Magazine article Risk Management

New Challenges in Overseas Exposures

Magazine article Risk Management

New Challenges in Overseas Exposures

Article excerpt

As we approach the year 2000, the "export" of risk management expertise to foreign operations requires not so much having an insurance program in place as the need to implement risk management techniques abroad. There is a rising trend toward exportation of exposures prevalent in the United States, such as directors' and officers' liability (D&O), environmental liability and worker safety, to places where risk managers previously had little need to focus on the issues in global terms. The terms and conditions for risk have changed, not only in industrialized nations, but also in the emerging economies of Latin America and the Asia-Pacific region. Risk management programs are obliged to consider cultural norms, local needs and environments of global operations that have implications in a vast array of countries.

Environmental legislation in the European Union (EU) took an about face one year ago with the publication of the "Green Paper on Remedying Environmental Damage." To date, 80 responses have been received, public hearings held, and a debate by the EU environmental ministers conducted. At this point, there is still considerable debate over what constitutes environmental damages, a question that is fundamental to the laws under consideration. This has prompted those close to the action to state that an early resolution is unlikely.

However, there is much to be gleaned by the BS7750 parliamentary legislation in the United Kingdom. This legislation outlines the process for developing environmental management programs and provides the framework for firms to develop and implement environmental policy. In addition, it ties in the EU's ISO 9000 quality assurance credential process as a component to the establishment of a sound environmental management practice going forward. The ISO 9000 standards are generic international standards that are applicable in any customer/supplier situation. The standards require that objective criteria of quality be built into all activities involved in providing a product or service, including administration, design, procurement, manufacture and installation. These standards are intended to be used worldwide and form a framework for risk management.

These legislative developments mean that techniques that have worked for the U.S. side of manufacturing operations have real meaning for the United Kingdom and other areas. For example, Mexico will be affected by the North American Free Trade Agreement (NAFTA) sidebar agreements; and South Korea and possibly other Asian countries by the adaptation of ISO 9000 standards. The EU will continue to focus on the immediate problem of cleanup, and this will center around getting it done through cooperation, not through "potentially responsible parties." They will then use the risk management framework of BS7750 to address the ongoing management of the environment again through cooperation and quality process, not legislation of emission levels or acceptable levels of contaminants.

An increasingly aware public and the emergence of special-interest groups abroad will demand legislative movement to protect the environment. The considerable experience of the U.S. risk manager in dealing with anything like Superfund will go a long way in helping develop a comprehensive risk management approach to the environmental issue, particularly when the EU's legislative environment appears to be more progressive than that of the United States.


Worker safety in overseas operations has long been a concern of U.S. business. New directives aimed at protecting workers in Europe as well as the emphasis that has been placed on this issue through NAFTA will further highlight safety concerns. Human rights violations, along with the increased media coverage of poor working conditions in developing economies in Asia, will help force the issue to the forefront. As we move toward the year 2000, we will be seeing labor management replace natural-resource extraction as the focus of host governments. …

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