Business
CEO at cybersecurity firm that caused a global outage forgot to apologize
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CrowdStrike Holdings Inc. Chief Executive Officer George Kurtz co-wrote a book that’s commonly referred to as the bible of computer security. When it comes to crisis management, though, he’s on shakier ground.
In a post on social media platform X early Friday morning about a botched software update that crashed countless computer systems globally, Kurtz made clear the incident was not a cyberattack, his firm had identified the problem, and deployed a “fix.” What he didn’t say — at least at first — was the magic phrase that public-relations experts advise all businesses to shout from the rooftops at times like this: “I’m sorry.”
Kurtz’s PR blunder, which he subsequently rectified in a television appearance and follow-up statements later that morning, could be the result of several things, crisis communications experts said. One possible reason is a rush to pack a lot of details about the company’s response into the initial missive. A potential desire to avoid legal liability also could have been a factor.
Most likely, though, the lack of contrition stems from the IT sector’s longstanding struggle to relate in a more personalized and less robotic way with the general public.
“A CEO needs a nuanced and emotionally truthful response,” said Davia Temin, founder and CEO of crisis-communications firm Temin & Co. “This is a response scrubbed by a legal team with lawsuits in mind. It holds little to no accountability, which is what makes apologies so powerful. And it positions Kurtz almost as an AI voice — automated, soulless. In fact, ChatGPT does a better job of appearing to care than he does.”
CrowdStrike didn’t immediately reply to a request for comment on its CEO’s initial statement.
Other public-relations advisers were more generous in their assessment of Kurtz’s handling of the situation, but all agreed that the lack of an apology at the start wasn’t wise. CrowdStrike’s shares fell more than 11% — their biggest drop since November 2022.
“The formula is always the same, no matter what — you start by saying there was a mistake, and apologize for it,” said Paul Argenti, professor of corporate communications at the Tuck School of Business at Dartmouth. “That statement he came out with is the kind of statement you get from IT people all the time. They’re not thinking about the human side, they just want to get a job done.”
The early-morning post “appears to be written to IT departments,” said Ron Culp, a former corporate public relations executive who now advises at DePaul University’s College of Communication. “It is essential to allay fears, start fixing the problem and apologize. All three should be done in the same communication.”
The snafu put a spotlight on the tech sector’s challenges in forging human connections, but it’s nothing new.
Sitcoms like Silicon Valley and Britain’s The IT Crowd have mocked technology workers as arrogant and out of touch. Industry leaders who could communicate well with the general public, like Apple’s Steve Jobs, honed those skills despite — or perhaps because of — a dearth of tech chops.
When a crisis hits, those failings are magnified, experts said. But they’re not fatal. Most public-relations experts gave Kurtz a grade of “B” for his overall response so far, noting his later statements were much improved. And he might not be done saying he’s sorry for a while.
“While I respect George’s instinct to come clean and apologize,” said Malik Khan, an analyst at Morningstar, “the real apology will likely occur when customers come calling.”
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Business
Russia economy: Relying more China’s yuan is backfiring
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After the U.S. and its allies sanctioned Russia in 2022 for its invasion of Ukraine, Moscow turned away from the dollar and euro in international transactions and relied more on China’s yuan.
That coincided with more trade between the two countries as Russia was largely shut out of Western markets as well as the global financial system.
By June, the yuan accounted for 99.6% of the Russian foreign exchange market, according to Bloomberg, which cited data from Russia’s central bank. And Russian commercial banks ramped up corporate loans denominated in yuan.
But this dependence on the yuan is now backfiring as top Russian banks are running out of the Chinese currency, Reuters reported on Thursday.
“We cannot lend in yuan because we have nothing to cover our foreign currency positions with,” German Gref, CEO of top Russian lender Sberbank, said at an economic forum.
That’s because the U.S. expanded its definition of Russia’s military industry earlier this year, thereby widening the potential scope of Chinese firms that could get hit with secondary sanctions for doing business with Moscow.
As a result, Chinese banks have been reluctant to transfer yuan to Russian counterparts while servicing foreign trade payments, leaving transactions in limbo for months. With yuan liquidity drying up from China, Russian companies have tapped the central bank for yuan via currency swaps.
At the start of this month, banks raised a record 35 billion yuan from Russian’s central bank through these swaps, according to Reuters. And banks were expecting more help.
“I think the central bank can do something,” Andrei Kostin, CEO of second-largest bank VTB, said Thursday. “They hopefully understand the need to increase the liquidity offer through swaps.”
But on Friday, Russia’s central bank dashed those hopes, calling on banks to curb corporate loans denominated in yuan.
The Bank of Russia also said in a report that swaps are only meant for short-term stabilization of the domestic currency market and are not a long-term source of funding, according to Bloomberg. But rather than simply filling the roles that dollars and euros did, yuan loans have expanded.
“The increase in yuan lending was partly caused by the replacement of loans in ‘toxic’ currencies, but 41% of the increase was down to new currency loans,” the bank said.
The central bank also released a survey that showed a quarter of Russian exporters had trouble with foreign counterparts, including blocked or returned payments even when dealing in supposedly friendly countries. And about half of exporters said the problems got worse in the second quarter from the prior quarter.
The overall Russian economy has been propped up by the government’s wartime spending as well as oil exports to China and India. But the combination of busy factories and labor shortages due to military mobilizations have stoked more inflation.
Researchers led by Yale’s Jeffrey Sonnenfeld warned the seemingly robust GDP data mask deeper problems in the economy.
“Simply put, Putin’s administration has prioritized military production over all else in the economy, at substantial cost,” they wrote. “While the defense industry expands, Russian consumers are increasingly burdened with debt, potentially setting the stage for a looming crisis. The excessive focus on military spending is crowding out productive investments in other sectors of the economy, stifling long-term growth prospects and innovation.”
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Business
ETFs are set to hit record inflows, but this wild card could change it
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![ETF Edge, September 4, 2024](https://image.cnbcfm.com/api/v1/image/108029268-1725475250ETF-FULL-090424.jpg?v=1725475249&w=750&h=422&vtcrop=y)
Exchange-traded fund inflows have already topped monthly records in 2024, and managers think inflows could see an impact from the money market fund boom before year-end.
“With that $6 trillion plus parked in money market funds, I do think that is really the biggest wild card for the remainder of the year,” Nate Geraci, president of The ETF Store, told CNBC’s “ETF Edge” this week. “Whether it be flows into REIT ETFs or just the broader ETF market, that’s going to be a real potential catalyst here to watch.”
Total assets in money market funds set a new high of $6.24 trillion this past week, according to the Investment Company Institute. Assets have hit peak levels this year as investors wait for a Federal Reserve rate cut.
“If that yield comes down, the return on money market funds should come down as well,” said State Street Global Advisors’ Matt Bartolini in the same interview. “So as rates fall, we should expect to see some of that capital that has been on the sidelines in cash when cash was sort of cool again, start to go back into the marketplace.”
Bartolini, the firm’s head of SPDR Americas Research, sees that money moving into stocks, other higher-yielding areas of the fixed income marketplace and parts of the ETF market.
“I think one of the areas that I think is probably going to pick up a little bit more is around gold ETFs,” Bartolini added. “They’ve had about 2.2 billion of inflows the last three months, really strong close last year. So I think the future is still bright for the overall industry.”
Meanwhile, Geraci expects large, megacap ETFs to benefit. He also thinks the transition could be promising for ETF inflow levels as they approach 2021 records of $909 billion.
“Assuming stocks don’t experience a massive pullback, I think investors will continue to allocate here, and ETF inflows can break that record,” he said.
Business
Tens of thousands in South Korea protest lack of climate progress By Reuters
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By Sebin Choi and Daewoung Kim
SEOUL (Reuters) – More than 30,000 protesters gathered in South Korea’s capital in broiling heat on Saturday, demanding more aggressive action by the government to combat global warming.
With temperatures exceeding 30 degrees Celsius (86 degrees Fahrenheit), protesters young and old marched in the country’s biggest demonstration so far this year, snarling traffic in central Seoul.
They waved large banners reading “Climate justice,” “Protect our lives!” and “NO to climate villain (President) Yoon Suk Yeol’s administration”.
“Truth is, without the air conditioner this summer was not liveable and people could not live like people,” said Yu Si-yun, an environmental activist leading the protest.
“We are facing a problem not unique to a country or an individual. We need systemic change and we are running out of time to act.”
Organised by the 907 Climate Justice March Group Committee, the protest followed a ruling last month by South Korea’s top court that the nation’s climate change law fails to protect basic human rights and lacks targets to shield future generations.
The 200 plaintiffs, including young climate activists and even some infants, told the constitutional court that the government was violating citizens’ human rights by not doing enough on climate change.
South Korea, which aims to be carbon-neutral by 2050, is the biggest coal polluter after Australia among the Group of 20 big economies, with a slow adoption of renewable energy. The government last year lowered its 2030 targets for curbing industrial greenhouse-gas emissions but kept its national goal of cutting emissions by 40% from 2018 levels.
Even South Korea’s kimchi has fallen victim to climate change. Farmers and manufacturers say the quality and quantity of the napa cabbage used in the ubiquitous pickled dish is suffering due to intensifying heat.
“Feel how long this summer is,” said Kim Ki-chang, a 46-year-old novelist who was participating in the protest for a third straight year.
“This would be a much bigger threat and survival issue to younger generations than the older ones, so I think the older generation should do something more actively for the next generation.”
Seoul has had a record 20 consecutive nights defined as “tropical”, with low temperatures remaining above 25 C (77 F).
Protest organising committee member Kim Eun-jung said the demonstrators chose the popular Gangnam financial and shopping area this year, not the Gwanghwamun area they used last year, to have their voices heard by the many big corporations there that the group blames for carbon emissions.
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