Magazine article Risk Management

Risk Managers' "Glogal" Concerns

Magazine article Risk Management

Risk Managers' "Glogal" Concerns

Article excerpt

Globalization, consolidation and technology are three major areas of concern for risk managers today and will continue to be so in the near future, according to a new survey by Liberty Mutual.

In terms of sheer size, the recent joining of Chrysler and Germany's Daimler-Benz is unprecedented-it's the largest industrial merger ever-but it is representative of the increasing globalization of the business world. Risk managers working for the resulting megafirm will face a new breed of challenges, as will their peers in other expanding companies.

A look at the survey reveals some interesting trends. The number of companies expanding through acquisition increased from 1996 by over 20 percent, to 53 percent. Those opening offices or starting new companies decreased substantially to 32 percent. This means that many risk managers face the task of making sure that the parent company's operating procedures are followed in newly acquired offices.

Interestingly, however, only 34 percent of survey respondents' companies have standardized, written operating guidelines translated into the local languages of the countries where they operate-a deficiency that could make their policies and procedures difficult to comprehend.

The major areas of international expansion for the respondents' companies are Mexico, South America, western Europe and, despite recent difficulties, the Pacific Rim. Four out of five risk managers expect global activity to increase.

With that increase come other concerns, such as: understanding the way foreign businesses are run and the local culture; having a centralized system for claims; international shipping exposures; the consolidation of financial and performance measures; and having loss control plans for each country.

Finally, risk managers for companies active in Europe need to be concerned with the imminent currency changeover. At a recent panel discussion in New York about the implication of the new euro on the insurance industry, Jeff Hardin, financial services segment manager for SAP America, outlined the information systems requirements for dealing with the complex conversion issues. Those requirements are a bit too complex to detail here, but suffice it to say that he placed the challenge on a par with year 2000 software compliance. The degree of difficulty for international companies would depend, of course, on the extent of their European involvement. But in today's environment it seems prudent to be prepared; a national company can become international almost overnight. …

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