Risk managers at companies with global operations may appear to be superhuman, but their actual key to getting this difficult job done is relying on an international support system that keeps up with local regulations, customs, languages and other intelligence that informs every decision they make.
NU spoke with several risk managers with a global purview, and one broker, to discover just how complex the global risk-management equation has become, in both navigating foreign territories and identifying the potential threats to business therein.
William J. Montanez
Director of Risk Management
Ace Hardware Corp.
Oak Brook, Ill.-based Ace Hardware does business in more than 60 countries and regions, among them South America, the Caribbean, Dubai and Malaysia, and the company is currently looking to expand to Russia.
For risk managers, the most critical part of setting up shop in any new region is identifying which coverages must be in place before a company can even move in, says Director of Risk Management William J. Montanez.
In Dubai, for example, “we had to buy local coverage before we had a presence,” he recalls. “We know what our risks typically are, based on our experience in the U.S., so we try to replicate the domestic side and also bring in insurance advisors to help us walk through the coverages we’ll need in that country. It’s a dynamic marketplace, so things are constantly evolving.”
While Ace’s retail locations are independently owned, the company has an associate operation in Shanghai and warehousing operations in Panama City and Dubai—both of which present major business-interruption risks if compromised.
“[Our biggest] exposure is in those locations,” says Montanez. In addition to inventory and offices, he adds, “we have Ace employees on the ground in all three locations.”
Ace’s coverage, he explains, is mostly related to shipments in and out of those locations—Ocean Marine, Cargo and Business Interruption.
“We try to place as many coverages as possible in our master program, which is controlled by the corporate office, and we place any local policies to comply with local laws,” he says.
Montanez is a member of NU’s Risk Managers Advisory Board.
Director of Risk Management
Headquartered in Salt Lake City, Alsco Inc. runs commercial laundries in 14 countries, including New Zealand, Singapore, Switzerland and Thailand, as well as in the U.S. Its laundries clean everything from uniforms to mops to flat goods such as tablecloths and napkins, depending upon the demand in a particular country.
Alsco’s customers come from a variety of industries: hospitality, medical, manufacturing, even clean rooms for the production of computer chips. As the company’s business is so varied, so are the exposures against which it must be insured—in a vast swath of territories.
Director of Risk Management Randall Brough says Alsco has risks that include property exposures, business-interruption exposures and casualty liabilities.
The strategy for purchasing coverage, he says, is to find a carrier large enough to issue a policy on a global basis—and to issue local admitted policies in each of the countries in which Alsco does business.
That way, Brough says, “we will comply with country requirements, but they all report up to a master policy so we don’t have any gaps in coverage.”
Brough’s biggest challenge? “The fact that outside of the U.S., most countries do not embrace high deductibles and risk-retention programs,” he says.
For example, when a high-deductible program was introduced to several of its laundries in Europe “with the understanding that they would be responsible for the dollars within their retention, they hated it.”
The reason was that they were used to “first-dollar coverage, where you just pay your premiums, and if you have a claim you send it in and you’re done with it,” he says.
That model was altered, however, when those laundries were made more loss-responsible and were told the better their claims were managed, the more they would save.
“That was a huge fight for the first couple of years, until they began to see the savings,” Brough adds. Now that they have been under the program for several years, “the savings are quite significant.”
Director of Insurance and Risk Management
New York University
New York University has students, faculty and staff all over the world, including campus locations in China, Singapore, London, Buenos Aires, Madrid, Prague, Berlin and Paris.
“I am totally global,” says New York University’s Michael Liebowitz, whose international risks include “student health, employee health, travel risk, travel accident and [other] coverages I can’t discuss.”
From a brokerage perspective, “everything channels back through my domestic broker, Marsh,” says Liebowitz. “That gives me seamless coverage with all my domestic programs.” Working with his broker on a global basis, he says, assures the same level of service at all locations.
“Ours is not a fragmented program; it has been tailored over the years,” Liebowitz notes. “Marsh allows that. They are my eyes and ears on the ground in a foreign country. It’s still a people-and-relationship business.”
Liebowitz is a member of NU’s Risk Managers Advisory Board.
Richard Roberts Jr.
Corporate Risk Manager
Ensign-Bickford Industries Inc.
“We have people going all over Europe and into the Far East,” says Richard Roberts Jr., corporate risk manager for Simsbury, Conn.-based Ensign-Bickford Industries Inc., which is involved with manufacturing in the Netherlands, Australia and Brazil and has an office in Venezuela.
The biggest overall risk challenge his company faces, according to Roberts, is “international travel in general.”
Another challenge, he adds, “is figuring out what needs [our people] have as they’re going into these places and what protections we want to make sure are in place—and to get them educated.”
For example, Roberts wants his employees to know “once you’re on the ground, what taxis you can and can’t use—or if you should even use a taxi. And what hotels to stay at. And we want to get the word out that they should never stay on the first floor of a hotel.”
While he says he relies heavily on his broker, Roberts works directly with insurer FM Global for property coverage. Having the broker stay on top of new developments in each country is “well worth the money,” he adds.
Richard E. Jensen
Managing risk globally has “gotten more challenging for our clients in the last decade,” says Richard E. Jensen, managing director for Willis International in New York.
The reason why is not due to regulatory changes, he says, but rather because of increasing enforcement of those regulations already in place.
“Our clients do their utmost to respect the laws and regulations of each country they do business in, but sometimes it’s not possible to know what all those things are,” Jensen notes. “And it can be difficult to efficiently construct their [companies’ risk] programs without spending all of their money.”
To provide risk managers with the information they need, brokers often serve as their eyes, ears and translators in foreign lands. For someone new at managing the global market, Jensen advises creating or acquiring trusted information sources.
“Even experienced people have a tough time” when managing risk overseas, he observes. “There is a big gray area, where even with the most conscientious effort it’s still not certain a program will be compliant, legal and efficient in many jurisdictions.”
Jensen observes that while many companies have gone more global, a number have tried to lighten their footprint by outsourcing the manufacturing of certain products.
In doing so, however, “you have lightened your property risk and maybe your people risk, but you’ve increased your liability risk,” he says. “There are a whole different set of risk matrices to consider.”