Three Things Any International Risk Manager Must Do Now
The Guardian Global Development Professionals Network, Photograph: Brazil Photo Press/CON/LatinContent/Getty
In the face of confusing or presumably conflicting assessments, what's a risk manager to do?
Hundreds of thousands of protesters taking to the streets. Riots ensue. Confrontations involving armed forces yield scores of people injured. Heavy infrastructure damage is generated by the sustained violence and increased vandalism. No passing bystander is safe. The crisis' toll on lives and property is enormous. Egypt? Syria? Not so fast.
The scenario described above – while certainly applicable to those two troubled nations currently in the news – was extracted from a report on the extensive riots against government corruption in Sao Paulo, Brazil. Or, it could have been from Turkey, following country-wide demonstrations against urban development; or direct from Santiago, Chile, as a result of massive student protests.
And all that happened just a few months ago in June 2013.
Unpredictable risks in unexpected locations
The reality is that in today's volatile environments in most parts of the world, it is becoming increasingly harder for anyone --including so-called risk experts—to predict where next crisis will erupt. More importantly, determining how a given risk could morph into a major loss-generating event for any organization with assets or personnel overseas, can be even more daunting.
International risk managers know that they cannot rely on third-party 'threat assessments', or anecdotal 'expert' risk analyses to do their job. Which leads to the question many managers face: in the face of confusing or presumably conflicting assessments, what's a risk manager to do?
Identify, plan, get smart
Kidnappings, civil unrest, forced evacuations. For-profit and even charitable organisations operating outside of their home country know that any meaningful international opportunity is fraught with new forms of risk. While the potential benefit from operating in foreign countries remain high for organisations, risk managers should take three key steps in order to protect employees, assets and supply chains abroad from existing and unexpected threats:
1. Identify key vulnerabilities and quantify potential exposure: for risk managers, perhaps the most important step – and often the most overlooked as well – is the careful identification of all potential vulnerabilities abroad. Is the company's compound properly guarded and protected from attacks? Are there mechanisms in place for employee evacuations? Are all the organisation's assets and proprietary equipment safe from theft? A comprehensive analysis of the human and financial exposure that the organisation must safeguard in the event of one or multiple crises is a critical first step in this process.
2. Understand policy triggers and plan for contingencies: for international insurance policies to take effect on behalf of the insured organisation in the event of a crisis, specific policy 'triggers' have to be proven to have occurred. Unfortunately, international risk managers often secure a certain coverage without fully understanding what those triggers are, and may actually be unknowingly exposed. Do policies have specific conditions, warranties and exclusions? Must specific risks be declared to insurers? Risk managers must work closely with international insurance agents who can offer valuable advice and help managers develop contingency strategies and post-event action plans.
3. Secure necessary coverage and avoid 'panic buying': Proactively insuring specific risks effectively eliminates the typical 'panic-purchase' of coverage in the aftermath of a crisis. Political risk coverage – already difficult to place for Egypt and Turkey in the wake of recent events – is becoming even more challenging to find. Rates for the region have been high for some time and continue to adjust depending on which losses are emerging. Consulting with an international insurance expert is essential – the sooner, the better.
Irrespective of where the next crisis will flare up, global organisations operating abroad should ensure they are prepared to face any international risk. By following the three steps mentioned above, risk managers will be sure their organisations, their assets and personnel, are appropriately protected.
Call us today at +1.202.872.0060 or 800.872.0067 or e-mail email@example.com to discuss solutions tailored to your organization's insurance needs.