Expect the Unexpected - How K&R Risks Relate to Everyday Business - Are You Covered?
Has Kidnapping Risk Actually been Increasing?
Since 2001, the threats associated with international organizations have changed, growing each year. Some dangerous hotspots are exhaustively covered in the news, such as the Middle East or Somalia, but others might be unexpected. Kidnappings can and do occur everywhere—no country is completely safe. The Americas accounted for 21% of foreigner kidnappings in 2014, predominately in Mexico. Some criminal organizations use kidnappings as a source of revenue. While foreigner kidnappings typically get all the press, both foreigners and your national staff are at risk in these types of attacks.
Although some companies believe that this is only a risk for large corporations, all businesses, universities, and nonprofits are at risk. “Organizations need to realize that once employees are on the ground working in the emerging markets their risks of a kidnapping related event has increased” said Kevin Pedone, a producer for Clements Worldwide. Ensuring employees understand the potential exposures of working overseas is the responsibility of the employer. Some recent cases of kidnappings have included:
- A global charity CEO’s daughter was kidnapped. When no ransom demand was received, a PR firm was hired to publicize the missing girl and she was recovered with the help of local authorities after 2 weeks.
- The president of a U.S. university was kidnapped while traveling to Southeast Asia. It took several months to negotiate his release. His salary was continuously paid to his family while other costs to the university included ransom and medical expenses.
- The executive director of a commercial construction firm in Mexico was kidnapped with a ransom demand sent almost immediately. A hired consultant was able to quickly negotiate terms and he was released within 2 days. “Companies need to have a plan to deal with these types of issues and consider the legal and monetary consequences that can ensue”, said Pedone.
How Do You Possibly Prepare for Kidnappings?
Many HR managers worry about scaring employees. “In reality, it is their duty of care to provide proper training to their employees about the risks abroad,” said Pedone. Making sure HR is armed with up-to-date information about the region where staff is posted or traveling to is crucial. Employees need to know if they are travelling to a high-risk zone for kidnapping because it allows them to increase their own awareness. In the end, duty of care is a shared responsibility between the employee and the employer; however, the employer needs to initiate the training.
A full fledge kidnap for ransom is not an average occurrence. In most parts of the world it is considered low risk, but the costs can be catastrophic. Express kidnappings are more prevalent in some regions of the world, so employees should understand this risk. Express kidnappings are kidnappings where the employee is picked up by what they believe to be a taxi and then forcefully taken to multiple ATMs at gunpoint to withdraw funds.
Giving your employees tips on scheduling car services from reputable hotels, never taking a cab from off the street, and never walking alone at night can help to mitigate the most common risks associated with kidnappings.
When you are sending employees to some of these higher-risk environments, organizations need to consider the business cost to the organization. “Self-insuring is not the best option when it comes to any size organization. The larger companies have larger lawsuits because they have bigger pockets and the smaller companies can’t afford a lawsuit because it could bankrupt the organization,” explained Pedone. The cost of dealing with an event of this nature can easily be in the hundreds of thousands of dollars…even before a ransom is paid.
All this information should be part of your risk management plan for addressing kidnappings, but most organizations lack the knowledge or skills to start putting together such a plan. This is where a crisis management firm comes in – they can help do an initial assessment and provide resources to monitor risky areas, where your employees travel. Kidnap & Ransom insurance policies will often cover consultation pre-event with a crisis management firm.
What do K&R Policies Actually Cover?
“Why buy kidnap and ransom insurance? Many people have the misconception that kidnap and ransom insurance is just about funding a ransom payment, but it is much more than that,” said Pedone. A policy provides tools and services for dealing with the situation before, during, and after.”
Kidnap and Ransom coverage may provide access to an online portal that provides up-to-date information on the political environment of a country where you have business. This will help keep you informed so that you can set up evacuations if necessary, and possibly avoid having employees kidnapped and held for ransom.
K&R policies also give you access to crisis response specialists to help deal with the event as a whole. These specialists, usually former military or FBI professionals, can give you training and advice on developing an educational program for employees. Their most important function is to manage a kidnapping situation, usually on-site. These experts have dealt with kidnappings hundreds of times and have the expertise necessary to deal with the situation including direct negotiations with kidnappers and exchanges, but also dealing with local authorities, the press, and the family.
If money needs to change hands, the team can take care of the drop-off. Drop-offs can be dangerous or complicated, so professional experience is essential. For instance, in the event of piracy you may need to drop the money off on a ship, requiring the use of a helicopter. Sadly, not all of these situations end with a happy outcome (see chart below), but at least your company will know it exercised its duty of care for its employees.
Items to Consider When Looking at a K&R Policy
“Not all K&R policies are the same. Make sure you have a checklist of your needs when researching a policy,” said Pedone.
Key questions to consider:
- Does the policy include express kidnappings? As described above, express kidnappings may be more common than kidnap for ransom cases in some areas, but are still very emotionally damaging for employees.
- Would the policy adequately cover everyone who supports the organization – such as national employees, volunteers, and consultants? Ensure you have a complete list of who needs to be covered when negotiating a policy and what is the definition of an insured person in your policy.
- Do you need add-ons such as Business Interruption, or Political Evacuation and Salary Continuation insurance? When key employees are not there to manage the business, the business will suffer. Also, many of these events happen in areas prone to civil unrest. To ensure the safety of all employees, an evacuation provision under a kidnap and ransom policy can save money and provide critical coverage. Ensure your policy does not require you to wait for your government to issue the order, but instead can allow an embedded crisis response company to make that decision. If you wait for a government order, your employees may already be in undue danger.
For the safety of your organization and your employees, it is important to follow these three steps:
- Develop an emergency plan for your organization.
- Provide your employees with the proper training.
- Document the training for future learnings.
For more information on kidnap & ransom policies, reach out to Clements Worldwide for a free consultation.
This article was written based on a recent conference presentation by Kevin Pedone of Clements Worldwide. To receive a copy of the presentation, please reach out to email@example.com.