1. Vol. 4 | Autumn 2010 Go culture (and metrics) Page 24 Saving money and planet Page 30 Swim, float, live Page 44 The highest possible stakes Managing your personal risks Page 16

2. TO LEARN MORE ABOUT ENERGY CONSERVATION FOLLOW US AT: www.miniwarehousepr.com http://facebook.com/miniwarehouse http://twitter.com/miniwarehouse BAYAMN Carr. #2 Bo. Candelaria T. (787) 474.2884 CAGUAS Autopista, Salida 18 Bo. Bairoa T. (787) 449.9815 CAROLINA La Cermica Ave. Campo Rico T. (787) 750.5744 Because we all live on planet Earth Mini Warehouse Almacenes, leaders in the self storage business since 1989 has gone greener by reducing our carbon footprint. As part of our energy conservation commitment, we use solar energy at ALL our locations. We care about the planet and we care about you. 3. 2CLevel|Autumn10 Greater risk than you may know P UB L IS H ER S M EM O Ramn A. (Tony) PrezRamn A. (Tony) Prez Chairman of the BoardChairman of the Board Fulcro Insurance, Inc.Fulcro Insurance, Inc. WW e always select the theme of our main piece (C-Story) based on whate always select the theme of our main piece (C-Story) based on what we believe to be critical risk management issues and emerging riskwe believe to be critical risk management issues and emerging risk trends of importance to you, our C-Level readers. It has been thetrends of importance to you, our C-Level readers. It has been the case so far that, upon research and writing, every one of them turnscase so far that, upon research and writing, every one of them turns out to be of far greater importance than we imagined going in.out to be of far greater importance than we imagined going in. This editions C-Story is no exception. C-Level executives tend to be high-This editions C-Story is no exception. C-Level executives tend to be high- net worth individuals with families, lots of travel, several bank and investmentnet worth individuals with families, lots of travel, several bank and investment accounts, multiple properties, and other personal trappings that come withaccounts, multiple properties, and other personal trappings that come with wealth, not to mention the ones you deal with on the business side.wealth, not to mention the ones you deal with on the business side. Yet, beyond the typical protections we all take and the insurance policies weYet, beyond the typical protections we all take and the insurance policies we tend to buy, most of us fail to realize the truly signicant and growing riskstend to buy, most of us fail to realize the truly signicant and growing risks inherent to our personal lives that generally go unprotected and uncovered.inherent to our personal lives that generally go unprotected and uncovered. Our families are heavily exposed to extortion and blackmail. Everything we sayOur families are heavily exposed to extortion and blackmail. Everything we say and post online is easily available to privacy invaders who know where to look.and post online is easily available to privacy invaders who know where to look. An equally trained impostor can get dangerously close to any of us, double as aAn equally trained impostor can get dangerously close to any of us, double as a cleaning or security employee and take us to the cleaners.cleaning or security employee and take us to the cleaners. These and other risks are chillingly real, but they can be minimized if we becomeThese and other risks are chillingly real, but they can be minimized if we become aware, less ignorant and more vigilant. This editions C-Story shows us the way.aware, less ignorant and more vigilant. This editions C-Story shows us the way. On the business side, we bring you several stories that also teach valuableOn the business side, we bring you several stories that also teach valuable lessons. Our two Daring Leaders show us the guts and vision needed to go for itlessons. Our two Daring Leaders show us the guts and vision needed to go for it and take the risk even when the odds are against you. Wilda Aguirre stuck it outand take the risk even when the odds are against you. Wilda Aguirre stuck it out when everyone was urging her to jump ship. The same year, on the other sidewhen everyone was urging her to jump ship. The same year, on the other side of the island, Angel Santiago sweated it out (literally) to get his business going.of the island, Angel Santiago sweated it out (literally) to get his business going. May you be inspired, as we were, by their stories.May you be inspired, as we were, by their stories. In Crisis to Apex, learn the equally inspiring story of how Alco High Tech reactedIn Crisis to Apex, learn the equally inspiring story of how Alco High Tech reacted to the decline of the pharmaceutical industry and became the islands #1 plasticsto the decline of the pharmaceutical industry and became the islands #1 plastics manufacturer. At a time when so many companies are going under for the samemanufacturer. At a time when so many companies are going under for the same reason, success stories such as Alco teach us how to get it right.reason, success stories such as Alco teach us how to get it right. Level Above, which features companies launching a noteworthy initiative,Level Above, which features companies launching a noteworthy initiative, brings you real estate mogul Vadim Nikitines visionary clean-energy conversionbrings you real estate mogul Vadim Nikitines visionary clean-energy conversion to save both money and the planet, as well as Atlanta accounting rm Forrestallto save both money and the planet, as well as Atlanta accounting rm Forrestall Galeanos use of diversity as the lead pillar of its double-digit growth.Galeanos use of diversity as the lead pillar of its double-digit growth. This editions Next Level section, which highlights companies taking theirThis editions Next Level section, which highlights companies taking their entire business to another level, is actually about a non-business (non-protentire business to another level, is actually about a non-business (non-prot organization Centro Para Puerto Rico) and how it decided to operate like aorganization Centro Para Puerto Rico) and how it decided to operate like a company, with an interesting take on prot.company, with an interesting take on prot. Do you have small children, nephews or grandkids? Read Fine Living carefully.Do you have small children, nephews or grandkids? Read Fine Living carefully. Its the story of how Wanda Blanco and Mariana Martin turned a hair-raisingIts the story of how Wanda Blanco and Mariana Martin turned a hair-raising email video into a passion that may very well save your little ones.email video into a passion that may very well save your little ones. And have fun with Fun Living, as well-known attorney Gary Montilla goes onAnd have fun with Fun Living, as well-known attorney Gary Montilla goes on his annual shing expedition to Alaska with a group of friends.his annual shing expedition to Alaska with a group of friends. Finally, Fulcrums featured voice this time around is Fulcros own Julio Ortiz,Finally, Fulcrums featured voice this time around is Fulcros own Julio Ortiz, who speaks out on what the current wave of health care reform means for yourwho speaks out on what the current wave of health care reform means for your employee benets.employee benets. So sit back once more and enjoy this edition of C-Level, which as always,So sit back once more and enjoy this edition of C-Level, which as always, brings you the story behind the risk. Happy reading!brings you the story behind the risk. Happy reading! 4. www.rado.comRADOTRUECHRONOGRAPHJUBIL Distribuidor exclusivo: Nilo Watch Parts, Inc. Servicentro Rado Autorizado: Unico centro de servicio con todas las piezas genuinas. Calle De Diego #169, esq. William Jones, Ro Piedras. Tel. (787) 764-3290. Abierto de lunes a sbado de 8:30AM a 5:30PM 5. 4CCLevel|Autumn10 2PUBLISHERS MEMO Open your eyes DARING LEADERS 6 Angel Santiago A rags-to-innovation story 10 Wilda Aguirre Against all odds C-STORY 16 Beyond ignorance, into safety Personal risk management CRISIS TO APEX 24 Life after big pharma Culture drives Alcos rebound LEVEL ABOVE 30 Counting on clean energy Vadim Nikitine shows the way 36 Counting on diversity Growth driver at Forrestall Galeano THE PLAN C Publisher Fulcro Insurance Sales Janyra Prez Blanco 787.616.2929 jperez@fulcroinsurance.com Design & Production Arteaga & Arteaga 787.250.0006 www.arteaga.com Editor Alex Daz 787.923.0743 alexfdiaz@gmail.com Copyright 2010 Fulcro Insurance No part of this publication may be reproduced, stored in any retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the Publisher. Fulcro Insurance ALL RIGHTS RESERVED. 204 San Francisco St. Old San Juan 787.725.5880 www.fulcroinsurance.com NEXT LEVEL 40 Running a non-prot like a for-prot Focused at Centro Para Puerto Rico FINE LIVING 44 Self-rescue to the rescue ISRs life-saving lessons 48 Of sh and men Out in the high seas of Alaska ON THE AGENDA 52 Special announcements And other matters FULCRUM 54 Pay attention to health reform Julio Ortiz speaks out 6. 6CLevel|Autumn10 DA R IN G LE A D E RS H is dad, a highly regarded college professor and preacher in Guayama and Bayamn, always knew Angel Santiago would be a successful businessman one day. Neither one imagined that it would be so soon. As a kid I would sell things and get a real good mark- up, he told C-Level. My dad and others kept telling me I was a natural at it, so when the time was ripe, I gured lets go for it. And thats the thing. When the moment came, the only one who thought the time was ripe was well, Santiago himself. Everyone else thought he was crazy to launch a capital-intensive business with no money, no college degree, a new family and very little experience. I did have one thing going for me, though, he said, ashing his characteristic smile. I was a really, really good salesman. And a very, very courageous one at that. He also had God on his side. My faith has never failed me, and it certainly came through at that point in my life. His journey began in 1999. Santiago, born in Guayama 25 years before, lived in Bayamn, where he was raised. He lost his job unexpectedly three months before getting married and was immediately tipped to a sales opportunity at Lumar Medical, a medical equipment distributor in Hormigueros. I drove there right away and practically begged for the job. I told them I was about to get married and just wanted to work. The pay wasnt all that good and it meant moving to Hormigueros, but it didnt matter. He got the job, moved to Hormigueros and spent the next two years learning everything he could about the medical equipment business and building close ties with the areas doctors, clinics and hospitals. It didnt take me long to realize this was my big break. Lumar became my school, he recalled with a twinkle. This is where it all began for Angel Santiago in 2004, before turning AS Medical into a powerhouse. Angel Santiagos big, affable smileAngel Santiagos big, affable smile opened all the doors he needed.opened all the doors he needed. Then he barged right in,Then he barged right in, when the time was ripe.when the time was ripe. 7. AS Medicals new building in Hormigueros includes warehouse space to keep its new brand of Ikonmed medical equipment products slated to be launched later this year. Santiago is shown explaining how subsidiary AS Rehab customizes wheelchairs for patients. 7CLevel|Autumn10 DA R IN G LE A D ERS The road to October 8 Lumars highly specialized medical equipment, designed primarily for older and disabled patients, must be prescribed by doctors and is generally covered by health plans and Medicare. Santiago would pick up the prescriptions and coordinate the order and delivery of the equipment, oftentimes accompanying the delivery personnel to the patients homes. Thats why it was so important to know the doctors well and build relationships with their staffs, and thats something that has always come easy for me. You can say that again. One can just imagine this highly likeable fellow as the spark of the family party, the buddy in the group who always knows just what to say, the fearless one who could always get the girl. He didnt just build relationships with the doctors and staffs. He became friends with the truck drivers, the patients and their families. And the town people, police ofcers, ambulance paramedics, you name it. Yeah, I really got to know everyone really well. A huge asset he would capitalize on when the time was ripe. That would be 2002, the year he decided to launch his own medical equipment distribution company. The year prior, he had left Lumar and taken on two sales jobs, at medical equipment distributor American Medical (same job as Lumar) in Hormigueros and A&R Pharmacy in Carolina. A&R featured the same home-delivery model, but for doctor-prescribed respiratory therapies. About a year into the American Medical job, Santiago sat with boss Jorge Zayas and revealed his intentions. I told him I planned to launch my own business, and he reacted well, even though that meant I would be a competitor. He even offered to help. Told me that he liked me and knew I would go far and that he wanted to teach me what I still needed to know. Fast forward two years. Santiago had done all the legwork. AS Medical, as the business was named, was ready to go. And he obtained a Business Administration degree from InterAmerican University in 2003. Only one obstacle remained: obtaining the Medicare providernumber,asortofpermitforMedicaretocoverthe medical equipment purchased by the upstart company. At rst it was denied. They asked for some changes that were difcult to comply with and delayed the launch, but in the end we nally got it. I even remember the date: October 8, 2004. I received the call from Medicare in the U.S. at exactly 9:15 a.m. They said, Mr. Santiago, were happy to inform that we have approved your provider number, and gave it to me right then and there. Ill never forget it. The sweet taste of sh Neither has he forgotten the long hours and hard work that followed. His only initial capital was $2,000 borrowed, meaningfully, from his mentor father. It multiplied like sh, Santiago said. I received the rst prescriptions, purchased the equipment, sold it and did it again and again. Every dollar that came in was reinvested in new orders. And we began to grow. He didnt just build relationships with the doctors and staffs. He becameHe didnt just build relationships with the doctors and staffs. He became friends with the truck drivers, the patients and their families. Yeah, I reallyfriends with the truck drivers, the patients and their families. Yeah, I really got to know everyone really well. A huge asset he would capitalize on whengot to know everyone really well. A huge asset he would capitalize on when the time was ripe.the time was ripe. continued on next pageccontinued on next pagecontinued on next pageccontinued on next page 8. 8CLevel|Autumn10 DA R IN G LE A D E RS It was just Santiago and his wife in those early months. He did the deliveries himself, dressing up to visit doctors, dressing down minutes later to make a delivery, and dressing back up (after a shower break at home) for more doctor and hospital visits. His rst Medicare check was for $9,000. The second, a $29,000 shocker, provoked an excited call from Santiagos wife that he at rst mistook for an emergency. Our niece was very ill and I thought something happened to her. I told my wife in that call that this was what we had worked so hard to achieve. This was it. The early money allowed Santiago to buy a delivery vehicle (he had been using his old and not-made-for- deliveries Cherokee) and begin hiring. AS Medical was off and running. The daring leap from a lost job to the medical equipment industry had blossomed. Medical equipment carries signicant risks, primarily product liability from patients use of the equipment, as well as worker health given the risks that accompany manufacture and delivery, all of which has required a carefully designed and administered insurance coverage. And awless execution by AS Medical to minimize risks and satisfy doctors and customers. Eighteen months after launch, business had grown to some 350 deliveries per month, and the company moved from its initial modest basement apartment next to his home to a larger space leased by his former employer, American Medical. Santiago had maintained a close bond with old man Zayas. I loved him. He really helped me out. I dont know if I could have done it without him. Zayas had since passed away, but Santiago remained present. I told his wife Ana that I would sell our equipment as well as theirs, so she can keep the business going. It was now my turn to help. Events have moved at a frenzied pace since. January 2008: AS Medical moves to the space formerly held by Santiagos other signicant employer, Lumar Medical, where it all began. That same month: Santiago launches AS Rehab in Caguas, an assembly and manufacturing plant where the company began making its own equipment, mostly customized. January 2009: Santiago launches AS Pharmacy at the ground level of the AS Medical building and positions it as a highly personal community pharmacy featuring wouldnt you know it, home delivery. Summer 2010: The company adds a new building in Hormigueros and gets ready for the launch of the new babies, Ikonmed and Ikon Trade Corp. The former will be AS Medicals own brand of medical equipment, while the latter will serve as the umbrella company housing all the companies of this emerging Puerto Rican conglomerate. We want to position ourselves as the great innovators in our industry. The goal is for every doctor and hospital administrator in Puerto Rico, the United States and Latin America to know top-of-mind that if they want or need something truly innovative, some equipment that no one else has in Puerto Rico and all of the Americas, that they can only get it from Ikon Trade Corp. Were bent on becoming THE source and putting Puerto Rico on the map of the industry, and I know were going to do it. Given his story, can anyone doubt it? We want to position ourselvesWe want to position ourselves as the great innovators in ouras the great innovators in our industry bent on becoming THEindustry bent on becoming THE source and putting Puerto Ricosource and putting Puerto Rico on the map of the industry, and Ion the map of the industry, and I know were going to do it.know were going to do it. Angel Santiago;Angel Santiago; President, AS MedicalPresident, AS Medical The companys Hormigueros pharmacy will soon add a cybercaf and a seniors lounge.The companys Hormigueros pharmacy will soon add a cybercaf and a seniors lounge. We want it to be like a social center for the people of the town, said Santiago.We want it to be like a social center for the people of the town, said Santiago. continued from previous pagecontinued from previous page 9. 10CLevel|Autumn10 DA R IN G LE A D E RS Faith in God, and in her value proposition When the odds seemed againstWhen the odds seemed against her, Wilda Aguirre stuck to herher, Wilda Aguirre stuck to her dream and became a cutting-dream and became a cutting- edge outsourced warehouseedge outsourced warehouse supplier.supplier. Launching SQS was a daring move for Wilda Aguirre, with no contract in hand at a time when warehouse outsourcing was questioned by many experts. 10. 11CLevel|Autumn10 DA R IN G LE A D ERS W hat do you see that Im missing? her husband Rodolfo asked repeatedly during the many tense conversations when the contracts were not coming in. Wilda Aguirre had launched her dream warehouse (Successful Quality Systems, or SQS) in March 2004, without a contract to ll the space, which sat empty in a Catao industrial park for what seemed like an eternity, as the credit line began drying up and the bills became a heavy pile on her desk. Her banker, which had stuck his neck out for her to the tune of $750,000, was growing nervous. So were her suppliers, who gave her a generous break on payments. While hustling for that rst, life-saving contract, Aguirre sat in bed many a night, unable to sleep. She and Rodolfo had pledged their primary residence as collateral. Would they lose it all? Their personal savings and college fund (for daughters Laurie and Valerie, ages 12 and 9 at the time) were at risk. She recalled the warnings from well-meaning friends when she was putting the business together. Youre getting into a mans world Its a dog-eat-dog industry Manufacturers prefer to store their stuff in their own warehouses Theres no room in the market for another outsource supplier Were they right? No! Cant be! I know what Im doing. Just have to work harder to get that contract. And she would get up the following morning and go at it again. Face the doubters again. Battle the second guessing. Work the phone, emails and visits. Week after week. After week. At one point, a contract seemed near, but the prospect nickled and dimed. I would have lled the warehouse but with little space left to make money with other contracts, so I had to say no, Aguirre recalls. All about value The bank, which usually requires a pre-sale or contract in hand, had given her the money on the persuasive strength of her passion and experience. Aguirre boasted an impressive resume: Biology graduate with top credentials from the University of Puerto Rico at Mayaguez (1987), an outstanding career in quality assurance with a great record everywhere she worked (mostly local operations of U.S. and foreign manufacturers), an obvious high achiever. Clearly, she knew what she was doing, the bank gured. Manufacturers must comply with strict federal regulations in the storage of their primarily sensitive inventory: temperature, humidity and air conditioning set at a certain level, manic pest control, protection from hurricanes and other possible disasters, and so much more. Aguirre had spent most of her career making sure her employers and their suppliers met those high standards. Her longest-running and most inuential employer, Amgen, was so impressed that Aguirre became one of the companys top quality auditors of suppliers in the U.S. and around the world, reporting directly to headquarters in California. In fact, the warehouse idea arose in 2000 while at Amgen, when she noticed how that and other companies could not nd enough adequate outsourced facilities on the island and had to build their own spaces, consuming capital and real estate that could be better invested in prot-generating activities. She also saw the need for warehouse operations to provide better logistics management (faster truck turnarounds and error-free inventory control). And better risk management to protect client merchandise against natural disasters, oods, res, theft and the like, which Aguirre does with cutting-edge security systems, building structure and insurance coverage. The opportunity was there, she now says. I knew the quality they looked for. Heck, I was the auditor looking for it and not nding it. I knew the value such a warehouse would represent. And thats what she saw, in answer to her husbands, bankers and suppliers persistent questioning. That, and her deep faith. I felt God was with me the whole time, urging me on, not letting me quit. We did it, Aguirre now exclaims.We did it, Aguirre now exclaims. The lost sleep, the long nightsThe lost sleep, the long nights It was a high-wire act, but allIt was a high-wire act, but all worthwhile. Actually, it makesworthwhile. Actually, it makes the whole experience far morethe whole experience far more meaningful and fulfilling.meaningful and fulfilling. continued on next pagecontinued on next page 11. 12CLevel|Autumn10 That summer, the bank money had largely run out and Aguirre (who was not drawing a salary at the time) began paying her sole employee from Rodolfos salary (hes an engineer at the Puerto Rico Electric Power Authority). And then the big break. A contract with GlaxoSmithKline in July 2004 allowed her to pay suppliers and catch up on rent payments, and she never looked back. Two years later, an Amgen contract lled an expansion of the warehouse. SQS added document storage for various types of clients, and two years after that (2008) the company launched a second warehouse to accommodate a large Wyeth contract and other orders. GSK closed operations and emptied the rst warehouse that year, butanotherpharmaceutical came in quickly. One client will leave later this year, and its substitute is already lined up. Looking ahead, the company is gearing up to attract South American nancial institutions for safeguarding of documents, as part of a new interna tional strategy. We did it, Aguirre now exclaims. The lost sleep, the long nights It was a high-wire act, but all worthwhile. Actually, it makes the whole experience far more meaningful and fullling. All about faith Also making it highly fullling is Aguirres corporate social responsibility. SQS grants a generous chunk of its space to the non-prot organization Iniciativa Comunitaria, run by Dr. Jos Vargas Vidot, for storage of earthquake relief supplies headed for Haiti. The volunteers come by every so often to drop off and pick up materials, she said. I felt God was with me the whole time, urging me on, not letting me quit. AndI felt God was with me the whole time, urging me on, not letting me quit. And then the big break. A contract with GlaxoSmithKline in July 2004 allowedthen the big break. A contract with GlaxoSmithKline in July 2004 allowed her to pay suppliers and catch up on rent payments. She never looked back.her to pay suppliers and catch up on rent payments. She never looked back. Aguirre also considers her love affair with, and board membership in, the Puerto Rico Manufacturers Association (PRMA) as part of her social responsibility. My role in the organization is to spur entrepre neurship in Puerto Rico and the islands competitiveness, mainly through education and mentoring, so that others can have the opportunity to realize their dreams the same way I realized mine, since we couldnt have done it without the help of so many mentors and friends who helped us along the way. Adding meaning and fulllment is SQSs high- engagement culture. She describes the companys eight employees and managers as family, and even extends the culture to truckers and other suppliers. Everyone told me when I was planning the business that the truckers would drive me crazy with their lack of discipline and manners, and I wouldnt buy that. I always felt, watching truckers operate, that theyre like anyone else. All it takes is a high degree of respect and fair treatment, and Ive been proven right. Our relationship with truckers is a fun and gratifying aspect of the business. Aguirre, whos writing a book about her daughters and paints on occasion (some of her works grace the ofce walls), is not done writing this chapter of her life. With God and family by my side, there are no limits. Its what I tell people in my seminars and everywhere I go. You can achieve your dreams. You must have a clear vision of where you want to go, acquire the experience you need, have a lot of passion and love for what you do, and have faith in God and in yourself. Thats what its about. continued from previous pagecontinued from previous page DA R IN G LE A D E RS SQS grants a generous chunk of its space to the non-prot organization Iniciativa Comunitaria for storage of earthquake relief supplies headed for Haiti. 12. 16CLevel|Autumn10 The of peace C - S TO R Y 13. 17CLevel|Autumn10 On your business side, chances are you dont cut cornersOn your business side, chances are you dont cut corners when it comes to security. But what about your personal side?when it comes to security. But what about your personal side? Your money, home and valuables? What about your family?Your money, home and valuables? What about your family? N ice lady. I think thats the one, you tell your wife as you nish interviewing Mara, the eighth domestic-help candidate youve both seen since placing the want-ad in the Sunday newspaper. She sure seems to t the bill: the right age, good with kids (which is great because yours are still small and the job includes taking them to school and picking them up every day, in addition to soccer and piano classes), plus plenty of experience, great attitude and personality, and projects a high degree of responsibility. Three months into the job, youre all tickled with her work. She cleans that big house in a ash, as well as the weekend beach-front apartment at Rio Mar, is super careful driving the kids and with all those expensive decorative items and valuable works of art she must care for, never steals a thing, and is oh so quiet. Heaven sent, you comment among yourselves. C - STO R Y concono tintinttini uedueduedued ononoo nenenenextxtxtxt pagpagpapapp eeeconconcontintintinueduedued ononon nenenextxtxt pagpagpageee 14. 18CLevel|Autumn10 C - S TO R Y Known vs. unknown This is an all-too familiar story among high-net- worth, C-level executives in Puerto Rico and around the world. Everyone has a Mara and a Pedro. Indeed, many afuent homeowners and executives have several. What is less familiar but becoming increasingly frequent is how the Mara and Pedro story unfolds. While youre off on the next family trip, this time combining the Holy Land in Jerusalem with a safari getaway in Africa, Pedro and a couple of friends put on their clear gloves and approach your San Juan home. After sedating your security guard to sleep, they enter the code that turns off the alarm, enter the combination that opens the safe, enter the password that accesses two of your bank accounts (without touching the one they know youre using during the trip), and begin the swift and highly professional work of wiping you clean. One of them pulls up with a truck and the three unload every valuable piece of art, jewelry and gold you own. As they do, Pedros cel phone rings. Its Mara. Theyre sound asleep. How are you guys doing? Pedro tells her theyre doing just ne and to keep them abreast of your and your familys every move. When done at the house, they drive to the docks and unload the truck on to a yacht, which sails off to the Dominican Republic. With Pedro and friends, of course. Mara has built up so much trust that you invite her on your next family trip abroad so she can help with the kids and the chores. Its the three-week tour of Asia youve been planning for months. As usual, you stay in the nest hotels, rent awesome cars with chauffer- guides who know just where to take you, dine at the best spots, and of course buy in the best shops. Mara even helped you select that rare emerald you bought your wife and took care of the logistics that allowed the big, stunning sculpture you purchased to arrive home safely. Back in San Juan, the rst item on your agenda is to hire your new personal assistant you know, the one who takes care of the car (mechanics, detailing, car wash, the works), drives you to the meeting when you have no time to deal with trafc and parking, makes your personal deposits and withdrawals, as well as those nagging monthly payments using your internet accounts(mobilephone,cableTV,creditcards,mortgage, auto loans, etc.). He even carries your tote bag when you play tennis with your ofce buddy (whose assistant does exactly the same thing and hangs out with yours when youre sweating it out on the court). Mara had recommended this fellow, Pedro. Said he would be perfect for the job and explained how they grew up together in the same neighborhood in Panama and went to the same school. Great family, too, and he really needed the job. She hasnt failed you yet, you think, so why not. Hes hired. Now you can nally focus all your time and attention on running the business and making money. continued from previous pagecontinued from previous page 15. 19CLevel|Autumn10 C - STO R Y Mara had agreed with you not to go on the safari leg of the trip. She really just wanted to see the Holy Land and would then y to Panama for a family reunion. Well, at least it wasnt a total lie. It was very much a family reunion, since Pedro was her brother. Turns out they did grow up together and went to the same schools, only it wasnt in Panama! Variations on this theme can take many forms. Mara could have kidnapped the kids for extortion. Pedro could have kidnapped you, or he could have simply transferred some funds out of your account, or used your card information on a spending spree. Notice that the victim in this story had taken the usual precautions: housealarmandsecurityguard, a safe in the study, hacker rewalls in all bank accounts, the works. That is, he protected against the threats he knows, the ones familiar to him. Problem is, a new breed of impostor has arisen better said, has proliferated, since he has always existed, only in fewer numbers. What makes this one so different? He is able to get through traditional security barriers because he gets real close to you. So close, in fact, that he is able to gain control of those barriers and simply waltz through them. To him, they are no barriers at all. Culture of ignorance What to do? Create a broader perimeter that catches those guys (and gals, as our Mara example illustrates). You must build an invisible shield that screens everyone who gets that close to you, minimizing the risk that a Mara or a Pedro will get through. Paul Viollis calls it Silent Safety, the title of his recently published book on the subject, co-authored with business partner Doug Kane. The imperative, he says, is to change the culture of the afuent that allows this to happen. It is the culture of ignorance, the one that relies too much on known threats and too little on threats of which you know less or nothing at all. Its also the culture of trust, the one that allows Mara and Pedro to get into your inner circle because, well, they look like great people and project trustworthiness. How many high-net-worth individuals have rigorous background investigations in place and actually use them when they hire a cleaning lady or a personal assistant, not to mention an investment broker, lawyer, doctor or accountant? asks Viollis, CEO of Risk ControlStrategies,aNew York - based company specializing in personal and corporate security. RCS, he told C-Level, devises solutions con gruent with the 21st century risks that have become much more prevalent. From 11 extortion cases the rm handled in 2008, the total more than quadrupled the following year and is on pace to virtually double this year. Home invasions in the United States experienced a whopping 300% increase in 2009, with 80% of the cases either intruders known to the homeowners or given access by a domestic employee, according to Viollis. The worlds afuent have multiplied so exponentially in number and wealth, he added, that a new cadre of extremely experienced, highly equipped and very sophisticated intruder has multiplied in response. And the security needed to guard against these savvy sleuths is not available at department stores, cautioned Viollis. You cant just buy an off-the-shelf alarm or safe. The protection is of a different order altogether. He should know. Silent Safety is his second book on the subject of private security for the afuent, aside from his long and storied career in law enforcement and security: New York District Attorneys Ofce, Once clients become aware ofOnce clients become aware of the risks they did not know about,the risks they did not know about, the risks that come with wealth,the risks that come with wealth, and make the decision to protectand make the decision to protect themselves and their families, thethemselves and their families, the thing to do is erect an invisiblething to do is erect an invisible hedge around them. Securityhedge around them. Security should be noninvasive.should be noninvasive. Paul ViollisPaul Viollis CEO, Risk Control StrategiesCEO, Risk Control Strategies Co-Author: Silent SafetyCo-Author: Silent Safety continued on next pagecontinued on next page 16. 20CLevel|Autumn10 Florida Police Academy, U.S. Space Command, Citigate Global Intelligence Corp., Kroll and more thousands of investigations, countless speaking and media engagements, one of the worlds foremost authorities on the matter. Multi-tier protection The trick, he says, is to set up a multi-tier security ring around you and your estate. To arrive at the right approach for each client no two are the same RCS follows a three step process. First, establish your level of risk and vulnerability. This is very lifestyle driven. Your risk level depends rst of all on how you live, how many people know about your lifestyle, who they are and how much they know. This includes how much people can nd out about you online. So we review and diagnose everything we can to isolate the risks and make recommendations. Much like a doctor would do, he explained, when you are run through tests and diagnosed to isolate a condition prior to prescribing a treatment. Second, the prescription. Now were ready to sit with the client and present where we see vulnerabilities and the actions we recommend. This process is usually tough, since clients become aware of some security threats for the rst time and must make a determination, looking at many variables, many moving parts, of what the acceptable risk will be from that moment on. Which risks will be protected against and what level of vulnerability can he or she live with? Finally, deployment, evaluation and adjustment. The objective is always peace of mind, said Viollis. Once clients become aware of the risks they did not know about, the risks that come with wealth, and make the decision to protect themselves and their families, the thing to do is erect an invisible hedge around them. Security should be noninvasive. Its like placing an out-of-bounds marker around your life and estate and enforcing them without compromising aesthetic beauty or desired privacy. Solutions run the gamut, starting with the traditional: the alarms, cameras, security personnel and safety deposit boxes youre familiar with, along with the also familiar cyber protections for your accounts, systems, servers and networks. Cyber nowadays includes social media and internet security, given the lack of privacy and the ease with which our new intruders can gain access to all the information published or posted about you online. So your security ring must include the knowledge of how to use these internet, social media channels, and procedures on how to prevent unwanted invasions. Then theres the new breed of James Bond-like devices: cameras that can see thru walls, microphones that can be placed in the unlikeliest places, sensors of all kinds, and much more. These intruders know them all, and much of this is available on E-bay, assured Viollis. So we have a situation in which there are more wealthy targets on the one hand, and easier, less-costly access to invasive devices on the other. The only way to protect against this is for the afuent to know about these devices as well and include the appropriate countermeasures within their personalized security deliverable. Everyones on the radar Which brings us back to Pedro and Mara and the next level of protection: get to know those who know you. A no-brainer are valid background investigations, Viollis added. You must make it your business to nd out as much as you can about everyone who is close or who is trying to get close to you. Sometimes that The big difference now vs. the past: noThe big difference now vs. the past: no ones off the radar. Not even you. Andones off the radar. Not even you. And the notion that you can avoid the risk bythe notion that you can avoid the risk by staying off the news and the newspapers isstaying off the news and the newspapers is an illusion, since todays intruders can easilyan illusion, since todays intruders can easily find out whos wealthy and whos not.find out whos wealthy and whos not. C - S TO R Y continued from previous pagecontinued from previous page 17. 21CLevel|Autumn10 can be a pretty uncomfortable decision to make, but thats where a rm like ours comes in, as true specialists in gleaning a wide array of non-readily available information to crystallize the true character of the person on the other end of the transaction. One example he mentions is the country club investmentbrokerwhoiscuddlinguptoyouforbusiness. At least thats what he would have you believe. Like Mara and Pedro, this character is affable, appears trustworthy and makes all the right moves. His credentials sound convincing Harvard MBA, Goldman Sachs experience, even two years as an auditor at the U.S. Securities and Exchange Commission (the agency that regulates brokers) plus impressive non-prot activism and board memberships. Wehadaguylikethatandourclientfeltuncomfortable about asking him too many probing questions to test his story, so we came in, asked him some questions, had him to ll out a form we use for this sort of situation, which he resisted at rst, and in the end drove him away. Turns out his story was all fake. According to Viollis, 35% of all domestic staff fail the RCS background investigation, people who are former prisoners, have false identities, or otherwise pose a security threat. When you think about it, this is an amazing number, considering how much we entrust upon these people, including our sons and daughters! When imposters get through your visible and invisible security wall, the nal tier is well-designed insurance coverage. RCS, for one, partners with Chubb to cover such events as identity theft, home invasions, extortion and child abduction, and more. Having an insurance policy earns you better rates on background investigations, home and cyber audits, unlimited hotline access, travel security and other services. Speaking of travel, security risks overseas add yet another dimension. Imagine Mara during the Asia trip above coordinating ahead of time with her China network. Your hotel room would be completely set up before you get there. Or perhaps they would go for a kidnapping, since youre away from your security detail back home. NoMara?Nomatter.Americanshavebecomefarmore of a target abroad than ever before, warned Viollis. The anti-American sentiment is now matched with greater access to information about you and to the weapons and devices that can be used by intruders overseas to track you down and get you when you least expect it. Remember, youre on their turf, and they oftentimes belong to an organized crime entity or criminal network and may even have police and government ofcials in their pockets. This is precisely why we created International Travel Intelligence Network. The big difference now vs. the past: no ones off the radar. Not even you. And the notion that you can avoid the risk by staying off the news and the newspapers is an illusion, since todays intruders can easily nd out whos wealthy and whos not. So if you have money and possessions others want, and lots of it, you probably cant afford not to protect yourself and your family from the new, smart, well- equipped Pedros and Maras who may very well be following you and plotting against you even as you read this article. RCSs website (riskcontrolstrategies.com) is full of free useful checklists with ways to strengthen your personal security. Heres one: things to check out before heading out on an overseas vacation or trip. Local political climate Organized crime activity Propensity for kidnap and extortion Local economic strength General crime issues Health & safety risks Active terrorist groups Local corruption issues Local ethnic/religious issues Airport/travel terminal security Weather concerns Labor instability Recommended hotels/restaurants Roads not to travel, cabs not to take & rentals not to use All relevant emergency numbers, including U.S. embassy & trusted law enforcement ofcials Follow the checklists C - STO R Y 18. T.: 787-620-1600 1575 Alda Street Urb. Caribe San Juan Puerto Rico 00926 At VOICE, our experienced team applies the principles of public relations to the constant changes of new media. Voice is an affiliate of MS&L Worldwide, leading global communications firm, offering the best in public relations, digital, social media, real-time communications, corporate and events communication. To develop ground-breaking platforms that cater to your many communications targets and their playing fields, contact Lynnette Teissonniere at lynnette@voicepragency.com. In a world so easily connected, one opinion can influence thousands with a simple click. Is your brand ready for the conversation? 19. 24CLevel|Autumn10 T here was no sense of panic. No lost sleep. None of the typical signs of stress that visit companies facing the sharp market decline experienced by Alco High Tech Plastics in the early 2000s. Founded less than ve years prior (late 1997), the young company had already faced down the tough times most start-ups undergo while the business gets going. But this was different. Alco was launched with high hopes. Even with the repeal of Section 936 that same year, pharmaceuticals InthebagThe islands pharmaceutical decline wasThe islands pharmaceutical decline was bad news for this local plasticsbad news for this local plastics manufacturer, until the company awakenedmanufacturer, until the company awakened its unique culture and diversified its offeringits unique culture and diversified its offering were expected to thrive in Puerto Rico for years to come. (The former Section 936 of the U.S. Internal Revenue Code granted generous tax breaks to American manufacturers with operations on the island.) The industry was booming, said Gilberto Nieves, Alcos President & CEO. For a while, at least. It wasnt just the phase out of 936. The economy, which had begun slowing in Puerto Rico and the states in late 2000 and early 2001, dove into extended sluggishness following the 9/11 attack on the World Trade Center. CR ISIS TO A P E X Alcosstrategytogofromcrisistoapex:investheavilyinmachinerytoproduceawidevarietyofplasticproductsanddiversifythebusiness. 20. 25CLevel|Autumn10 At the turn of the decade, business tightened further for pharmaceuticals with the expiration of several key patents and the highly-reported invasion of lower-priced generics and bioequivalents. The result: a big decline in orders for Alco, which relied on big pharma for about 80% of its business mainly the sale of clear plastic liners used by pharmaceuticals to pack their products for shipping and export. Gilberto, a Merck veteran on the island, knew that side of the business well, especially the strict federal codes and standards that must be met by a plastics supplier. His sister Mara mastered the plastics side of the business, having built a career at several leading plastics makers in Puerto Rico. We knew what we had to do to compete with imported plastic and other local players, he recalled. Clients generally prefer a local supplier because it makes the logistics and quality audits less expensive and far easier to manage. Response time is shorter, and less storage space is needed for inventory. Alcos strategy? Beat the competition across all of these drivers, said Gilberto, especially world-class quality delivery, since the company would be subject to pharma audits nearly every month. For good measure, the company threw in outstanding service and the human touch. Culture is king It was Mara, the General Manager, who rst saw the opportunity and gathered the initial team of 22. She recruited her brother, they raised the capital ($1.2 million), acquired the machinery, rented and converted (into a manufacturing operation) the Corozal building from Pridco (the Puerto Rico Industrial Development Company), and off they went. There was one other thing they set up at the start that would prove to be the saving grace when the pharma business dried up. Culture is critical, and it made all the difference when we had to gure out what to do next, said Mara. At the beginning we made sure we had a strong culture, and since then weve insisted on nurturing it no matter what. The cultures starting point is the companys mission and vision, which the Nieves use as a constant guide and anchor to align the entire company and keep everyone focused. Every January, following the annual two-week vacation shut down at year end, all employees (100 today) gather for three days prior to the plants reopening. The rst thing we do is go over the mission, vision and values once again, and then we get into planning and break out into department groups to hold specialized trainings, said Gilberto. Just the fact that we get together like that every year is critical, since it reinforces another important aspect of the culture, which is teamwork and bonding, added Mara. The bonding and sense of family received a boost early on, when all management personnel took a 50% pay cut for a full year as one way to counter the companys tough start. We realized it was a drastic move and told everyone we would understand if someone wanted to leave, recalled Gilberto. Everyone stayed. Thats when we came together as a single unit, he CR ISIS TO A P E X rtrtrtrtrtrtrtrtttrttrttrtededeedededededededededddd ppppppppppppppppppplalaalaaaalaalalaalalaaallalalalallaasstssstststststsststsststssttss icicicccicicicicicicc aaaaaaaaaaanddndndnddndndndndnddnndnndndndndndnddddddddn oooooooooooothththththththhhthththththhhththerererererrererrereerereeer lllllllllllllllllloococococococcococoococccoocoo lalalalalalalalalalaallalal pppppp bbbbb iiiii wwww oooooo mmmmmm cccccccccccc wwwwwwwww iiiiiiii mmmm ttttttt ggggggggg ttttttttt ttttttttttt vvvvvvvv eeeeeeeeee tttttttttttt prpppprprprprrprprprprrprpprprioiooioooioioooioiooooorrrrrrrrrrrrr tototototootototototototottot ttttttttttttttttthehehehehehehehehehehehehheheheheh plplplplplplpllpplplplplplplplplplplanananananananananaaannnnnantttttttttttttttt sssssssssssssssss weweweweweweweweweweweeweee dddddddddddddddddooooooooooooooooooo isisisississisisssisisisissisiissii gggggggggggggggggggoooooooooooooooooo ovovovovovovvovovovovovovovovovovvoooo erererereerererererrerrerereer tttttttttttttttthehehehehehehehehehehehehehehehehehheeee The diversification strategyThe diversification strategy and investments produced aand investments produced a dramatic turnaround at Alco.dramatic turnaround at Alco. The company is now the islandsThe company is now the islands #1 local producer of plastic#1 local producer of plastic products and has developedproducts and has developed an expertise in plastic bags andan expertise in plastic bags and films in particular.films in particular. Alco uses high-grade resin pellets as its raw material. Its the key to the quality of our plastic, said CEO Gilberto Nieves. conconconcoconconcoconconconconcononcccccccoonc tintininintintinintintintintinintintinintinttintintinti ueduedueduedueduedueduedueduedueduedueduedueuedueduedueduedu duedededueduedduedddddu duedededeee ononononoonononononoononnoononononnooononoonoooon nenenenenenenenenenenenenenennenenenenenenenennneneenennenenenennenextxtxtxtxtxtxtxxtxtxtxtxtxtxtttxtttxxxtxx papagpagpagpagpagppagpapapagpapagpagpagpagagagagppapagpppapapaggagpaggpp gggpp ggggaggpppaaaggeeeeeeeeeeeeeeeeeeconconococcc tintintintintinuedueduedueduedueduuede onononnonoono nenenenenenneneextxtxtxtxttt pagpagpagpagpagpaaggpp geeeeeeee 21. 26CLevel|Autumn10 said. It was a very emotional moment and set the tone for the company from that moment on. We developed a team in every sense, added Mara. Its part of the way we deal with each other and make decisions on a daily basis. Listen, listen, listen As is a dashboard full of clear metrics and data, another key aspect of the culture from day one. The companys ne-tuned management system tracks eight performance indicators: productivity, human resources, quality, security, safety, customer service, environmental impact and protability. Each, in turn, is broken down into several measures productivity per group, machine and shift, for example, and customer service by timely delivery, quality perception, customer complaints and other signals. Its how we know exactly how were progressing, the health of each customer relationship, the performance of each employee, the maintenance needs of our machines, etc, etc., explained Mara. The metrics also help us make sound investment decisions, since we have a much better sense of what to expect in the future and what the market needs us to produce. Yes, what the market needs Alco to produce, which takes us back to the moment of truth, when pharma sales plummeted and the company faced the What now? question. Its when the dashboard and teamwork and bonding and mission all came into place. We held countless meetings where we as senior managers simply listened, said Gilberto. We listened to our salespeople, who are extremely knowledgeable about whats happening in the marketplace. We listened to our clients, who guided us on new lines of business. We even listened to our suppliers, and they shared valuable insights into the latest technologies being used around the world. One of the basic principles of our culture is that we have to listen rst in order to act. And act they did. We began to see several big opportunities where we could sell new products and do extremely well, and we moved fast, said Mara. From an almost one-product focus (clear plastic wraps for pharmaceuticals), the company began a diversication process that continues to this day, but keeping the same commitment to world-class quality standards required by the highly regulated industries it was serving (pharmaceutical, medical devices and food). We decided to make that a key part of our value proposition for all products, not just regulated ones, said Gilberto. Quality has become perhaps our biggest differentiator over the competition. And a major part of the companys risk management. Poor quality is the principal exposure plastic makers have to product liability issues. Better plastic, by contrast, allows for wrapping pharmaceutical products to prevent breakage and contamination, and keeps bag ripping to a minimum. The rst major investment in new machinery, real estate and personnel came in 2003, when Alco spent about $2.4 million to dive heavily into printed bags for a far wider gamut of industrial and commercial clients, from ice makers to waste disposal to construction products and beyond. Then came shrinkwrap, namely the tight plastic that hugs Coca-Cola and Pepsi bottles for store distribution and for which Alco quickly developed the capacity to make clear and printed versions. You know the plastic used by clothing stores to cover suits and dresses, and by laundromats when you pick up your clothes? Those too. One diversication that rocked the company was suggested by Abbott, which needed local production of a highly customized plastic wrap. When we began, we didnt even dream of producing something like that, which requires a special team, with each bag prepared individually, but here we are. We had CR ISIS TO A P E X We began to see several big opportunities where we could sell new productsWe began to see several big opportunities where we could sell new products and do extremely well, and we moved fast.and do extremely well, and we moved fast. Mara Nieves, General ManagerMara Nieves, General Manager conconconconconconcononononconconc tintintintintintintintintinnntinntinntttt ueduedueduedueduedueduededueduedueduedededdd frfrfrfrfrfrfrfrfrfrfrfrfromomomomomomomomomomomomom preprepreprepreprepreprepreprerprepreprereeevioviovioiviovioviooviovioviooviov usususususususususussuss pagpapagpagpagpagpaggpagpagpagpagpapageeeeeeeeeecononc tintinuedued frfromom prepreevioviousus pagpagee 22. made by the company to date, that will double its size in building and electrical capacity, as well as add machinery and staff for yet another round of diversication. We estimate that sales to pharmaceuticals will stabilize at 30% or below, with our growth driven by other products, said Gilberto. Alco will produce zip-lock bags, expand its line of laminated bag products (printed plastic covered on both sides of the sheet to keep the ink from smearing; lamination is also used to create exible packaging), bags with special handles, and a new line of tight-t shrinkwrap called hooder lm used for industrial and shipping needs. Some of our suppliers are based in other countries, including South America, or do business there, and they keep us abreast of the plastic and bag innovations taking place around the world and tell us that Puerto Rico is behind in terms of those innovations, Gilberto added. We want to be the company that brings and keeps Puerto Rico at the cutting edge, and that means constant research and investment to manufacture those products right here in Corozal. CR ISIS TO A P E X to convert our only conference room at the time into our Abbott plastic center, said Mara. Now we welcome those challenges from clients and feel we can produce anything custom made. Expansion coming The diversication strategy and investments produced a dramatic turnaround at Alco. The company is nowtheislands#1localproducerof plastic products and has developed quite an expertise in plastic bags and lms in particular. The original 80% concentration in clear sheets for the pharmaceutical industry is now down to 40% of sales, and the Nieves are just getting started. In the works for the next eight to ten months is a $3 million expansion, the biggest investment conconconconconconconconconcconocconconconconononcconooonnontintintintintinintinintintiintintititintit nt nueduedueduedueduededueduedueduededuedueduedueduedeeu duuuuueu onononononononononoononoooooo neneneneneneeneneneneneneeenen xtxtxtxtxxtxtxxttxxtxxtttxt pagpagpagpagpagpagpagpaggpaggpagpagpaggpagggaggpagagpapagaggeeeeeeeeeeeeeeconconconono tintintintinnueduedueduued ononoon nenenenextxtxt pagpaggpagaggeeee When the pharma business declined, Alco turned to printed bags for a wide range of commercial clients. Pictured left to right: General Manager Mara Nieves and CEO Gilberto Nieves. 27CLevel|Autumn10 23. CR ISIS TO A P E X 28CLevel|Autumn10 We want to be the company thatWe want to be the company that brings and keeps Puerto Rico atbrings and keeps Puerto Rico at the cutting edge, and that meansthe cutting edge, and that means constant research and investmentconstant research and investment to manufacture those productsto manufacture those products right here in Corozal.right here in Corozal. Gilberto Nieves, President & CEOGilberto Nieves, President & CEO conconconconconcononconconcooocononontintintintintintintinninintintinttint ueduedueduedueduedueduedueduededueduedu frffrfrfrfrfrffrffffrromomomomomommmommommomommo prepreprprepreprepreprepreprprepreprepreeviovioviovviovioviovioviovvioiovioiov ususussususssusuuss pagpagpagpagagapagaggpagpagpagpagpagpagpaggggeeeeeeeeeeeeeeconconntintinuedued frfromom preprep vioviousus pagpagee Alco boasts extensive warehouse space to store clients products ready for pick up or delivery. Alco deploys several strategies to reduce its environmental impact, including this state-of-the-art machine that recycles most of the plastic waste that would have ended up in a landll. The machine converts it back into raw material (resin pellets) and recycles it into the production process by way of a closed loop. Eco friendly In an environmentally friendly way, the Nieves add. All plastic waste at Alco is put through a recycling process thatbeginswithastate-of-the-artmachinethatconverts nished plastic back into the original raw material (high- grade resin pellets), which in turn is used to produce new plastic in a closed loop process. Plastic waste not put through this process is sold to other companies, including the bags that carried the resin pellets acquired from suppliers. When emptied, they are gathered and sold to a company in the Dominican Republic that uses them as raw material to manufacture garbage bags. That keeps to a bare minimum the plastic that ends up in landlls from our plant, he said. Many of the bag products sold by Alco include a special additive that makes the bags biodegradable. Therearenowseveralsuchadditivesinthemarketplace that biodegrade plastic in a variety of timeframes, anywhere from several weeks to several years, depending on what the client wants, revealed Mara. While the production process uses loads of electricity, the machinery is energy efcient, reducing the impact. Reducing our environmental impact is one of our guiding principles, and as a team were always exploring ways to do so, said the CEO. Its all part of the companys continuous improvement process. Every department on the plant oor has a white magic-marker board for employees to write improvement suggestions and track results. Thats another one of the strengths that allowed us to bounce back from the decline of the pharmaceutical industry and diversify the business, concluded Mara. Everyone contributes, and their ideas are listened to and inserted into our decision making. Its a single team. The turnaround and growth formula, you might say, is in the bag. 24. 30CLevel|Autumn10 LE V E L A B O V E Suns up at CCMOne of Puerto Ricos leading mall and property owners turns to solar powerOne of Puerto Ricos leading mall and property owners turns to solar power and other forms of sustainability to reduce his companys carbon footprint,and other forms of sustainability to reduce his companys carbon footprint, strengthen the bottom line and create a lasting legacystrengthen the bottom line and create a lasting legacy V adim Nikitines blood, you might say, is green. The eco passion began early on, when his dad, a real-estate man and environment fan, worked ve years in Peru and while there helped develop a national park. He injected a deep interest in the environment in my brother and me, both born in the land of Incas during that time, recalled Vadim during an exclusive interview with C-Level. It has been a deep-seated commitment in the family since, one later extended to Rare (rareconservation. org), a global organization that conducts high-impact social-marketing nature pride campaigns around the world. Vadim, active for more than 15 years, is currently a trustee. He is, of course, better known as one of Puerto Ricos leading real estate developers and shopping mall managers. His company, Commercial Centers Management (CCM) owns and/or operates some of the islands best known properties: Santa Rosa Mall, Plaza Caparra, Reparto Metropolitano, Plaza Canvanas, Aguadilla Mall, Plaza Villa Blanca, Plaza Scotiabank, and many others. The portfolio also includes a growing presence in the U.S., mainly through Casto Lifestyle Properties, which boasts a list of mixed-use developments and traditional strip centers in several states. Given the fast growth of all things green in the industry, one gured it wouldnt be long before the real estate Vadim began catching up with his greener self. Sure enough, CCM is now in the midst of a multi- year sustainability program designed to reduce the companys carbon footprint across most or all of its properties, saving millions of dollars in electricity and other operating expenses, cutting down the waste it sends to the islands shrinking pool of landlls, and 25. 31CLevel|Autumn10 LE V EL A B O V E continued on next pagecontinued on next page otherwise contributing to saving the planet he and his family have worked hard to preserve. Theres a lot we as business people can do, he said. Low-carbon roll out Try one of the largest solar investments Puerto Rico has yet seen: $6.5 million to place photovoltaic panels on the rooftops of the companys Mini Warehouse self- storage business. Mini Warehouse has three facilities. Carolinas solar installation is the largest: 1,778 panels supplying 1,670 kilowatts per hour (kw/h) of electricity across 34,000 square feet of rooftop. In Bayamn, 870 panels provide 968 kw/h on 16,317 sq. ft., while Caguas has 627 panels worth 613 kw/h over 36,000 sq. ft. Mini Warehouses website features an innovative demonstration of how much electricity the solar system has generated in Caguas alone. At the time of this writing (late August), the panels had provided 74% of total electricity demand during the previous month, an impressive number by any measure. They had also saved 420,345 pounds of CO2, including the carbon equivalent emitted by 43 cars in one year, as well as generated enough electricity to power 19 homes also in one year. Solar power is only one component of CCMs sustainability platform. At Mini Warehouse, the company also collects rainwater, recycles cardboard and features insulated walls and ceilings. At Mini Warehouse and Plaza Scotiabank (the Hato Rey ofce building), motion sensors and phosphorescent bulbs reduce lighting expenses, while the eco impact of air conditioning is minimized with timers and efcient motors. Santa Rosa Mall and Centro del Sur Mall also feature more efcient lighting. 26. Plaza Scotiabank goes further. The building is in the midst of a retrot that includes greater efciency in its elevators and air conditioners, the result of a process called power factor correction provided by Florida supplier Power Patriots which has increased the efciency of motors by a stunning 95%. These and other green improvements will soon be rolled out in CCMs other properties, revealed Vadim. So far the numbers have worked out, so its in the works, numbers enhanced in part by new federal energy programs under the ARRA legislation. Solar payback At Plaza Scotiabank, the electricity bill a year into the improvements fell about as much as the $120,000 investment, which means that the company enjoyed a payback of a year. From now on, its all bottom-line savings that we can pass on to tenants, he added. As to the solar panels, the payback will take a bit longer, but compared with solar investments globally, CCM is in for a pretty good deal. At Mini Warehouse, the company recovered more than 60% of the $6.5 million investment within a year thanks to $4 million in local tax credits, which brought down the cost of the solar power from roughly $8.00 per watt to $5.00. The Puerto Rico Electric Power Authority (PREPA) charges $0.24 per kw/h, which is high for utilities in the U.S. and the developed world. Even so, the warehouse business is saving enough money each month on its bill as to recover the $2.5 million net investment in only about 7-8 years, Vadim estimates. We say only because, according to the popular industrywebsitesolarbuzz. com, the typical solar payback in countries with PREPA- like costs is closer to 12-15 years. Cracks in the system While the numbers worked out just ne thank you for CCM, solar has seen frustratingly slow growth in Puerto Rico and around the world. In the U.S., for example, it supplies a paltry 0.01% of the countrys total energy. Wind power isnt faring much better at 0.94%. Thats in part due to the absence of more companies like CCM with easy access to capital and the long-term perspective needed in the solar business today. What must change? For starters, reducing the cost of the panels and of the batteries they charge, a trend well on its way. Just three years after CCMs investment, higher global demand cut the cost of the equipment by nearly half what Vadim paid, before stabilizing in recent months. The efciency of solar panels can also use some enhancement. Current technology, night hours and such blockers as debris and clouds, all limit efciency to 23% or so of a panels full potential. Manufacturers are relying on innovation to reach 40%, the point at which solar becomes competitive with fossil fuels (oil, gas and coal). One additional factor to be managed is the risk of damage or loss from such events as extreme weather, re, vandalism, electrical charges, a ood that may damage the batteries, etc., all of which is subject to specialized insurance coverage. 32CLevel|Autumn10 LE V E L A B O V E Solar payback Thats in part due to the absence of more companies like CCM with easy We do not have the luxury of not using all the renewable energy we have atWe do not have the luxury of not using all the renewable energy we have at our disposal. We have all the sun, wind and ocean we need. But as long asour disposal. We have all the sun, wind and ocean we need. But as long as we continue to rely on fossil fuels, those who consume more energy than theywe continue to rely on fossil fuels, those who consume more energy than they need will be shortchanging those who need more.need will be shortchanging those who need more. Vadim Nikitine; President, Commercial Centers ManagementVadim Nikitine; President, Commercial Centers Management continued from previous pagecontinued from previous page 27. Then there are improvements in government incentives. In Puerto Rico, larger subsidies and tax breaks would certainly help, as they do in more generous states like California and New Jersey, and countries like Germany and Japan. Spain, the most generous of all, rolled back its benets last year. The island improved its own offering in the new energy law enacted earlier this year (to take effect in 2011), but remains considerably below the leaders. The law follows a comprehensive recent study by the University of Puerto Rico at Mayaguez showing that the islands entire energy needs could be met by renewable sources like solar, wind, biomass and ocean thermal. In countries like Puerto Rico without the massive open land spaces required to build solar power plants, governments and utilities are boosting private rooftop systems like CCMs. One of the most effective such incentives is net- metering, which allows a solar producer to sell whatever excess electricity it doesnt use to its utility. In CCMs case, that would mean a monthly check from PREPA, which would in effect reduce the companys electricity bill further. Indeed, Mini Warehouse was PREPAs rst major net-metering client. But the monthly checks havent happened. Instead of paying for CCMs excess solar power, PREPA holds the energy in reserve for CCMs use and future savings when its needed, but charges CCM nonetheless for access to the grid as if at full capacity, even though CCM is now only partially using it. PREPA prices the solar energy it would buy from CCM at $0.07 per kilowatt hour, but charges $0.24 for the energy it sells to CCM, a rather wide discrepancy that also trims the growth of net-metering on the island, since it limits the incentive for companies to invest in solar panels. Businesses obviously prefer to receive the monthly checks, and I would say that if solar power is to fare better in Puerto Rico, PREPA will have to gure out a way to make net-metering work better for investors and consumers, he said. 33CLevel|Autumn10 LE V EL A B O V E In countries like Puerto Rico without the massive open land spaces requiredIn countries like Puerto Rico without the massive open land spaces required to build solar power plants, governments are turning to incentives for privateto build solar power plants, governments are turning to incentives for private rooftop systems like CCMs. But the process can use some improvements, asrooftop systems like CCMs. But the process can use some improvements, as evidenced by the CCM case study.evidenced by the CCM case study. continued on next pagecontinued on next page 28. 34CLevel|Autumn10 LE V E L A B O V E continued from previous pagecontinued from previous page And banks will have to gure out at way to nance the investments. Were not quite there yet in Puerto Rico, added Vadim. CCM paid the entire $6.5 million invoice without any nancing. ROI of incremental costs Beyond solar, Vadim would like the government to be far more aggressive in its energy policy. The current administration is doing more, to its credit, but so much more can be done. Like strengthening building codes to require certain simple environmental improvements in all new and existing structures. Things like were doing at our buildings: phosphorescent lighting, sensors, timers, energy-efcient air conditioning and motors, rainwater capture, energy insulation these should be required of everyone and enforced by the government, added the Harvard Kennedy School of Government graduate. Many countries and U.S. states already do. Eighteen states, in fact, require solar power in certain facilities. To industry executives and trade associations that would no doubt protest, Vadim cites the example of his own building-focused business. Incremental costs always come with an ROI calculation. Its a matter of guring out the math in the immediate and long term. But it can be done, as has been for decades every time the government has imposed a new building requirement. Dont have the luxury ROI aside, Vadim points to an even bigger reason to move industry and government towards greater energy and environmental responsibility. We really have no choice, he said in a more sombertone. Thecurrentpathissimplyunsustainable for an island this size. We simply dont have the energy capacity to accommodate all future economic growth. That is, the number of power plants required will be unfeasible. Vadim fears that unless the island moves far faster on renewables, development will inevitably clash with energy supply, creating zero-sum scarcity in which those who over consume will be taking energy away from those less well off. We do not have the luxury of not using all the renewable energy we have at our disposal. We have all the sun, wind and ocean we need. But as long as we continue to rely on fossil fuels, those who consume more energy than they need will be shortchanging those who need more, he surmised. His eco-vision for the island extends to other realms. Tourism is one example. There are lots of tourists looking for places with green hotels and nature attractions, and Puerto Rico is falling behind in that business as well. Vadim also points to waste disposal and the urgent need in Puerto Rico for aggressive, comprehensive recycling. In fact, the island has the dubious honor of being the worlds highest generator of garbage per capita and lagging way behind other jurisdictions in recycling efforts. The bottom line, he concluded, is that to make Puerto Rico greener, we need to change the mindset of business owners, improve government incentives, streamline the implementation of new laws, and make this program a priority for our entire community, which shares the 35 x100-mile sliver of land we live on. ble ergy wth. Vadim also points to wasteVadim also points to waste disposal and the urgent needdisposal and the urgent need in Puerto Rico for aggressive,in Puerto Rico for aggressive, comprehensive recycling. Wecomprehensive recycling. We dont have the luxury of throwingdont have the luxury of throwing away so much waste, either.away so much waste, either. 29. 36CLevel|Autumn10 W hen you hear the phrase diversity in business, what comes to mind? For most non-minority or Anglo business people, it means three things: hiring minority employees (primarily Hispanic, African-American and Asian); launching a supplier diversity initiative to use minority vendors; and targeting minority customers for its products. For most minority-owned businesses, the phrase means setting up shop in a minority community-enclave or neighborhood (and generally going nowhere else), and/or looking for supplier diversity contracts from big business and government. Well, welcome to accounting rm Forrestall Galeano & Li and its new way of thinking about diversity. Consider it multicultural business on steroids, since its not just about penetrating minority markets (for them, Latinos and Asians). Its about the rm becoming multicultural itself. And more: making a conscious decision to position FGL as a leading provider of high-quality, world- class accounting services for small and medium-size businesses (SMBs), since thats precisely where most Hispanic and Asian companies are at. The rm was founded in 1978 as Forrestall & Co. in the mostly Anglo Atlanta suburb of Buford, and spent its rst 25 years building and retaining a healthy client base in the community. When founder John Forrestall semi-retired and left the business to his son Jeff, the Forrestalls and others One for the books Atlantas ForrestallAtlantas Forrestall Galeano & Li isGaleano & Li is writing a newwriting a new chapter in Americanchapter in American multiculturalmulticultural businessbusiness managementmanagement LE V E L A B O V E The frims two minority partners (left to right) Roger Li and Javier Galeano are joined in the photo by Carlos Villegas, senior manager of the Atlanta ofce. 30. 37CLevel|Autumn10 LE V EL A B O V E These are companies thatThese are companies that are underserved by the Big 5are underserved by the Big 5 accounting firms, small neighaccounting firms, small neigh borhood firms and everyone inborhood firms and everyone in between, said Galeano. Theybetween, said Galeano. They know they need top-qualityknow they need top-quality services, but the big firms arentservices, but the big firms arent interested in such small accounts,interested in such small accounts, and the small firms dont have theand the small firms dont have the CPAs and top-notch diversifiedCPAs and top-notch diversified solutions they need, so thesesolutions they need, so these companies basically fall throughcompanies basically fall through the cracks.the cracks. in the rm gured the time had come to take the rm to another level. Underserved Enter Javier Galeano, a stocky Colombian engineer- turned-CPA who had recently arrived in Atlanta to learn English and strengthen his promising career back home in Barranquilla, but stayed in the Capital of the South when he realized the even bigger opportunities that awaited him in the Hispanic market. Galeano joined Forrestall in 2000. About 90% of our business at the time was Anglo and another 10% Asian, he told C-Level. The rm had some 15 employees. The only minority: Galeano. The transformation hap pened quickly. Galeano joined several business and civic organizations in the metro area and met loads of Hispanic business owners, who told him all he needed to know. These are companies that are underserved by the Big 5 accounting rms, small neighborhood rms and everyone in between, said Galeano. They know they need top-quality services, but the big rms arent interested in such small accounts, and the small rms dont have the CPAs and top-notch diversied solutions they need, so these companies basically fall through the cracks. He learned something else that caught him somewhat by surprise. Language is really a barrier. Many if not most of these business people, particularly rst- generation Hispanics, do not speak English very well. So they can deal with their accountants to work on the numbers and simple compliance matters, but when it comes time to talk strategy and growth, the communication breaks down. Thats where we saw an opportunity to offer more than simply accounting and compliance solutions. In sum, Forrestall became minority-SMB uent, kno wing their needs, able to communicate in Spanish and offering the full menu of diversied solutions and high-tech tools the rm had already developed for the Anglo market in Buford, and becoming a trusted advisor in matters way beyond accounting. We have helped many companies grow, added Galeano. When were do ing the books or meeting with the owners to discuss the business and we see an opportunity to penetrate a market here or introduce a new product there, we offer that advice as well, and its a value added that has helped us build their trust and establish long-running relationships, which in turn builds revenue for the rm. True blood It didnt take long for Galeano to become a partner and for the rm to grow its Hispanic business. From virtually zero in the early 2000s, Latino clients now represent 45% of billings and the bulk of the rms double-digit growth in the last 5-7 years. ti d tcontinued on next pagedontinued o ext pageii pagedcon ued on nex pagetexttcontin e on ne pageii 31. 38CLevel|Autumn10 Then theres the Asian side. Roger Li had worked at the rm in the 1990s and rejoined as a partner in 2005 with the same mission as Galeanos, but in the Asian market, which while not as sizeable as the Latino space, was and remains highly promising. The repositioning was complete. Forrestall & Co., the Anglo rm from Buford, became Forrestall Galeano & Li, the multicultural rm with ofces in Buford and Atlanta. FGL has set an overriding goal for itself: to become the premier multicultural accounting and professional services rm in Georgia and beyond. Indeed, it already does business with clients in 12 states and helps companies in Atlanta do business throughout Latin America, where it has developed an extensive partner network. Were also building a nice network of organizations, lawyers, government leaders and business associates who refer companies to us that are setting up in Georgia so we can help them with the multicultural market, said Galeano. Next: turn those global-company referrals into business anywhere in the world. But without taking its eyes off the diversity ball right here at home. In fact, thats what the Atlanta ofce opening was all about. We opened the Atlanta ofce in 2008 precisely to serve the minority market, since this is where theyre at, and its a lot easier and faster for them to come here when they have to visit than to drive all the way to Buford, explained Galeano. Of the rms 30 employees today, 14 are Hispanic and four are Asian. The rm has eight CPAs: one Asian, two Hispanics and ve Anglos. Six other accountants are in the process of becoming CPAs: one Anglo, one Asian and four Latinos. We need the CPAs in order to grow, and their ethnic background is indicative of where the growth will continue to be for years to come, he added. The front end the staff that meets and comes into contact with clients is one thing, but Galeano assures that on the back end its another story. There it doesnt really matter what we are. The important thing is for the team to work in sync and offer clients world-class service, and thats the team and the process we have built. In other words, true multiculturalism. Of the firms 30 employees, 14Of the firms 30 employees, 14 are Hispanic and four are Asian.are Hispanic and four are Asian. The firm has eight CPAs: oneThe firm has eight CPAs: one Asian, two Hispanics and fiveAsian, two Hispanics and five Anglos. Six other accountantsAnglos. Six other accountants are in the process of becomingare in the process of becoming CPAs: one Anglo, one AsianCPAs: one Anglo, one Asian and four Latinos. We needand four Latinos. We need the CPAs in order to grow,the CPAs in order to grow, and their ethnic background isand their ethnic background is indicative of where the growthindicative of where the growth will continue to be for years towill continue to be for years to come, said Javier Galeano.come, said Javier Galeano. LE V E L A B O V E continued from previous pagecontinued from previous page 32. Ernesto Villarini, an MBA, was hired as Executive Director precisely because of his business knowledge and management experience. A fter four recession years in Puerto Rico (or is it ve?), non-prot organizations have seen their funding dwindle, and more so since the island does not have as robust a charitable deduction as in the states. For that matter, non-prots in the states report a drop in donations and fund-raising as well. The crisis is widespread. Its no surprise, therefore, that thousands of non- prot managers in Puerto Rico and every state of the union are scratching their heads more like pulling their hair! trying to come up with ways to make ends meet and (hopefully) have enough money to fund their worthy causes. One way gaining favor among a growing number of non-prots in the U.S. and around the world is to run their operations just like for-prot businesses run theirs. Not that your net income will now suddenly be considered a prot or capital, but in order to generate 40CLevel|Autumn10 Center for Puerto Rico is leading the way amongCenter for Puerto Rico is leading the way among non-profit organizations on the island turning tonon-profit organizations on the island turning to next-level for-profit methods to attract fundingnext-level for-profit methods to attract funding and deliver on their high social missions.and deliver on their high social missions. N E X T LE V EL Results Deliverables ROI 33. 41CLevel|Autumn10 N E X T LE V EL Center for Puerto Rico, founded and still presided over by businesswoman and former Governor Sila Caldern, is following a tried-and-true business formula for success. continued on next pagecontinued on next page revenues in excess of expenses and yes, capital it may make sense to adopt business-like practices. For one recent start-up, thats certainly the plan. Center for Puerto Rico (CPR), founded in 2007, even hired an MBA and management consultant to get the job done. The board deliberately looked for someone from the business community, said Ernesto Villarini, formerly Executive Dire ctor of management con sulting rm Lucy Lopez Roig. His mission: run CPR like a business, produce results and grow. Business-speak I think the rst thing any non-prot has to realize is that donors and funding sources have to be looked at as investors, because thats exactly what they are, said the graduate of Regis University in Denver, who is certainly uent in business-speak. Its little different from a corporations relationship with its shareholders, at least operationally. Our job in management is to produce a high return on their investment, like a duciary responsibility. And what is that high return? What is it that they want? The social change we promise and are engaged in. Thats our deliverable. And just like traditional investors demand reporting and accountability to keep track of their investments and measure results, so too social investors. Its the only way, or the best way we have to keep them coming back and investing in our enterprise, plus spreading the word and referring other donors, added Villarini. Sure enough, CPR is obsessive about tracking everything it does and keeping donors engaged and informed about results. The organization works on four primary areas: reducing poverty, strengthening the role of women in society, revitalizing communities and urban districts, and fostering ethics and social responsibility. While it has touched all four in its rst three years, the focus has been the rst. We thought a lot about where we could make a signicant difference in the ght on poverty and arrived at a business model focused on strengthening community leadership. Its a teach-them-how-to-sh approach, so grassroots leaders can have the training and tools they need to lift themselves. The organization, founded by former Governor Sila Caldern and a star- studdedboard,ishousedin a striking, modern facility inRioPiedrasurbancenter much of our time, said Villarini, has also gone into putting up the building which boasts a state-of-the-art training center that recently hosted the graduation of several community leaders who went through CPRs rigorous course. Not only is the training part of what we report to our investors, but so is the work of our graduates on the ground back in their communities, and so far the results are impressive. The ultimate deliverable Behind the reporting and results is a management system borrowed from the corporate world. We have to deliver great service to donors and beneciaries alike, work with a high sense of urgency and discipline, provide employees with the best possible work experience, hold them accountable for results, communicate effectively internally and externally, deploy the latest and smartest technology, deliver on a set of metrics and benchmarks, you name it, he explained. That also includes living the mission. For most businesses, a well-articulated mission is a nice-to- have. For non-prot organizations, it absolutely drives everything they do. Far too many non-prot leaders come from the mission side but lack the business skills to maximize operational success. In our case, were as mission-driven as any organization, but we realize that in order to last and have a great impact on society, we need to strike the right balance. The operation must always remain true to its mission, though, Villarini warned, and not fall into mission drift, 34. stage, we plan to offer our services as a supplier and get hired by other organizations, companies and government agencies to provide a wide range of solutions, all of them focused on the work we do. To the extent we can charge for those services, well strengthen our bottom line as well. As it does, CPR will build its brand and become widely recognized for quality and delivery. On the management side, the idea is to institutionalize that: the systems, strategies, processes, branding, the whole thing. We aim to become a high-quality organization that delivers results in the pursuit of our social mission. And isnt that the ultimate deliverable investors want: a better society for everyone, including for themselves, since it takes a healthy society to deliver a growing business, as well as happy citizens. or the practice of compromising on the mission in the desperate or unfocused chase for funding. It happe