As U.S. and Canadian businesses 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 recent survey, presenting an opportunity for producers to help manage that risk.
The 2014 Chubb Multinational Risk Survey identified the top overseas business threat as supply chain failure (19 per cent), followed by a data breach/cyber event (15 per cent), with government/regulatory investigation and political instability tied for third at 13 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,” says 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.”
Natural catastrophe ranked fourth out of the 10 events listed at 12 per cent.
The survey also found that one in two 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).
“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.”
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.
Supply Chain Risk
Despite their concern regarding supply chain failure, only 56 per cent of companies have a business continuity plan that addresses overseas risks, and 22 per cent of companies that do have a plan have never tested it.
Larger companies (74 per cent) were much more likely to be prepared for overseas business interruptions than smaller companies (48 per cent).
“The lack of business continuity plans and testing is disturbing,” said Ellis. “Companies are left exposed to significant supply chain failures and associated business interruption costs that can undermine their financial results and stability. It is equally important for companies to assess whether their overseas suppliers and vendors also have up-to-date, well-tested business continuity plans.”
Forty percent of respondents require their overseas suppliers and vendors to have a business continuity plan.
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