120 CHAPTER 6 crucial training program for their sales reps and distributors. When SARS hit the headlines, British marketing staff refused to work with Canadians. “It nearly shut us down,” says VanderPlaat. “Th e fallout lasted over a year. Next time, we will be well prepared because we recognize that this is a key part of our sales process.” • Information Security Risk. Th is involves the risk of losing control of your confi dential customer data in an era of growing privacy legislation. Although he does most of his business in Canada, Sam Dennis, CEO of Torontobased Rydium Canada, a digital advertising company, noted that he has to keep on top of everchanging U.S. regulations-because although his clients are American, the privacy law will apply in Canada. His risk is not being able to observe U.S. law in Canada. • Outsourcing Risk. Th is term refers to losses stemming from interruption of services provided by suppliers. Th e risks arise from outsourcing parts of a medical device, for example, to manufacturers who do not adhere to your company’s quality and behavioural standards, says Arun Menawat, CEO of Novadaq Technologies, a publicly–traded, Mississaugabased producer of medical devices. Menawat says he is relentless in assessing suppliers and the risk they pose. “With medical devices, you are dealing with safety issues and regulations that have enormous impact.” • Security Risk. The loss of an organization’s assets, cash, or accounting information involves security risk. This is a clearcut example of how paying attention to risk can help your bottom line, not hurt it. Jack Hoang, CEO of i3DVR, says his company has developed software that can count how many customers are lined up in front of a restaurant counter. The program can then estimate revenues on a realtime basis and flag any anomalies- discouraging counter staff from attempting to intercept any of that cash. • Legal Risk. Th is type of risk involves losses from violations of the law or uncertainty regarding a company’s legal position, rights, and duties. Many private companies address this risk by establishing high behavioural and cultural standards. Th ey state something What You Should Know about Venture Capitalists 121 along the lines of “ethical standards in our company surpass regulatory requirements. We do not wish to be ‘clever’ and push the boundaries.” • Reputation Risk. When your business’s reputation among various stakeholder groups deteriorates, you are risking your reputation. Companies that off er advice, for instance, must be prepared to take responsibility for the quality of that advice. Your liability here could be growing as U.S.–style litigiousness spreads north. Toronto publisher Penny Shore notes that a few years ago bad advice in a book might result in a negative letter from a disappointed reader. Today it could just as easily result in a lawsuit. Even if the case is thrown out, she warns, it could seriously damage your image.