The 3 Things Businesses Should Know Before Expanding Overseas By Sergio Sanchez, Clements Worldwide
The situation was quickly deteriorating, and dangerously so. It was early 2011, and the Libyan government started a harsh crackdown on street protests. With the violence rapidly spiraling out of control, thousands of foreigners were clamoring to get out. In the middle of this chaos were three international schools, which also happened to be our clients.
Rewind to three months earlier, to December, 2010 before the violence had started. We insisted on obtaining a visa to travel to Libya to meet with the school administrators and advise them on Political Risk Insurance and outline an evacuation plan. After much red tape, we obtained the visa, met our clients, and hammered out a plan.
Sure enough, everyone’s worst nightmare became a reality as Libya descended into civil war. We were shocked and relieved, however, to turn on CNN and see one of those American teachers we met describing her escape from Libya, working directly from the playbook we had written for her school.
Things to consider before expanding overseas
Today, businesses and NGOs of all sizes are increasingly looking overseas to expand as a necessary step in their business development. PricewaterhouseCoopers predicts a 50 percent growth in overseas assignments by 2020. But how many organizations are fully prepared to meet that challenge? Just like in the real-life example above, businesses need to prepare for the risks that a foreign country can bring. To help with this challenge, I’ve outlined three important questions CEOs and chief risk officers should ask themselves before setting up operations expanding overseas.
- What level of risk does the country pose? From terrorism to political violence to economic instability, businesses need to measure levels of risk in each country before expanding there. We estimate Thailand, for example, to be less risky now than it was in 2014. Nigeria, however, has an increased risk profile in 2015, due to oil price depression, which has hurt the ability of state-owned enterprises to pay bills, among other domestic issues. A good understanding of the level of risk and the country’s political process also can go a long way. Normal events like elections can fan political flames as social media has become a catalyst for unplanned street protests. Conducting a risk assessment will help provide a framework for setting up your operations and what types of insurance coverage you may need. Country risk profiles, found online can help you initiate this process.
- Are my employees protected? Catching a stomach virus in South Africa or being hit by a motor bike in Vietnam are examples of very possible situations that your staff may face. Make sure your employees have the health coverage and insurance they need if an accident occurs — and in emerging markets make sure they have access to health facilities and providers who work to Western standards.
Executives and directors need further protection from lawsuits related to their professional activity, so double-check that director’s liability coverage works both in the U.S. and overseas.
Kidnapping and ransom is also a rising possibility across the globe, from Mexico to more high profile cases in the Middle East and Africa, such as the American missionary recently kidnapped in Nigeria. Therefore, check that your employees are trained and prepared for this situation and you’re managing your risk, perhaps with Kidnap & Ransom Insurance.
- Are my assets protected?
In addition to your employees, your assets also need protection. While the unexpected could occur –spontaneous civil unrest, for example – more common events can slowly wear away at your business’ infrastructure.
China is relatively safe for individual employees, but many of the roads are in poor condition. This can be very costly for your auto fleet due to maintenance and replacement needs. Do your homework on the country and remember that when it comes to expanding abroad, sweat the small stuff.
In addition to conducting the right risk assessments and creating protective measures, it is important for companies to test their plans and conduct mock simulations to see if they have any weaknesses. Understanding the challenges and risks your company faces before it expands overseas is a critical step in ensuring long-term success and safety.
Sergio Sanchez is chief marketing officer of Clements Worldwide, a global risk manager and insurer of over $2 billion in assets for international organizations and government agencies, including the U.S. State Department and the United Nations. He has over 20 years of insurance and financial services experience and works out of the company’s international headquarters in Washington, DC.