The View | VTech’s hacking and a Hong Kong culture which pays little attention to IT security

VTech Holdings Ltd. became computing history’s biggest ever database hack targeting children when the confidential information of 6.4 million children and 4.9 million adults were stolen.

The personal information stolen, which was not encrypted, included names, passwords, secret questions and answers for password retrieval, IP addresses, postal addresses, download histories and children’s names, genders and birth dates according to VTech. It appears that VTech’s I.T. managers failed to implement even basic encryption practices on their data.

The crime attracted global attention partly because about half of the accounts hacked were based in North America, which represents VTech’s biggest market, comprising nearly half of its US$928 million in revenue for the six months ended in September.

VTech’s Chairman and CEO Allan Wong said it is too early to put a figure on the financial impact, but he has not dealt with the disastrous impact on VTech’s brand. It may be finished unless he can decisively communicate beyond bland corporate speak and assure the market and ultimately parents that his products are safe.

Branding represents the trust between the company and its consumers. Its compromise is more destructive and pernicious than financial losses. VTech is about to find this out the hard way.

The problem with Hong Kong firms like VTech, where their roots started in low margin, contract manufacturing services, is that they can’t escape the mentality of an import-export, low cost trading culture.