As US and Canadian firms plan to expand their business overseas this year, supply chain failures, data breaches and political instability are weighing heavily on the minds of their executives, according to a survey by the Chubb Group of Insurance Companies
The 2014 Chubb Multinational Risk Survey identified the top overseas business threat as supply chain failure (19 per cent). A data breach/cyber event (15 per cent) was ranked second, and government/regulatory investigation and political instability were tied for third (13 per cent). Natural catastrophe (12 per cent) was ranked fourth out of the 10 events listed. The survey also found that one in two (52 per cent) businesses plans to increase its overseas activity in 2014. Survey respondents expect to increase overseas travel (27 per cent), introduce new products in foreign markets (27 per cent) and increase employee headcount abroad (26 per cent).
“Companies, large and small, continue to seek out new business opportunities abroad, and they increasingly are being confronted by political and economic turmoil, natural and manmade disasters, and regulatory hurdles,” said Kathleen Ellis, senior vice-president and worldwide manager for Chubb Multinational Solutions. “As they expand their international business operations, companies need to take a more holistic or global approach to managing risk.”
Nearly half (45 per cent) of the executives surveyed noted that overseas risks pose a greater threat to their company than domestic ones, while one-third (33 per cent) reported that overseas risks are an equal threat. In addition, nearly half (48 per cent) of the companies had experienced at least one loss related to conducting business overseas over the last three years.
Employee travel risk
Two out of three (69 per cent) companies have employees who travel outside the US and Canada on business, according to the survey. Only 57 per cent of the companies provide emergency medical care or evacuation assistance to those employees. “Companies have a moral and legal obligation to take care of their employees when they travel on business,” said Ellis. “A global emergency assistance provider could mean the difference between life and death when an employee becomes seriously ill overseas or is caught in the middle of a military coup.”
Employees travelling with mobile devices are increasing the potential for cyber-related data breaches, according to the results of the survey. Nearly three in four (72 per cent) companies allow employees to use their own mobile devices, such as smartphones, tablets and laptops, for work. However, companies with fewer than 500 employees (80 per cent) are more likely to permit these devices, compared to 67 per cent of companies with 5,000 or more employees.
“With many employees travelling outside the US and Canada, more mobile devices, often with proprietary company information, are at risk of being lost or stolen,” said Ellis. “The good news is that many, but not all, executives recognise the threat and are taking steps to mitigate the risk.”
Eighty-two percent of companies require at least one security feature on mobile devices used for work, including password protection (75 per cent), encryption (53 per cent) and the ability to remotely wipe clean the device (39 per cent).
Survey respondents were also asked whether their companies have established global social media policies. Sixty-three per cent of the firms have social media policies that extend to overseas employees, and 23 per cent of these firms have tailored the policies for different locations. However, large companies (77 per cent) were significantly more likely to have an overseas social media policy than smaller companies (55 per cent).
“It’s not surprising that larger companies appear to be better prepared to manage the risks that come with an increase in overseas activities,” observed Ellis. “But smaller companies, which may be more financially vulnerable to such risks as data breaches or supply chain failures, can turn to agents, brokers and insurers that have underwriting, loss control and claims resources on the ground overseas to help them manage the risks of their international expansions.”
Chubb’s survey of 300 senior executives was conducted by JLA Strategic Research, an independent public opinion and market research firm.