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The US legal system should scare investors more than North Korea
Forget North Korea and Kim Jong Un. The biggest problem for Sony is the US legal system, says Merryn Somerset Webb.
North Korea isn't the real threat, the US legal system is
There are lots of things to worry about in the global economy right now. The fallout from the massive crash in the oil price and Russia's growing desperationare just two of the most obvious headline-grabbers right now.
But another big story this week has highlighted a longer-term risk, which I think is still not getting enough attention from investors in big companies. It is regulatory and legal risk.
Sony's travails this month illustrate the point perfectly. Earlier this week, it pulled the release of its new comedy about an assassination attempt on North Korea's leader Kim Jong Un.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
This has caused endless outrage. The White House is now calling it a "serious national security matter", and Kim himself claims that the very existence of the movie is an "act of war. It has, as one commentator put it, gone "beyond stupid."
But from Sony's point of view, the hackers are not the only aggressors in the game. The US legal system is just as much of a problem for them. The hacker or hackers (who may, for all we still know, be a group of giggly teenagers in a hotel in Bangkok) have threatened terrorist action against anycinema playing the (apparently quite bad) movie.
The risk is slight to non-existent. But what if even the slightest harm were to befall a cinema-goer following this threat even if it couldn't be proved that the harm was caused directly by the original hackers?
The victim's lawyers would be able to claim the cinema was negligent in allowing the film to be shown, given the known threat. They'd sue the cinema. The cinema, which would presumably find its insurance wasn't valid, given the known threat, would sue Sony. It would all very expensive very quickly.
The huge growth in the role of the state in the developed world and the legal profession that feeds off the laws that growth has created, makes doing business oddly more risky than it once was.
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