When expanding overseas, a company's risk exposure can change quickly. "One of the biggest changes when customers move internationally is the introduction of natural catastrophes," according to Mark Pennock, head of property underwriting at Zurich's UK Commercial Insurance division. "In the UK, these are typically limited to flooding; however with expansion into territories such as Asia Pacific or the US, we are now looking at everything from earthquakes to hurricanes, cyclones and tornados."
Do you know the local infrastructure?
Customers need to understand the nature of the territory they are getting into, Mr Pennock explains. "This includes the natural catastrophe element, but should also involve building a picture of the local infrastructure. For example, a customer might be sited near the fire brigade, but how quickly can they be expected to respond?"
Supply chain risk also needs careful consideration. According to Mr Pennock: "While not all customers are expanding internationally, their supply chains might be." Sprawling international supply chains are frequently necessary, but they can introduce new elements of risk.
Organisations should ask themselves what their contingency plans are if one link in the chain gets broken. The 2015 explosions at Tianjin's port (one of the world's largest) caused major supply chain disruptions for months. Blockages prevented the delivery of raw materials to many major factories in China, with goods heading in the other direction similarly affected.
Understanding regulatory and legislative differences
Managing differences in regulation is perhaps the most complex issue for customers to negotiate when international expansion is being considered. It is essential to establish what insurance taxes and charges need to be paid, and how claims will be settled in a foreign territory. Most countries will require certain insurances by law.
While many exposures will be similar overseas as they are in the UK, there can be substantial differences in claims culture, taxation and legal systems. Relevant legal systems may be well established in some territories, but this cannot be taken as a given.
The more countries involved, the more the complications mount. As Brendan Donlon, international programme manager for real estate at Zurich, explains: "One of the trickiest things for customers is tracking change. If a customer has multiple exposures in different states and countries, then keeping up to date with regulatory challenges is incredibly difficult."
Political risks also need to be considered, and of particular importance are sanctions. As Mr Donlon points out: "Not only are there US, UN and EU sanctions to consider, following Brexit, there are likely to be more UK-specific sanctions.
"With countries like Myanmar and Iran increasingly appearing in customer supply chains, an understanding of where and how business and insurance can be transacted is very important."
Do language barriers pose a risk?
"One of the biggest challenges associated with international expansion is the language barrier," explains Mr Pennock. As soon as English is not the first language for everyone involved in the process, the chances of a misunderstanding related to policy language multiplies.
"There can even be difficulties between English-speaking countries," he says. "One example involved different understandings of the word 'mould', which was taken to mean a type of fungus in Canada and an implement to cast shapes in the UK."
In all cases, it is important to establish consistent, standardised wording internationally, as well as translating policies and documents into local languages.
A stitch in time
"It is important that customers liaise with their insurers at an early stage of the planning process," explains Mr Donlon. There is no one-size-fits-all approach for managing international risk. However, by involving insurers at an early stage, potential risks can be identified and mitigated before they become major issues.