Risk managers at companies withglobal operations may appear to be superhuman, but their actual keyto getting this difficult job done is relying on an internationalsupport system that keeps up with local regulations, customs,languages and other intelligence that informs every decision theymake.

NU spoke with several risk managers with a globalpurview, and one broker, to discover just how complex the globalrisk-management equation has become, in both navigating foreignterritories and identifying the potential threats to businesstherein.

William J. Montanez
Director of Risk Management
Ace Hardware Corp.

Oak Brook, Ill.-based Ace Hardware does business in more than 60countries and regions, among them South America, the Caribbean,Dubai and Malaysia, and the company is currently looking to expandto Russia.

For risk managers, the most critical part of setting up shop inany new region is identifying which coverages must be in placebefore a company can even move in, says Director of Risk ManagementWilliam J. Montanez.

In Dubai, for example, “we had to buy local coverage before wehad a presence,” he recalls. “We know what our risks typically are,based on our experience in the U.S., so we try to replicate thedomestic side and also bring in insurance advisors to help us walkthrough the coverages we'll need in that country. It's a dynamicmarketplace, so things are constantly evolving.”

While Ace's retail locations are independently owned, thecompany has an associate operation in Shanghai and warehousingoperations in Panama City and Dubai—both of which present majorbusiness-interruption risks if compromised.

“[Our biggest] exposure is in those locations,” says Montanez.In addition to inventory and offices, he adds, “we have Aceemployees on the ground in all three locations.”

Ace's coverage, he explains, is mostly related to shipments inand out of those locations—Ocean Marine, Cargo and BusinessInterruption.

“We try to place as many coverages as possible in our masterprogram, which is controlled by the corporate office, and we placeany local policies to comply with local laws,” he says.

Montanez is a member of NU's Risk Managers AdvisoryBoard.

Randall Brough
Director of Risk Management
Alsco Inc.

Headquartered in Salt Lake City, Alsco Inc. runs commerciallaundries in 14 countries, including New Zealand, Singapore,Switzerland and Thailand, as well as in the U.S. Its laundriesclean everything from uniforms to mops to flat goods such astablecloths and napkins, depending upon the demand in a particularcountry.

Alsco's customers come from a variety of industries:hospitality, medical, manufacturing, even clean rooms for theproduction of computer chips. As the company's business is sovaried, so are the exposures against which it must be insured—in avast swath of territories.

Director of Risk Management Randall Brough says Alsco has risksthat include property exposures, business-interruption exposuresand casualty liabilities.

The strategy for purchasing coverage, he says, is to find acarrier large enough to issue a policy on a global basis—and toissue local admitted policies in each of the countries in whichAlsco does business.

That way, Brough says, “we will comply with countryrequirements, but they all report up to a master policy so we don'thave 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-retentionprograms,” he says.

For example, when a high-deductible program was introduced toseveral of its laundries in Europe “with the understanding thatthey 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 sendit in and you're done with it,” he says.

That model was altered, however, when thoselaundries were made more loss-responsible and were told the bettertheir claims were managed, the more they would save.

“That was a huge fight for the first couple of years, until theybegan to see the savings,” Brough adds. Now that they have beenunder the program for several years, “the savings are quitesignificant.”

Michael Liebowitz
Director of Insurance and Risk Management
New York University

New York University has students, faculty and staff all over theworld, including campus locations in China, Singapore, London,Buenos Aires, Madrid, Prague, Berlin and Paris.

“I am totally global,” says New York University's MichaelLiebowitz, whose international risks include “student health,employee health, travel risk, travel accident and [other] coveragesI can't discuss.”

From a brokerage perspective, “everything channels back throughmy domestic broker, Marsh,” says Liebowitz. “That gives me seamlesscoverage with all my domestic programs.” Working with his broker ona global basis, he says, assures the same level of service at alllocations.

“Ours is not a fragmented program; it has been tailored over theyears,” Liebowitz notes. “Marsh allows that. They are my eyes andears on the ground in a foreign country. It's still apeople-and-relationship business.”

Liebowitz is a member of NU's Risk ManagersAdvisory 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 withmanufacturing in the Netherlands, Australia and Brazil and has anoffice in Venezuela.

The biggest overall risk challenge his company faces, accordingto Roberts, is “international travel in general.”

Another challenge, he adds, “is figuring out what needs [ourpeople] have as they're going into these places and whatprotections we want to make sure are in place—and to get themeducated.”

For example, Roberts wants his employees to know “once you're onthe ground, what taxis you can and can't use—or if you should evenuse a taxi. And what hotels to stay at. And we want to get the wordout that they should never stay on the first floor of a hotel.”

While he says he relies heavily on his broker, Roberts worksdirectly with insurer FM Global for property coverage. Having thebroker stay on top of new developments in each country is “wellworth the money,” he adds.

Richard E. Jensen
Managing Director
Willis International

Managing risk globally has “gotten more challenging for ourclients in the last decade,” says Richard E. Jensen, managingdirector for Willis International in New York.

The reason why is not due to regulatory changes, he says, butrather because of increasing enforcement of those regulationsalready in place.

“Our clients do their utmost to respect the laws and regulationsof each country they do business in, but sometimes it's notpossible to know what all those things are,” Jensen notes. “And itcan be difficult to efficiently construct their [companies' risk]programs without spending all of their money.”

To provide risk managers with the information they need, brokersoften serve as their eyes, ears and translators in foreign lands.For someone new at managing the global market, Jensen advisescreating or acquiring trusted information sources.

“Even experienced people have a tough time” when managing riskoverseas, he observes. “There is a big gray area, where even withthe most conscientious effort it's still not certain a program willbe 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 themanufacturing of certain products.

In doing so, however, “you have lightened your property risk andmaybe your people risk, but you've increased your liability risk,”he says. “There are a whole different set of risk matrices toconsider.”