Global Sourcing Logistics: How to Manage Risk and Gain Competitive Advantage in a Worldwide Marketplace

expertise, oversee operations, or assist in logistics, distribu-

tion, and so on. While overseas, these personnel are exposed

to the same risks as when doing business in the United

States, with the exception that the risks may be more com-

plex. Benefits, disability issues, Workers’ Compensation,

auto liability, and general liability are a few of the risks to ac-

company personnel overseas.

In certain countries, there may be a host of other expo-

sures based on local customs, culture, and legal differences.

Additionally, personnel who travel overseas are subject to

kidnap and ransom exposures. Kidnappings of business per-

sonnel have occurred in Central and South America, the

Middle East, and Europe, among other countries. Many times

company personnel and the general public are unaware of

these occurrences because the parties involved usually decide

to avoid publicity. Although is it not well-known, many cor-

porations maintain dedicated kidnap and ransom personnel.

One of the most important benefits of having a kidnap and

ransom policy in place is that it provides immediate access to

expertise that can assist in managing a kidnap and ransom

situation. Kidnap and ransom underwriters typically employ

former Federal Bureau of Investigation, Interpol, and Central

Intelligence Agency staff with the skills necessary to inter-

vene with hostage-takers and negotiate a favorable resolve. If

an executive is taken hostage, the kidnap and ransom policy

affords access to the expertise to take the next step.

If an executive traveling overseas is injured, sick, lost,

or requires personal assistance, there are companies re-

lated to the commercial insurance industry that provide a

global emergency hotline. Corporations and individuals

who travel overseas can purchase access to these services.

Kidnap and Ransom

When a company makes plans to locate overseas, it is

important to become familiar with the risks associated with

living and working abroad. One of the risks, which is often

RISK MANAGEMENT AND INSURANCE 141

overlooked, is the chance that a staff member could be kid-

napped. It is estimated since 1995 until the present that kid-

nappings around the world have increased 100 percent.

Ransom demands can be overwhelming. More than 14

countries have recorded ransom amounts of $25,000,000 or

more in recent years. Although kidnappers usually settle for

10 percent to 20 percent of the demand, in certain territo-

ries they refuse to negotiate and use violence to achieve

their aims. Most kidnappings are carried out to obtain a ran-

som, and in most cases a ransom is paid. Rescues are rare,

largely because the authorities in most countries recognize

that the safety of the victim is paramount.

Kidnappings can occur anywhere. Insurance companies

that specialize in kidnap and ransom coverage understand

the challenges involved in living abroad. Kidnap and ran-

som coverage offers confidential protection should the need

arise. This insurance coverage provides assistance to the

family and business, including independent investigations,

negotiations, arrangement and delivery of funds, and nu-

merous other services vital to a safe, speedy, and satisfactory

resolution. The typical kidnap and ransom policy covers the

following:

• Ransom paid following a kidnap or threat to kill, injure,

or abduct

• Hijack

• Detention

• Death or dismemberment

• Legal liability

• Crisis management team expenses

The risks in different countries vary. The expertise of the

insurance brokers and underwriters that manage these ex-

posures will assist in determining the proper protections.

Personnel traveling overseas present a serious risk to the

companies that send them. Failing to properly protect them

can present another liability to a company; the company

142 GLOBAL SOURCING LOGISTICS