Are You Doing Enough to Grow and Protect Your International Assets?
Global trade and the exchange of commercial services across borders, especially into developing economies, is the new key driver of strategic growth for an increasingly larger number of multinational organizations. According to the World Trade Organization, merchandise imports into developing economies grew by five percent last year against an average global GDP growth rate of just two percent. The growth in export of commercial services worldwide topped six percent, three times the rate of growth from the previous year.
China’s recent economic slowdown notwithstanding, the global commercial activity continues to expand, particularly in Europe and throughout the developing world.
In this context of increasing international expansion among commercial enterprises and even not-for-profit organizations, protecting personnel and assets abroad against international risks is an absolute necessity.
This is especially true in developing countries—including in some of the very countries that promise the highest rewards in terms of investment opportunities and new customers.
According to the recent Clements Worldwide Risk Index, 28 percent of senior managers at international organizations and NGOs stated that political unrest was their “top concern,” while 21 percent admitted being “not prepared at all” for a terrorist attack overseas. These concerns stem from the realities of the global marketplace, and it suggests that international organizations must get real about their international insurance needs and, therefore, the protection of their most important assets abroad.
The direct link between international insurance and sustainability of overseas investments is often downplayed by global financial analysts. Increased political risks and unexpected bursts of civil disturbances and political violence, even in international locations typically considered stable, have the potential to generate significant –sometimes catastrophic– losses to organizations. Such events may also drive commercial or NGO insurance premiums higher, affecting organizations that delay securing their international insurance coverages and limiting expansion and growth plans overseas.
We’re seeing that right now in Libya. The political instability and intermittent violence there has made political risk, Kidnap & Ransom (K&R) and related international insurance very difficult to obtain. This has led major infrastructure and oil companies to all but halt additional investments in that country, in spite of significant opportunities.
There are relatively easy steps executives can take to manage and significantly lower these risks. We’ll outline how you can better prepare your organization for future international growth in an upcoming article on this site next week.
Sergio Sanchez is Chief Marketing Officer of Clements Worldwide, a leading international insurance provider with offices in Washington, DC, London and Dubai.