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As the world reopens, professional services firms operating abroad need to understand their risks.
By Stan Bernard, Head of Financial Institutions and Professional Services, U.S. Middle Market, Zurich North America
Parts of the world are starting to open up again. As the global pandemic wanes in some regions, international business travel will start to resume, reinvigorating opportunities abroad. For professional services companies, such as legal and accounting firms, business consultants, advertising agencies and others, a return to some normalcy is welcome. But, it also means the return of risks associated with international business that have been near-absent for more than a year.
From kidnap and ransom risks to compliance with local laws and regulations, professional services firms face numerous risks when doing business across borders. Doing business abroad requires the insights of partners who understand the risk landscape in countries where you have people, facilities and assets at risk.
Foreign travel risks
While some large professional services firms may have owned operations abroad, the majority of foreign business activities will likely involve travel by senior managers and other team members who are key to overseas transactions and operations.
An obvious risk whenever traveling abroad is the possibility of a medical emergency. Further, a traveling employee may face legal issues that he or she may not be readily able to manage. Professional services employees traveling abroad need reliable travel assistance services able to come to their aid quickly, from helping arrange medical care and repatriation to untangling foreign legal complications. Zurich’s Travel AssistTM is an example of just such an offering and is automatically included in our International Middle Market Envoy and Exporter Solutions programs.
While an unpleasant possibility, another international travel concern that should be on the minds of executives and others journeying abroad … the risk of kidnap and ransom.
Risks typically covered by kidnap and ransom policies include:1
- Kidnapping for ransom
- Threats to kidnap, injure, or kill for ransom
- Wrongful detention/holding under duress without a ransom demand
- Hijacking of an aircraft, motor vehicle, or waterborne vessel
Sadly, these events happen with disturbing frequency. For example, a Chinese national working in South Korea was detained for allegedly stealing protecting trade secrets. While they were eventually acquitted, they were left with consulting and legal fees as well as costs for rest and rehabilitation. In another instance, an executive traveling in Mexico was kidnapped, forced to withdraw funds from an ATM, held overnight, and beaten before being released. The traumatic experience resulted in medical care and counseling services in addition to his personal property loss.
Obviously, not all countries carry the same degree of kidnap and ransom risk, so it is important to keep up to date with the U.S. State Department’s travel advisories.2 As another point of reference, your travel assistance provider may also offer travel guidance and updates. For example, Zurich’s Travel AssistTM, in partnership with WorldAware, a leading risk management company, provides policy holders with a comprehensive range of personal and travel security assistance services (e.g., policy holders can subscribe to daily intelligence briefings and security updates via email). It is also important to make sure your kidnap and ransom insurance has adequate limits to help ensure the safe return of an abductee. For example, Zurich’s Kidnap and Ransom coverage, available as part of our International Middle Market Envoy and Exporter Solutions programs, can provide up to $5 million in limits.
Compliance knowledge is invaluable
Compliance with local laws and regulations is important for all U.S. companies doing business abroad, whether dealing in commodities, manufactured products or services. And for law firms, accounting firms and technology companies managing large stores of data, compliance can be of particular concern. Data privacy violations can result in fines and other civil penalties, and perhaps even suspension of the ability to do business.
For example, consider the European Union’s General Data Protection Regulation (GDPR), which took effect in 2018 and increases civil liability associated with the management of online user data. For professional services firms managing large swaths of data, any perceived mismanagement of personal and sensitive client data now presents a significant risk of civil liability.
Local insurance laws and regulations can carry severe and costly penalties for insurance customers, brokers and carriers if a violation occurs. Compliance failures considered severe enough can even result in criminal charges – all of which make it important for professional services companies doing business abroad to have access to up-to-date compliance information.
This is why Zurich launched Zurich Global Program Support (GPS) Tool, a global guide for structuring international insurance programs, putting a world of insight at your insured’s fingertips through the MyZurich portal. And, brokers can also access the Zurich GPS tool on behalf of their multinational customers.
Directors and officers international risk
The specter of directors and officers (D&O) liability is always present when senior leaders are making consequential business decisions, both stateside and in every country where they operate. That’s why every professional services business needs directors and officers (D&O) insurance with sufficient limits for potentially costly litigation in multiple countries.
With the number and settlement amounts of U.S. securities class action filings continuing to trend upward, it is important to make sure that U.S. D&O claims will not erode limits available to protect executives abroad. And keep in mind that the number of D&O lawsuits related to data breaches is also on the rise, further emphasizing the need for adequate coverage for all key decision makers.
Choose an ally with global capabilities and knowledge
For professional services firms and consulting companies, expertise is at the heart of everything they do, defining their brand and building the trust they need to be competitive. And just as their expertise helps customers navigate critical business needs, they too need the right expertise to help them navigate unfamiliar global risks.
Especially at a time of relative political and societal flux in many nations, having the assistance of a risk partner with a broad, multinational presence, people on the ground in many countries, and global knowledge and tools is invaluable. For example, Zurich’s global network is one of the largest in the insurance industry, with coverage in 215 countries and territories and powered by innovative technology that provides transparency and a holistic view of global programs. Professional services firms doing business abroad must expect and demand these capabilities from their insurance carriers for the protection of their assets and people.
The pandemic is starting to wane, and the world is calling. The opportunities for professional services firms with multinational vision are growing by the day. Make sure your firm and your people are prepared to leverage those opportunities by understanding the risks you face and the resources and assistance available to mitigate them.
Learn more about Zurich solutions and risk insights on global programs for international businesses.
- Global Risks Report: Building resilience in COVID-19’s shadow
- 3 trip saving tips to share with international travelers
- Zurich Exporters Solution helping manage your international risks
1. Kidnap and Ransom – Issues to Consider. March McLennan Agency. 2021.
2. Travel Advisories. U.S. Department of State – Bureau of Consular Affairs
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