Asian firms are stepping beyond borders to expand their footprints, as XL Group’s underwriting manager for crisis management in Asia, David Guest, explains
New markets promise large rewards, but they also bring new risks. Businesses can find themselves facing their biggest challenges in places where getting it wrong, can be most costly. Given the increasing complexity of risks, it is worrying that the region, despite recent advances, remains one of the least insured places in the world.
Insurers warn of the dangers of a lack of appreciation for risk assessment and crisis management and advise family conglomerates, which have long dominated Asian business, not to be complacent about risks by virtue of their past success. While many hailed the arrival of the ‘Asian century’, the region is facing growing economic, social and political complexities. Variations of geopolitical risks have added new risk dimensions to consider.
Supply chain risk and disruption can involve more than a loss of profit. Reputational damage to a brand can be more serious and long lasting. Product safety is paramount but outsourcing the manufacture of parts can make companies responsible for work and sub-systems that are not their own. Different territories require different standards for safety labelling, with the US particularly strict – its ‘Failure to Warn’ standard means that a claim may succeed even where the product itself is not faulty.
Product Liability and Product Recall cover can help firms mitigate these risks. And if for any reason a company should have to mount a product recall it will find itself having to advertise it, organise the logistics of returns and manage customers. The cost in terms of time and money can be enormous. In addition to bearing the expense of collection and replacing faulty products, insurers are increasingly able to offer access to 24/7 crisis consultancy that includes expert media handling.
Trade Credit insurance can protect a company’s financial investments from non-payment or currency events when operating abroad. Also firms must consider the political environment in which they are trading. Is War, Terrorism and Political Violence coverage required? Is Kidnap and Ransom cover necessary for employees?
We are already seeing signs of a mindset shift, but attitudes to risk in Asia are in transition. The new generation of leaders clearly possesses a growing appreciation for risk management. But there is still a way to go before it becomes second nature for Asian businesses to protect themselves against all the risks they face.