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Quest Means Business
Shoring Up Cyber Defense; Ups and Downs for U.S. Stocks; Russian Fallout Spreads
Aired December 19, 2014 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST (voice-over): And there you are. You don't see that very often. You don't keep your finger on the bell and they boo you
at the New York Stock Exchange. It brought trading to an end. How embarrassing. He didn't keep his finger twice on the button, but what a
way to end a week.
It's Friday. It's December the 19th. The president has spoken and it's a reproach for Sony.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Yes, I think they made a mistake.
(END VIDEO CLIP)
QUEST: In an exclusive interview, the chief executive of Sony Pictures gives his response to CNN. And he says the president is wrong.
(BEGIN VIDEO CLIP)
MICHAEL LYNTON, CEO, SONY ENTERTAINMENT: I think actually the unfortunate part is in this instance the president, the press and the public are
mistaken as to what actually happened.
(END VIDEO CLIP)
QUEST: Tonight, as the U.S. officially blames the hack on North Korea, why this cyber attack is a true business changer. It may be Friday but we have
an hour to go. And I'm Richard Quest and I mean business.
(MUSIC PLAYING)
QUEST: Good evening. What a dramatic day of developments in the Sony hacking scandal. The very scandal that forced the movie company to its
knees. Within the last couple of hours, the U.S. president says Sony's decision to shelve the film, "The Interview," was a mistake. And President
Obama was certainly absolute unequivocal in his comments.
The Sony entitlement chief exec has been responded in an exclusive interview with CNN and he says it's the president who's mistaken about what
happened. But we're heading towards a tit for tat here. But also tonight, the FBI's confirmed they believe North Korea, the North Korean government,
was behind the cyber attack.
Sony has been contacted again by the hackers, another development of crucial importance. And President Obama is weighing on the whole decision
to pull the interview.
(BEGIN VIDEO CLIP)
OBAMA: I'm sympathetic to the concerns that they faced. Having said all that, yes, I think they made a mistake.
We cannot have a society in which some dictator someplace can start imposing censorship here in the United States. Because if somebody is able
to intimidate folks out of releasing a satirical movie, imagine what they start doing when they see a documentary that they don't like or news
reports that they don't like.
(END VIDEO CLIP)
QUEST: A moment of the president speaking, the Sony Entertainment chief exec Michael Lynton speak exclusively to CNN's Fareed Zakaria. Mr. Lynton
responded directly to the assertion that Sony should have spoken to the White House first before pulling the plug on "The Interview."
(BEGIN VIDEOTAPE)
FAREED ZAKARIA, CNN HOST: The president says Sony made a mistake in pulling the film.
Did you make a mistake?
LYNTON: No. I think actually the unfortunate part is in this instance the president, the press and the public are mistaken as to what actually
happened. We do not own movie theaters. We cannot determine whether or not a movie will be played in movie theaters.
So to sort of rehearse for a moment the sequence of events, we experienced the worst cyber attack in American history and persevered for three and a
half weeks under enormous stress and enormous difficulty and all with the effort of trying to keep our business up and running and get this movie out
into the public.
When it came to the crucial moment when a threat came out from what was called the GOP at the time, threatening audiences who would go to the movie
theaters, the movie theaters came to us one by one over the course of a very short period of time -- we were completely surprised by it -- and
announced that they would not carry the movie.
At that point in time, we had no alternative but to not proceed with the theatrical release on the 25th of December.
ZAKARIA: So you have not --
LYNTON: And that's all we did.
ZAKARIA: So you have not caved, in your view?
LYNTON: We have not caved. We have not given in. We have persevered and we have not backed down. We have always had every desire to have the
American public see this movie.
(END VIDEOTAPE)
QUEST: That's the chief exec of Sony.
Barack Obama says a lot more needs to be done to prevent cyber attacks from happening in the first place, including stronger cyber security laws.
(BEGIN VIDEO CLIP)
OBAMA: More broadly though, this points to the need for us to work with the international community to start setting up some very clear rules of
the road in terms of how the Internet and cyber operates. Right now it's sort of the Wild West.
(END VIDEO CLIP)
QUEST: Howard Schmidt, the former cyber security czar for the Obama administration, now a partner at Ridge Schmidt Cyber LLC, he joins me from
Milwaukee in Wisconsin.
We'll come to what needs to be done in the future in a moment, sir. Let's just dwell for a question or two on this question.
The president now says it was a mistake to pull the movie. Sony says they did no such thing.
Where do your sympathies lie on this?
HOWARD SCHMIDT, RIDGE SCHMIDT CYBER: Well, I think in some sense, they're both right because by folding, as the term has been used, it opens up all
kinds of avenues for people to say, I can do this now in the future. And as the president said, documentaries, you name it, if someone doesn't like
it, they could use it.
On the same token, when you're CEO of a company like this and you have threats out there that where you have the movie theater owners coming back
and saying, listen, I don't have the resources, the local police can't do it. We don't want a 9-1-1 (sic) happening to us and then we blame.
QUEST: But in this case, for the president to come out when a company is already under threat -- I mean, under pressure -- Sony's under the biggest
pressure. And he says they made a mistake.
Do you find that helpful?
SCHMIDT: I don't. And that's one of the things I find a real challenge on this, is to sit there and say unequivocably (sic) that this is wrong.
You're not there. It's a lot of decisions that have to be made and they're not easy decisions. And I'm sure there were board calls and board meetings
to make this decision. But it was a short time to do it and they had to make a decision.
QUEST: Cyber security more generally, last night on this program, we had Alex Ross (ph) talking. He talked about the weaponization of code. He
basically says that this is the fighting ground for the future, and boards of directors need to have experts on them.
I assume you agree; but what do they need to do?
SCHMIDT: Well, there's a few things. First, I -- and absolutely agree because when I look at the board compositions on boards that I've sat on
over the years, it's basically really, really well educated business people who know little or anything about cyber risk. So that's number one.
Secondly, it does have to be a CEO, a board issue. It's not something comes up when somebody else has a problem.
But there's some technical things that we've been talking about for years. When I worked for President Obama, we released a national strategy for
trusted identities in cyberspace. Moving away from user ID and passwords. A lot of this would have stopped, had we had digital identities that would
have filtered out the things that we get in there.
The use of encryption is also something that's long overdue.
QUEST: Do you believe that what we -- we've obviously had a wakeup call as a result of the Sony hack. And if you then add Walmart and Neiman-Marcus,
JPMorgan, everything else, this has been the year of the hack.
Do you believe we learned the lessons?
SCHMIDT: Well, every time something like this happens there's a wakeup call. And this has been going on for 10 years. It's just more recently
it's been in the public eye as it is, we -- that you're referring to.
The bottom line is, yes. I think it's finally got the attention of senior government officials around the world, senior corporation executives around
the world who said, listen, we need to figure out how to fix this because, if not, we're going to be suffering as a business.
QUEST: Sir, thank you very much for joining us, Howard Schmidt.
We, you and I, sir, we'll talk more about this in the days and weeks ahead.
Sony, of course, will not be the last company that's going to be plunged into crisis by the hackers. If you want to know just how serious this is,
CNN's Tokyo correspondent, Will Ripley, looks at how Japanese businesses are now, shoring up the cyber defenses.
(BEGIN VIDEOTAPE)
WILL RIPLEY, CNN CORRESPONDENT (voice-over): Hidden behind security doors and bulletproof glass a Tokyo office that could easily be the set of a sci-
fi movie. Only this plot is real.
RIPLEY: They say this is a map that shows all of the cyber attacks launched at Japan just in the last month.
RIPLEY (voice-over): Hackers from around the world targeting thousands of Japanese companies for hundreds of them, this Tokyo cyber security firm is
the only line of defense.
"Hackers are always getting more advanced," says Itsuro Nishimoto. "Sometimes too advanced for those trying to keep up." For LAC, which keeps
its client list confidential, the chief technology officer knows a devastating hack, like the one on Sony Pictures, can penetrate even the
best cyber defense.
RIPLEY: You have all these experts here.
Could you have protected against an attack like this?
Could anybody protect against it?
RIPLEY (voice-over): "Not 100 percent," he says. "It's like catching a cold or getting the flu," or, in Sony's case, a disease that crippled a
major corporation. For the better part of a decade, the electronics and entertainment giant has been a popular cyber target.
Three years ago in 2011, hackers stole 77 million PlayStation accounts, knocking out the network for almost a month.
KEITH HENRY, MANAGING DIRECTOR, ASIA STRATEGY: People thought about so- called cyber terrorism, they thought hacking.
RIPLEY (voice-over): Asia strategist Keith Henry says Sony was taken by surprise last month. Cyber criminals took control of Sony Pictures'
computer system and they did something unprecedented: stealing massive amounts of data and using it to debase the company.
HENRY: They can inflict damage, an immense amount of damage, to corporate America.
RIPLEY (voice-over): Sony appears to be trying to avoid further provoking North Korea, the prime hacking suspect, telling CNN simply the
investigation is ongoing. The Japanese government is also distancing itself, telling CNN it's a United States issue.
HENRY: One of the reasons why no one's making -- no one is willing to make a statement is because you don't know what to say.
RIPLEY (voice-over): Henry says the world is coming to terms with the new reality of cyber terrorism.
HENRY: How are we going to deal with it? We don't know yet.
RIPLEY (voice-over): For now, at tech labs like this, a new sense of urgency, figuring out how to fend off a new kind of enemy -- Will Ripley,
CNN, Tokyo.
(END VIDEOTAPE)
QUEST: Well, we've ended the week; there was a small gain. The stocks just bumped a little bit higher on Friday. Thank goodness a calm end to a
week of up-and-downs as global turmoil rocked the market.
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QUEST: Looks like the Himalayas on a bad week. That was the way the markets traded on this Friday. Down, up, down, up, down, up, down, up, up,
up, up. They went all the way -- a small gain of -- a lot of movement for a small gain, 26 points on the Dow, just barely changed. But we are now
over 17,800. It's been one of the most volatile weeks of the year.
Join me over at the snakes and ladders and you'll see just how it was now last Friday where we had the oil companies that were hit hard, crude prices
fell and you saw the way prices fell. And IEA shared the global demand but rose just 1 percent when in the next year.
So that's how we've gone over the last week. Now the weekend brought no relief. By the time we got to Monday, OPEC was promising not to cut
productions. Oh, dear.
And as OPEC didn't cut production, the market went down the best part of 100 points. Then on Tuesday, you get the ruble, which plummets. Now when
that happens on Tuesday, all bets are off in this game. Straight the way down. As the ruble collapses, you get enough fall of 112 points and real
fears of contagion.
Wednesday -- now this is fascinating because on Wednesday, amid such misery, mayhem and misfortune, up the ladder we go because the Dow has one
of the best days of the year as the Fed pledges patience on its various rate hikes.
That's the way that week fell. And then finally of course yesterday more reflection. We have a superb session, straight the way up to the top.
They'd think about what has happened from Janet Yellen, the biggest point jump in some three years. We end the week with the Dow just little
changed, just up a smidgen or so, up 26-odd points.
That's the way snakes and ladders -- and joining me now is Alan Valdes. He's the director for floor trading, DME.
With a week like that, sir, you must be exhausted.
ALAN VALDES, DIRECTOR OF FLOOR TRADING, DME SECURITIES: Yes, it's pretty chaotic down there this week. But again, you were spot on. It's all about
the Fed. I mean, this market really could capitulated had the Fed not said we're going to be patient a while.
(CROSSTALK)
QUEST: But they really said nothing that we hadn't already heard. I mean, they had to get away from the phrase "considerable period of time," and
they did it elegantly with "patience."
VALDES: That was it. But it put enough clarity to most traders to know that, OK, they're going to raise rates in '15. But we have a long way to
go to '15 safely in their minds.
QUEST: If we get this sort of reaction just on the back of a few simple words, how do we price in the market reaction when the time gets closer so
we don't have dramatic volatility or is it inevitable?
VALDES: It's inevitable. You're going to have that volatility. There are so many traders don't just trade volatility. I mean, look at the VIX. No
one even thought about the VIX years ago. Now everybody has it on their screen. So they're trading volatility every day.
So, no, it's -- you're not going to get away from that volatility once we get closer to that gate.
QUEST: But are you already putting in place a strategy for exit for -- I think what the Fed calls liftoff?
VALDES: Yes, we're putting us in different strategies. We're checking. But it's too early yet. We'll really reexamine the market where it stands.
And plus the global implications, you know, emerging markets are really taking shots all over the place.
QUEST: When will -- the U.S. markets, in fact, the developed world markets -- were obsessed by the Fed this week.
When will they wake up? If at all to the Russian problem?
VALDES: Well, Russia's not going to go away. But I think that market's going to get a little stronger as oil -- we saw oil rebound a little today.
Again, that was a lot of short coverage. But no one thinks oil's going to go down much further. You're not going to break below 50. So I think
oil's going to stabilize here and only go up as the winter gets longer here in the Northeast.
QUEST: Look at this, the graph of Brent crude future prices this week. It's almost impossible to make sense on those sort of --
VALDES: Those swings --
QUEST: -- that mountain of swings.
VALDES: -- you can't. And like I said, today we're up basically short coverage. So a lot of guys are going home covered for the week. And we'll
see what happens Monday. But next week's a short week; basically a lot of traders are gone from now until after the 1st.
QUEST: Are you going to join in the celebratory singing of "Wait 'Til the Sun Shines, Nellie"?
VALDES: Of course. I've been doing that for 35 years down there on the floor. So I will be there.
QUEST: We'll be looking forward to seeing you singing that.
VALDES: Thank you. Happy Holidays.
QUEST: Happy Holidays. All the very best to you.
We'll explain that little bit of tradition, "Wait 'Til the Sun Shines, Nellie," and we'll even tell you why they sing it. They do it every year
on Christmas Eve and New Year's Day.
All right. The European stocks did mix, Air France, KLM down 8 percent as it predictions earnings for the year will come in a quarter of a billion
dollars lower than expected, hardly surprised after the quarter of a billion lower than expected. Air France has been hit by a pilot strike and
weak demand.
German chemical maker BASF lost 1 percent. The company's abandoned an asset swap with Russia's Gazprom. And Russia's economic slide has gone
this week had across the wider region. Countries are moving fast to shore up economies. QUEST MEANS BUSINESS.
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(COMMERCIAL BREAK)
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QUEST: The fallout from the economic crisis in Russia now is spreading way across Europe. In Moscow, the Russian parliament now rushed through
measures. It's designed to prop up the country's banks. And from Russia into Western Europe, neighboring nations with exposure to Russia are, some
would arguably say, almost in panic mode.
In Belarus -- now Belarus, of course, obviously well and truly on the border there -- Belarus is fearing a devaluation of the Belarusian ruble.
The central bank's put restrictions on currency trading and a 30 percent tax on purchases of foreign currencies.
Some interest rates in Belarus have been hiked to 50 percent to stop people from withdrawing the money, to force them or to keep them -- keep them in
the bank. And you'll understand, of course, Belarus is one of those countries which has basically thrown its lot in with Russia in terms of
trade agreements and the future trade region.
The -- in Russian gas deal with the German company has been called off. Gazprom's now looking to expand activity in Europe. Sanctions stopping
several new energy projects. But obviously the question of the South Stream pipeline and other energy -- and other energy projects very much in
question.
Charles Dallara is the former managing director of the Institute of International Finance, joins me now from Washington.
Charles, good to see you. Nice that we're not talking about Southern Europe for a change, sir. We're talking about Russia.
When do we start to see widespread effects of this Russian recession?
CHARLES DALLARA, FORMER MANAGING DIRECTOR, INSTITUTE OF INTERNATIONAL FINANCE: Good to be with you, Richard. Unfortunately, I think we could
see that fairly early in 2015. The cloud of economic weakness in Russia weakness in Russia is spreading over Europe. It has the potential of
spreading into contagion into other emerging markets, particularly those with large energy companies, such as Petrobras in Brazil.
And finally I think the combination of the weak oil prices, the lack of confidence in Russia and the ratcheting up of sanctions may well put
Russian corporations and financial institutions early in the year where they're unable to meet their financial obligations to the West.
QUEST: Right. And now where are you more concerned?
Are you concerned about Western Europe, which does, of course -- I mean, besides Germany, Austria maybe, a few other countries, the rest of Western
Europe or the E.U., to be more precise, isn't as affected.
Or are you concerned with the Stans over on the eastern and the southeastern part of the Russian border?
DALLARA: Well, I think there has to be concern in both directions. But actually I think the fundamental problem is not so much with the Stans. I
think they are adequately differentiated that they will be able to ride through this turbulence.
I think the fact is is that we've had virtually no growth in Europe for half a decade now, Richard. And I think that we see the growing signs of
political extremism. We see the continued weakness. We see the continued difficulty, which Europe has, reestablishing any sense of market momentum
under the -- over the austere policies that have been guided out of Brussels and Berlin.
I think this leaves Russia in a vulnerable -- not only Russia in a vulnerable position, but leaves Europe in a vulnerable position as we enter
the new year.
Finally I would just say that emerging markets are going to be put back into play, I'm afraid, by the combination of Russian weakness, energy
market weakness more globally and the prospect eventually of the Fed moving.
QUEST: Now hang on. If you -- I was going to ask you a different question, but you've just thrown -- you've just thrown a financial hand
grenade into the interview with that. If -- we've already seen Indonesia, Thailand, Brazil, their markets, their currency markets affected by what's
happening with a rising dollar.
If you do add in the Fed, the patient as Job they may be, eventually rates are going up, probably mid-next year. You're forecasting this -- the
emerging markets get hit.
DALLARA: I'm suggesting absolutely that emerging markets could be hit and hit hard, Richard. The fact is is that notwithstanding the vast amount of
hope which markets have extracted from the simple word "patient" in the last couple of days, the -- despite that -- and by the way that's happening
while earnings estimates in U.S. corporates are actually being marked down.
All 10 sectors in the U.S., in the Dow have been marked down for earnings over the course of the fourth quarter and yet we have this continued upward
movement of the Dow. The Fed cannot levitate markets forever. And when they finally do move, I think we have to be prepared for a considerable
amount of turbulence.
QUEST: And we heard that from our guest earlier on markets; we're hearing it now from you.
Charles, it's always good to see you, sir. Thank you for coming back. We'll have much more to talk about. Thank you.
DALLARA: Good to be with you, Richard.
QUEST: When we return, the President of the United States says Sony made a mistake in withdrawing the release of "The Interview." Sony says the
president is wrong.
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(COMMERCIAL BREAK)
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QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): President Barack Obama says Sony made a mistake in pulling the film, "The Interview," in response to a cyber attack by North
Korea. But at the yearend press conference the president said that a foreign dictator shouldn't impact creative decisions and has promised a
proportional response to the attack.
In an exclusive interview with CNN's Fareed Zakaria, the head of Sony Pictures says the president is mistaken as to the chain of events that led
to Sony pulling the film. Michael Lynton says the company had no alternative after theaters said they would not show it. We'll hear more of
that interview in just a moment.
In Cairns in Australia, the murder of eight children, aged between 18 months and 15 years old, has shocked the nation. An injured woman is
receiving treatment, is thought to be the mother. The police officials have said she is aiding the investigation.
FIFA says it will be releasing part of the controversial report into corruption within the organization. The report is said to expose any
wrongdoing in the Russia 2018 and Qatar '22 bids for the World Cup. It's expected to be heavily redacted.
And anyway, FIFA has said they will not rerun the vote.
(END VIDEO CLIP)
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QUEST: And so the Sony hacking saga, which had some extraordinary developments on this Friday, in an exclusive interview with Fareed Zakaria,
the Sony Entertainment chief exec, Michael Lynton, said the film studio did not make a mistake in canceling the release of "The Interview." And U.S.
officials are now telling CNN the cyberattack was a game changer. These are some of the events.
What it has shown - I mean we can talk about the tittle-tattle, the gossip, the celebrity nonsense. But what this has blown apart is the new digital
economy of the 21st century. It's got deep implications for every part of society. Think about what we've seen in the last few weeks. First of all,
you've got the Ethernet to the data breach. That's the raw hacking. But then you've got those celebrities and their privacy concerns. If that
wasn't bad enough, because that could affect all of us, you've got the terror threat assessments, an appeasement which came as a result of the
warning to Sony - don't show the movie, remember 9/11. That raised issues when Sony decided to cancel or at least delay the publication - one of
freedom of speech, the so-called First Amendment in the United States. And because it's North Korea and possibly what other countries were involved
and how Russia might be influencing other issues in the future. You've got geopolitics. You start to see now why this Sony hack at such a crucial
part of the global economy was so much more important than just a few nasty comments about Angelina Jolie.
President Obama had harsh words for Sony. He says the company made a mistake in deciding to pull the film. That's a charge that Sony's
entertainment boss denies when he spoke to Fareed Zakaria.
(BEGIN VIDEOCLIP)
FAREED ZAKARIA, HOST OF "FAREED ZAKARIA GPS" SHOW ON CNN: You are well- known as somebody who supported President Obama.
MICHAEL LYNTON, CEO, SONY ENTERTAINMENT: Yes.
ZAKARIA: Were you disappointed in what you heard today?
LYNTON: I would be fibbing to say I wasn't disappointed. I, you know, the President and I haven't spoken. I don't know exactly whether he
understands the sequence of events that led up to the movies not being shown in the movie theaters and therefore I would disagree with the notion
that it was a mistake. It's a generally-held view by the public and the press that that's what happened and maybe that's how that view was held by
him. But knowing as I do the facts and how they've unfolded, you know, we stood extremely firm in terms of making certain that this movie would
appear in movie theaters.
(END VIDEOCLIP)
QUEST: Fareed Zakaria joins me now. First of all, sir, congratulations on getting that interview. He says the press, the public and the President
have mistaken what they did. When anybody tells me that everybody else is wrong, you start to think that they've got a weak argument.
ZAKARIA: No, actually I think this is a case where it's a slightly technical argument but the sequence of events as he lays out is they've put
tens of millions of dollars into this movie. They were trying to get the movie out. The North Koreans make these threats. What starts to happen is
the movie theaters start pulling out. Now remember these are big movie theaters so they're often in malls. And so what happens is they're worried
about liability issues, things like that. They say they got to a point where literally there was not a single movie theater that would show the
movie.
QUEST: So why doesn't he instead of withdrawing the movie, why doesn't he face them down and go public and say, 'They won't show it, but I've got the
movie - they won't show it, I'm willing to show it'?
ZAKARIA: I think that's what has just begun to happen. Remember the movie theaters are partners to movie studios so they don't want to take a hostile
attitude. But what I think has happened also, they got one PR element wrong. They talked about canceling the release just as you described. I
think what they should have said is postpone or reschedule, because they seemed dissilent (ph) - this is what he said to me - Michael Lynton said,
"We want the American public, we want the world to see this movie. We are exploring every avenue." And now that means DVDs, that means video on
demand, but again, they don't own the pipes. Netflix has to be willing to sponsor it, YouTube has to be willing to sponsor it. And they will get
hacked if they do it.
QUEST: Did you get the feeling talking to him and interviewing him - looking him in the eye - that this is - I mean obviously a company under
pressure, but it's a company that's wilting? That there's a leadership that's absolutely - not crumbling but serious pressure now?
ZAKARIA: No. I mean, I think he's a highly-intelligent person, highly analytic and I think he's gone through, you know, what is the largest
cyberattack probably in history and what I think he is - what struck me about him is he was very disappointed to find that there was not one movie
studio that would stand with him. That the movie theaters all withdrew. You know, George Clooney revealed that he couldn't get a petition signed.
He couldn't get one person to sign that petition supporting the freedom of expression.
QUEST: So now let's talk to the President's proportional response in a time and place of our choosing. What's a proportional response to a mega
hack like this, do you think?
ZAKARIA: I liked what the President said with the exception of one word. Why should it be proportional --
QUEST: (LAUGHTER).
ZAKARIA: -- and why should we say that it would be proportional? I think that this is - I mean - think about what they've done. This is an attack
on American soil of an American company involving Americans, and as far as we can tell, the cost is at least $100 billion to Sony - probably more in
terms of damaged brand. If they'd sent in a truck and blown up the studios at Sony, we would take very significant action . I think it needs
to be real, I think that it needs to be something that is crippling, especially to the cyber warfare unit within the North Korean military and I
think that we probably are going to have to talk to the Chinese finally about their sheltering really what is, you know - we treat North Korea in
almost comical terms as kind of weird dictators. This is one of the most brutal regimes in the world. It has 100,000 people in what can only be
called concentration camps right now. There's nobody else in the world doing that.
QUEST: Fareed, thank you , sir. Thank you very much indeed and you will want to watch the rest of that interview exclusively with Michael Lynton,
the CEO of Sony Pictures. It's on the next edition of "Fareed Zakaria GPS" which is Sunday noon in London, 1 p.m. in Berlin and it's of course only on
CNN. The FBI cited similarities between the cyberattack on Sony and previous attacks by North Korea with one difference - the destructive
nature of this attack coupled with its coercive nature in the words of the FBI, "sets it apart." I want to bring in CNN's U.S. Justice Department Evan
Perez. Very strong words from the FBI. What's your understanding now of a proportional response that the U.S. government would launch?
EVAN PEREZ, CNN JUSTICE CORRESPONDENT: Well, Richard, I think that's one of the things the President is studying I think. We know that he has
received a series of recommendations from his administration. It's a long flight to Hawaii for his vacation and he's going to be reviewing those
options. Look, the problem with North Korea is this - you know it's already a heavily-sanctioned regime, it's a reclusive regime, there's not a
lot of connections with the rest of the world, so the only way to really hit them is through the banks that they do business with in China that they
depend on trading and dollars to be able to get whatever the military regime needs.
And so there are very few things you can do to them. One option would be perhaps putting them back on the list of nations that sponsor terrorism
because a lot of people consider this attack to be terrorist in nature. It's - look, I mean, there's so many attacks that we've had in the last few
- in the last few months and last couple of years - Target, JP Morgan, you know. This one is so different because this was an extortion to try to
censor an American movie industry.
QUEST: Right.
PEREZ: This is amazing.
QUEST: Thank you very much, Evan Perez who joins us on that side. Now the cyberattack on Sony's a serious issues which have been raised regarding how
businesses can protect themselves. Miller Newton's with me, the chief exec of PKWARE. Sir, good to see you. Thank you.
MILLER NEWTON, PRESIDENT AND CEO, PKWARE: Richard, it's a pleasure.
QUEST: Very simple question.
NEWTON: Yes?
QUEST: How do you protect yourself?
NEWTON: So you have to look historically at how companies have looked at how companies have looked at security. And they've made the major
investment on protecting the perimeters and the networks. And regardless, our adversaries are still penetrating these networks.
QUEST: But, you know, for the last five years - look, everything's Y2K. People have said you've got to have better security on your computers. So,
do you believe that after this, people will - companies, CEOs will spend the money?
NEWTON: Our phones are ringing off the hook.
QUEST: Ah, but that's like people who've got a burglary up the street. Everybody buys a new lock and then three weeks later, they've lost the key.
NEWTON: The post-Snowden, I mean, post-Snowden era, right?
QUEST: Yes.
NEWTON: The cloud, it's mobile, it's Snowden saying you need to encrypt everything everywhere.
QUEST: But Snowden said that two years ago, and Sony still hadn't done it.
NEWTON: And Sony, you know, Sony may had not, but there's - you know, encryptions hard. Smart encryption can be done in companies. You have to
protect data at its core. It's not about the network, it's not about the device, it's about strong encryption with authentication and key
management, and that's the answer.
QUEST: Is it your feeling that we will see more cases of cyber terrorism?
NEWTON: I believe that in the next 12 months, we will see a Sony-like attack to the tune of one a month. Absolutely, positively that's my
prediction.
QUEST: Wow. Sir, thank you very much indeed.
NEWTON: A pleasure. Thank you.
QUEST: Now, as we continue, we need to look into the "Quest Means Business" crystal ball. And as we look and see what's happening in the
future, -- ah ha! - the crystal ball. Today I see a historic five-star hotel reopening in Paris. And I see many more renovations. In other
words, it's my "Passport to 2015." Woo, yes.
(BEGIN VIDEO CLIP)
QUEST: Visitors to Beijing will be able to stay in the latest of the country's spectacular hotels. It's the Kempinski Sunrise. It opens its
doors this week. Encased within 10,000 glass panels, lit up at night by LEDs and it has the appearance as you might guess of a rising sun. Two
distinguished hotels on opposite sides of the tunnel will be reopening after a long (inaudible) refurbishment.
The Lanesborough is due to welcome our guests in London from spring next year after renovation work lasting 18 months. And the long-awaited return
of an old friend, the Ritz in Paris will finally reopen in 2015. Technology will continue to revolutionize the way people can stay in
hotels. Accommodation choices are increasingly being made online on social networks like flight TripAdvisor, instant messaging apps such as WeChat in
China and Line in Japan are used to book rooms. And the lack of free Wi-Fi will become the biggest reason not to book a hotel.
As for those room keys, they will start to appear as phone apps. Those in search of Jeeves the butler, not the search engine, the Starwood has the
robotic butler known as the Botlr. Being served breakfast by a Botlr on your hotel balcony overlooking one of the wonders of the world - now that's
a perfect order for a bragging. And a particularly boastful kind of selfie. Of all the trends, this will be the hottest in 2015. And some
hotels will even reward guests who post braggies on their room. Braggie up in 2015.
(END VIDEO CLIP)
QUEST: What a week it has been. Thank you. I hope you've been - I've thoroughly enjoyed having our nightly conversation on business and
economics. It wouldn't be the same if we weren't together. And that's "Quest Means Business" for tonight. I'm Richard Quest in New York.
Exceptionally busy week. And whatever you're up to in the hours ahead, (RINGS BELL) have a lovely weekend and I hope it's profitable. Let's get
together on Monday.
(END QUEST SHOW)
(BEGIN MARKETPLACE AFRICA)
DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Hello and welcome to "Marketplace Africa." I'm Diana Magnay and this week we're in Uganda
talking beer and mineral wealth. First up, we visit Nile Breweries on the banks of Lake Victoria and find out about an innovative local brew which
mixes good taste with sound business practice - a sure market winner.
(BEGIN VIDEOCLIP)
MAGNAY: The Apego Drinking Club meets every evening after work. Between long drafts, they swap stories over a pot of Ajon, the powerful home-brewed
beer made from local grain. It's a huge favorite with many Ugandans.
GREG METCALF, GENERAL MANAGER OF NILE BREWERIES: It started back in 2000, and really what it starts with is if you look at Uganda's per capita
consumption of beers or per capita - and it's one of the lowest in Africa which makes it actually one of the most in the world. A very, very lower
per capita consumption of beer. There have been official reports including World Health Organization say that Uganda's gotsamongst the highest per
capita consumption of alcohol in the world.
MAGNAY: Greg Metcalf is the general manager of Nile Breweries, one of Uganda's oldest and most established breweries. The brewery's in the
lakeside city of Jinja on the banks of Lake Victoria and meters from the source of the mighty Nile River.
METCALF: So there's this huge gap between total consumption of alcohol and consumption of beer and that gap is filled by a huge variety of informal,
illicit type of brews, spirits, concoctions. And they can be dangerous obviously, and there've been a number of recorded incidents. But they're
also unregulated. So you don't quite know what's going in there because they're unregulated their own tax as well.
MAGNAY: The Nile Breweries since 2001 owned by global brewing giant SABMiller decided to make a plan. They set out to find a local grain they
could use to brew beer.
METCALF: Our company engaged in this initiative with government and with local farmers to say, well, if we could create beers that use local
ingredients instead of your traditional imported malt and (hoffs), we will get a concessionary right of excise and pass that directly onto to
consumers. So you make a beer more affordable to those consumers who currently drink all of this illicit alcohol.
MAGNAY: With an eye on potential tax concessions, the brewery's approached Uganda's National Resources Research Institute in Serere, roughly three
hours northeast of the nation's capital Kampala.
METCALF: The sorghum was identified as a crop with lots of surplus in Uganda. But typically a subsistence crop and the initiative said well,
let's try and brew with sorghum.
(John (ph)): When the SABMiller first came to Uganda, they were using barley for brewing. So they started looking for a local ingredient to use
in the beer brewing. So they conducted the mee (ph) to Serere to provide them with a variety that could be tested/tasted (ph) for lager beer brewing
and out of the six varieties which they gave, Epuripur performed best and it was taken up in 2002 for lager beer brewing. This sorghum has a high
starch content about 7 to 1 (ph / 71 (ph). Protein is about to 9.7 and then it had low fat and it had a very low tines (ph). So it was actually a
excellent raw material for brewing.
Male 2: But we need to maintain the thick color. It's (inaudible) white. Also --
MAGNAY: John (ph) has been cross-breeding sorghum for a number of years, creating varieties that are targeted to specific end users.
(John (ph)): For brewing, we look at the - those varieties with the good brewing qualities - high starch, low protein and a lot and then a
fourfoots (ph) we target those varieties which are a bit brown and they are conier(ph) - brown and a flora because they make good bread.
MAGNAY: Once a seed has been produced, it's passed on to the farmer who grows under contract for the breweries, elevating his business from
subsistence to commercial and ensuring a healthier livelihood.
Male, VIA INTERPRETER: The introduction of this new seed has brought more income into my family. And I can use it to pay school fees and other
household necessities.
METCALF: The incomes that go to farmers - and they're something like $5 million of income going to farmers directly today annually. And you know,
there's something like 20,000 farmers that are benefitting from this. You know, this is a win-win-win situation. And our total footprint if you look
at our value chain from the farmers to suppliers to trade partners, distributors, drivers etc., you know there's some - the figures are
something like 200,000 incomes are dependent on us in some fashion or other. And it's really from this initiative that this was grown from very,
very small beginnings.
MAGNAY: After harvesting their crop, the farmers bring it to a collective transport point. And from here it makes the drive to the brewery to be
made into beer.
FRED BALIKAGIRA, PLANT MANAGER: The process of making beer starts with what we call the brewing process. In whiskers (ph) you get grain with is a
sort of starch. It can be in form of malt, it can be sorghum and other sorts like sugar. So you combine that into a simple sugar and another
complex sugars that you extract from the brew house. And then you add yeast and then you start off the process called fermentation. Fermentation
process - the end product of fermentation is mainly the alcohol and carbon dioxide. It's that that the brewer is interested in and the process which
takes anywhere from two weeks to three weeks. At that time the beer is ready to be filtered and ready for packaging.
MAGNAY: Ugandans have embraced the brand. Because of the tax concessions it's an affordable product and it's local.
BALIKAGIRA: They're proud of the raw materials that make the beer because they are part of it, they grow it, they grow the sorghum. The other thing
is that the quality of the beer is quite very, very, very high. We've got a high-quality product.
MAGNAY: This local sourcing initiative has proven very successful. SABMiller has already initiated the program in Ghana using Ghanaian surplus
crop cassava. Plans are underway to establish this initiative in other African markets.
METCALF: We believe that Africa's a growth continent. Not just because the economies are growing, but because there's such low per capita
consumption compared to other regions in the world. And if we can do more of this, we will create very healthy businesses.
(END VIDEOCLIP)
MAGNAY: Proving that partnerships between government, big business and micro enterprise can really work. Next up, a conversation about Uganda's
rich mineral wealth.
ELLY KARUHANGA, PRESIDENT, UGANDA CHAMBER OF MINES AND PETROLEUM: It's absolutely amazing what we have down here in Uganda.
(COMMERCIAL BREAK)
MAGNAY: Welcome back to "Marketplace Africa." Mr. Elly Karuhanga, leading attorney, company chairman and president of Uganda's Chamber of Mines and
Petroleum talks to us about the treasures which lie beneath Ugandan soil, appropriately known as the 'Pearl of Africa.'
(BEGIN VIDEOCLIP)
KARUHANGA: Uganda is uniquely endowed with many, many minerals ranging from gold, diamond, cobalt, cooper, tin. We are very fortunate to have these
minerals deposited here. We did not know this until very recently when we carried out an area magrick (ph) survey and where it was established very
unique anomalies. It's absolutely amazing what we have down here in Uganda.
Uganda should be very proud and very lucky country. The challenges are many, many - enumerable. First of all, the fact that you know that you
have established the minerals there, you need to do a lot of exploration. And this costs quite a bit of money. Mining companies all over the world
do not like the in-exploration space. They want to be in the produce space,. That is why we are saying government should set up a company - a
national exploration company - which does the actual exploration and then when it becomes to production, then we'll go out there and asking for
(inaudible), part and parcel of our newfound wealth.
We will not want to monopolize for Ugandans only because we'll not be able to raise the money to invest in such deep ventures. So we are looking for
foreigners who have saved money who can bring it to our country and be our partners. I think the story of exporting soils from Africa is ending. And
rightly so.
I have a lot of hopes in Uganda, not only in the mining and oil and gas space - no. But in tourism. We should be a mite bigger foreign exchange
honor (ph) than even oil and gas and minerals. We have to make sure that we expose ourselves to the world. The world has not known our beauty. Now
we want to uncover Uganda and have our space and our seat on the table in the world for investors to come and see what they can get here.
MAGNAY: Thanks for watching "Marketplace Africa." You can visit us online at cnn.com/marketplaceafrica. I'm Diana Magnay. See you later.
(END "MARKETPLACE AFRICA")
(COMMERCIAL BREAK)
END
