Magazine article Risk Management

Going Global with Wholly Owned Networks

Magazine article Risk Management

Going Global with Wholly Owned Networks

Article excerpt

Establishing widespread international operations elevates any company's insurance and risk management strategy to a more complex and expansive level, subject to multi-country legislation, practice and corporate risk philosophy.

When reviewing potential global brokerage partners, there are two distinct options: brokers that wholly own their international brokerage network to the fullest extent allowed by law; and brokers that partially own some of their foreign networks or who work through an affiliated network of offices. The brokerages that own their networks, however, have a distinct advantage over those that do not.

First, wholly owned networks realize economies of scale and efficiencies because best practices are in place to reduce the "reinvention of the wheel" that can occur in affiliated networks, particularly those that are subject to frequent changes of management, ownership or financial stability. Moreover, an owned, local office has established guidelines within a client's scope of service. It must comply with designated protocols and there is accountability both internally and externally to the client across all levels, supported by reporting structure and common ownership.

Second, wholly owned networks offer a range of exclusive benefits that nonowned networks cannot, such as uniform information technology systems, a professional code of conduct, client focus, service standards and corporate values.

Third, the local network of offices, in cooperation with the coordinating office, implements and executes its component of the client account plan. These "in-country" services can often be extensive and technical, and can be driven by both the local and corporate client objectives.

Affiliated networks, in contrast, either cannot deliver these services or do not do so as well as a wholly owned network. In addition, a common solution to poor performance in a nonowned network is to change to another nonowned office. This involves frictional costs of bringing a new party up to speed with no guarantee that the service or expertise that they provide will be any better. Nonowned affiliates could also be purchased by another firm, possibly upsetting its financial stability and service level. …

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