Managing risk while crossing treacherous borders

With increasing globalisation, the boundaries dividing the business world are getting more and more blurred. And with the increasing wealth and business acumen in the region, the Arab Corporate Citizens are making their marks in the international business horizons; they are even taking on the developed world and giving them a run for their money.

It is not surprising therefore to see the region based companies operating in different parts of the world across all continents giving birth to the region headquartered multi national companies.

Crossing borders is however not without risks. We dealt with the political risks involved in international business in a previous column (Managing Risk, Gulf News, March 15). Some of the relatively new risks which are now on the rise are the threats to corporations from kidnapping and extortion which have not only a direct impact on the security of personnel deputed to the risk prone territories, but also an adverse effect on the cash flow of the company.

Drastic social changes and an increasing divide between haves and have nots may be encouraging this criminality, from a business point of view, the corporations headquartered in this region should be considering these risks while bidding for projects in foreign countries. This is all the more imperative, if they are planning to send their senior executives in to do business.

Once the businesses appreciate the additional risks involved in foreign projects, ways and means of diminishing the risks could be considered and the consequential cost built into the overall pricing. Internationally accepted prevention methods are obviously the most crucial factors in combating the risk of kidnap and could be implemented by establishment of a Security Management Plan. A multi national company, planning to execute a project on foreign soil, may want to consult a firm specialising in risk management and business intelligence and ask for a professional assessment.

As a final recourse, it would be a good strategy for these corporations to safeguard their balance sheets by securing appropriate Kidnapping & Ransom Policies from specialist insurers. In the unfortunate event of any kidnapping incident, the experienced consultants of the Insurer or his agents would negotiate in-country with the kidnappers and obtain the victim's release by paying full or a fraction of the ransom demanded.

Contracts awarded in some of the African, Asian and South American countries may look very lucrative from the profitability aspects but unless the ensuing risks are effectively managed and protection measures initiated and built into the bid pricing, the multi national could find themselves bleeding rather than increasing their shareholder' wealth.

The writer is Deputy General Manager with Al Rajhi Company For Cooperative Insurance, Riyadh. The views expressed herein are his own and not necessarily subscribed to by his employers.

Caught 'napping

Taking only the incidents reported in the media during the last decade or so, there have been more than 10,000 cases of kidnapping worldwide, but according to international security experts, the actual unofficial figure could be much higher, as many experiencing the trauma of kidnapping, do not report them due to fear and sensitivity.

Countries with the highest risk of kidnapping for ransom, hostage taking and 'war tax' demands, according to international consensus are: Colombia, Mexico, Philippines, Brazil and CIS countries (former Soviet Union). And now of course, Iraq and Afghanistan are added to this growing list.