going to be on Wall Street, I'm going to do this, I'M going to do that. Anybody says they got a roadmap, all they have is a map full of exits, because you've got a lot of exits on your path. And I would say the one thing I learned, I think some of the hard way, is, is never look back, never have regrets, and just enjoy the journey. Because everything I've done in my life, even when I was in the middle of it and thought, this is the worst. I'm at my worst. This is not what I went to school for. This is not what I wanted to do. At the end of the day, I wouldn't trade experiences for anything.
[00:22:48] Speaker A: Chris, that was absolutely delightful. Thank you so much for coming on the show today.
[00:22:52] Speaker B: Thank you very much for having me.