1. ChoicePoint Problem Definition Authors Dionne Hill Sungkuk Ji Scott Schomaker

2. Contents 1.Framework 2.History 3.Business Vulnerabilities 4.Government Regulation 5.Next Steps

3. 3 ChoicePoint’s success in monetizing data is also increasing the impact of those data. As the negative impacts increase, a regulatory response hurting the business becomes more likely. Value Misuse Data Errors Privacy Concerns Impact Regulatory Response A Framework for understanding ChoicePoint’s challenge.

4. 1997, ChoicePoint serves insurance clients 2000, merges with DBT Online 2004, acquisitions provided new technologies 2004, provides information to 7K federal state and local law- enforcement 2005 Service grows over time 3.7K employees, 5K customers Adds 6B new public records to database, 13B total Adds data sharing among databases and electronic maps $117M in federal contracts, enforcement 5% of revenues, 100K customers 19B public records held

5. The ChoicePoint Business Vulnerabilities 5 DATA IN Collecting Business data Purchasing Databases Recording Public Acquiring competitors Misuse Errors CHOICEPOINT Maintain records Consolidate Databases Expand service lines DATA OUT Credit Checks Background Checks Direct mail lists Privacy Concerns

6. Costly regulatory environment US Constitution, no “right to privacy” Patchwork of federal, state, and local laws FCRA passed in response to widespread criticism ChoicePoint 550K in FCRA violations in 2003 US Constitution, no “right to privacy” Patchwork of federal, state, and local laws FCRA passed in response to widespread criticism ChoicePoint 550K in FCRA violations in 2003 Current State Breach leads to additional regulations and lawsuits Social Security restrictions, cost $15M-$20M in revenues Restrictions and bans like those in Europe and Mexico Other costs implications unknown Breach leads to additional regulations and lawsuits Social Security restrictions, cost $15M-$20M in revenues Restrictions and bans like those in Europe and Mexico Other costs implications unknown Future State Additional regulation causes value decrease and threatens current model; ultimately affecting ChoicePoint’s bottom-line and ability to provide information to clients.

7. Next Steps Analyze and prioritize potential regulatory change impacts Engage with Executive team over details of the problem definitions 7

8. Follow-up Questions 1.What are the other cost implications of changes to the business model or government regulations? 2.Are the endnotes available? 3.Do ChoicePoint contractors only collect information? How many does the company employ? 4.Are misuse, privacy concerns, and operational errors all weighted equally? 5.What is the current shareholder sentiment?

9. Revenue Mix and Share of income 9 Product lineRevenue mix Operating Margins Income (millions) Share of income Insurance Services40.0%55.5% $ 203.9563.24% Business Services40.0%21.0% $ 77.1723.93% Government Services9.0%25.6% $ 21.176.56% Marketing Services11.0%20.0% $ 20.216.27%

10. ChoicePoint Growth ‘00 – ‘04 10 CAGR = 16.4%CAGR = 30.3%