Business Travel Risk

Risky Territory

As business travel increases, risk managers need intelligence and communication systems to keep employees safe.
By: | October 1, 2014 • 10 min read

In mid-August, Boart Longyear Co., a global mineral exploration company, removed nine employees from Liberia after the Ebola virus broke out in a nearby village.

“Our customer shut down operations, and we’re evacuating,” said Rob Osha, global director of risk management at the company in August.

“There’s a lot of talk about closing borders and not letting air travelers out, so we’re working right now to make sure our crews leave Liberia.”

Video: The Ebola crisis continues to worsen, with a “best case” estimate of 500,000 dead by end of January 2015.

It’s not just deadly diseases that worry risk managers.

“A few years ago,” said Jan Randolph, director of sovereign risk at IHS Country Risk, “I was stuck in Qatar, due to go to Bahrain to visit some banks. This is when Bahrain had quite a lot of demonstrations and rioting going on.

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“We checked our website, and there was a UK travel government advisory that advised all UK nationals not to travel to Bahrain. That means if we went, our insurance cover was potentially not valid.

“In practice, it probably would have been okay, but that advisory made it a no go,” he said.

As economies become more interconnected, businesses expand globally and more employees are sent abroad, scenarios like Osha’s and Randolph’s may become the norm. Yet too many risk managers may be unaware of the risks involved with global travel or take the proper steps to ensure employees’ safety.

Growth of International Travel

According to the Global Business Travel Association, U.S. spending on international travel may jump as much as 6.6 percent, to $289.8 billion in 2014, while total person trip volume is expected to increase 1.7 percent, to 461 million trips for the year.

Charlie LeBlanc, vice president of security services, UnitedHealthcare International

Charlie LeBlanc, vice president of security services, UnitedHealthcare International

“In this world that is smaller and more mobile, emergency evacuations happen more often than they did 10 years ago,” said Charlie LeBlanc, vice president of security services at UnitedHealthcare International (formerly FrontierMEDEX).

“That also has a lot to do with the fact that the world, politically, is much more volatile than in the last 20 or 30 years. We have to be able to react quickly.”

Steve Kellner, global head of intelligence and risk assessment for Verizon International Security Group, said: “I saw a news article recently that said there are only 11 countries not at war. The same article also said roughly only 60 percent of companies monitor their employees’ travel. It’s a big world, and a lot to keep up with.”

Kellner’s team monitors 15,000 to 18,000 employee trips per year.

Many smaller businesses or nonprofit organizations don’t have the budget for a security department that can educate their travelers [about security risks], so they depend on others, Kellner said. Problems can easily arise with “the little things that you don’t plan on.”

“Mining and oil and gas people have this buttoned up pretty tight,” Osha said. “They work in some of the most remote, tricky areas of the world.

“But there are a lot of companies that send a lot of business travelers that don’t necessarily work in the field. Even if you’re just traveling for a business meeting, things can change on a dime,” he said.

Pre-Travel Risk Mitigation

Travel preparation should begin before a flight is even booked.

“For very high risk countries, it’s a no go unless you get approval from the executive committee,” Osha said.

“I would do research on the security environment where they’re going, what I think the relative risk is and what the mitigations might be. Is the trip business-critical? Do we need to put that person at risk? Are there other ways to mitigate or not?”

“The most important asset you can have is information intelligence,” Randolph said.

“You need to know if the risk level is green or yellow or red, or if a developing scenario could reach a flash point.”

Video: The families of expat employees may be more at risk than the employees themselves.

Bob Gill, vice president of global security for Quintiles, a consulting firm for the life sciences industry, said his team develops risk profiles for every country they visit or may visit in the future.

“We cover security and safety, health and medical situations, medical infrastructure, regulatory issues, human rights issues, economic sanctions, bribery and corruption. Those are the key areas,” he said.

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Even when companies give the green light, travelers should receive safety and awareness training tailored to the area they’re visiting.

“We have to look at risk from a variety of angles,” LeBlanc said.

“We look from the perspective of, when do our travelers start to feel uncomfortable? What are their risk tolerances?”

Political stability, crime, and cultural differences should all factor into a risk assessment, he said.

“As companies and economies are growing, their workforces are going to countries they didn’t go to five years ago,” LeBlanc said.

“That means a lot of novice travelers. For some, it may be their first international trip. And it’s not to London; it’s to Bangkok.”

Pre-travel training should cover basic “Safety 101” principles — like moving in groups and not opening the hotel door if no visitors are expected — but it should also include general background information on the destination country.

Travelers should know everything from what weather to expect, to what behaviors are acceptable in different cultures, to what inoculations they may need. Gender-specific training may also be necessary; women face greater risk in certain places, LeBlanc said.

“We have a traveler tracking system that is tied into our corporate reservation system,” Kellner said.

“When employees book travel, my group is alerted two weeks to 30 days ahead of time. We meet with them, whether they’re a naïve traveler or a group that goes constantly.”

At Verizon International Security Group, the company organizes a “meet and greet” program through its local offices to pick up incoming travelers or arrange transportation for them. Boart Longyear coordinates with their customers to see if they can provide transportation.

Traveler Tracking

Some risk management and security departments utilize traveler tracking software to centralize employees’ flight and hotel reservations, so they always know who is in what part of the world.

Being able to locate people anywhere in the world in real time allows risk managers to focus their attention and resources where they’re needed. Ensuring safe travel on the ground requires coordinated efforts and constant communication.

additional photo for webFor example, if 18 out of 20 employees are accounted for in a region hit by an earthquake, more time and energy can be devoted to tracking down the last two, instead of everyone in the group. If no employees are in the area, then attention can be focused elsewhere, to the next evolving crisis.

Travel assistance companies like UnitedHealthcare International (UHI), iJET and Europ Assistance offer software programs that not only track where employees are, but can push out automatic communications notifying them of potential threats in the area — like earthquake or tsunami warnings — or reminding them to check in.

Typically updated at least once per hour, the systems provide real-time data that is so crucial to crisis response.

“In the really risky countries, we establish check calls,” Osha said, “where an employee checks in every few hours to our outsourced security company’s operations team.

“In some places in Africa, they actually hire military to follow their company convoy,” he said, “or we see if they can fly point-to-point to cut out some of the risk of traveling on the ground.”

The advent of advanced cell phone technology has made the job of employee monitoring and communication much easier.

“As little as 10 years ago,” LeBlanc said, “I’d be carrying four or five different cell phones depending on what country I was going to. Now I just need one. That kind of power is extremely beneficial; risk managers need to be able to account for their people in a very short period of time.”

Call centers that operate 24 hours a day — also manned by third party travel assistance providers — help ensure that employees can always reach someone if they run into trouble.

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“Communication is your lifeline in many cases,” Randolph said. “You have to think, as an employee, what would you expect from your company? Who would you want to contact in an emergency?”

Boart Longyear’s crisis hotline, provided by iJET, routes employees’ calls to the appropriate department, whether it’s a medical emergency, security issue or internal problem. More often than not, though, simple text messages or emails suffice to keep everyone connected.

“The best part of working for a telecommunications company,” Kellner of Verizon said, “is that most of our travelers go with a global phone. We can always text or call them to check on them and make sure they’re safe.”

Crisis Response

Sometimes, no amount of intelligence can prevent simmering tensions from bubbling over, and no amount of monitoring can keep employees away from a natural disaster. Travel risk management should include policies and plans for when companies need to pull their people out of harm’s way quickly.

The most common reason for evacuations is a medical issue, rather than violence or political unrest. Travelers, rather than their employers, usually make the call as to whether they will abandon their travel due to a health issue.

“In medical situations, there tends to be a wider circle of hesitance to go,” LeBlanc said. Potential for violence doesn’t seem to stop travel as surely.

The Ebola outbreak in West Africa, for example, posed a relatively small risk to Western travelers but still sparked a worldwide scare. Flying out of the affected countries of Liberia, Nigeria, Ghana and Sierra Leone became more challenging as other countries were unwilling to take on the risk of accepting any visitors from those areas.

Luckily, governments rarely set strict travel restrictions in such situations, so while evacuations can get tricky when a pandemic hits, it is still possible to leave the country.

Nita Madhav, analyst and researcher, AIR Worldwide

Nita Madhav, analyst and researcher, AIR Worldwide

“In today’s world, economies are so interconnected that complete isolation isn’t feasible,” said Nita Madhav, analyst and researcher at catastrophe modeling firm AIR Worldwide.

“The best way for companies to mitigate is to stay aware of the global situation and which countries may be at risk for circulating diseases, and make sure that employees are up to date on vaccines,” she said.

Madhav identified the Middle East and Brazil as up-and-coming markets for air travel, which could make them riskier from a health perspective as business travel picks up.

Political and social tensions also pose an evacuation threat, though those risks are more rare than a medical threat.

Maintaining intelligence and proactively removing employees from potentially dangerous areas allows employers to avoid last-ditch evacuations. Government advisories, data from third party security firms, input from local employees and even social media trends help to paint a picture of emerging threats and areas to watch.

Still, things can change in an instant.

“We had to evacuate our expatriate staff out of Mali when they had a coup,” Osha said. “You do have to watch country elections, because violence and protests could follow.”

“In Libya,” Randolph of IHS Country Risk said, “they’re having a drawn-out civil war, and oil and gas companies have been involved in drawing out their staff, leaving behind only key personnel.

“You have to maintain your asset and your security as well as you can, but otherwise de-operationalize. You have a duty of care,” he said.

The Trickiest Risk

Natural disasters pose the trickiest travel risks to mitigate and often require the immediate, emergency response that risk managers try to avoid. Once tracking systems identify who’s in danger, it’s up to crisis management teams to get them to safety.

“You really need the right people in the room that are experienced with the global operations of their company,” said LeBlanc of UHI.

“They need the authority to make decisions quickly, whether they’re legal, financial, or human resource related. And they have to work well as a team.”

When UHI trains its clients on crisis management, it typically spends half a day on team-building alone, and keeps the core team limited to about 10 people.

Rapidly growing companies will face challenges learning how to manage increased travel to all parts of the world, but the realities of travel risk cannot be ignored. The consequences of shrugging off safe travel preparations are too great.

“Colleagues I work with have a keen sense of how travel has changed since 9/11,” Gill of Quintiles said.

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“That was the issue that brought travel security and safety to the forefront.”

But others say more progress is needed.

“I’ve given travel risk presentations at RIMS for a few years now,” Osha said, “and I’m shocked by the people who approach me after the sessions — large, brand name companies — saying their programs aren’t robust enough.

“It makes me think that there are a lot more companies out there that need to start working on this than you may expect.”

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Cyber Liability

Fresh Worries for Boards of Directors

New cyber security regulations increase exposure for directors and officers at financial institutions.
By: | June 1, 2017 • 6 min read

Boards of directors could face a fresh wave of directors and officers (D&O) claims following the introduction of tough new cybersecurity rules for financial institutions by The New York State Department of Financial Services (DFS).

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Prompted by recent high profile cyber attacks on JPMorgan Chase, Sony, Target, and others, the state regulations are the first of their kind and went into effect on March 1.

The new rules require banks, insurers and other financial institutions to establish an enterprise-wide cybersecurity program and adopt a written policy that must be reviewed by the board and approved by a senior officer annually.

The regulation also requires the more than 3,000 financial services firms operating in the state to appoint a chief information security officer to oversee the program, to report possible breaches within 72 hours, and to ensure that third-party vendors meet the new standards.

Companies will have until September 1 to comply with most of the new requirements, and beginning February 15, 2018, they will have to submit an annual certification of compliance.

The responsibility for cybersecurity will now fall squarely on the board and senior management actively overseeing the entity’s overall program. Some experts fear that the D&O insurance market is far from prepared to absorb this risk.

“The new rules could raise compliance risks for financial institutions and, in turn, premiums and loss potential for D&O insurance underwriters,” warned Fitch Ratings in a statement. “If management and directors of financial institutions that experience future cyber incidents are subsequently found to be noncompliant with the New York regulations, then they will be more exposed to litigation that would be covered under professional liability policies.”

D&O Challenge

Judy Selby, managing director in BDO Consulting’s technology advisory services practice, said that while many directors and officers rely on a CISO to deal with cybersecurity, under the new rules the buck stops with the board.

“The common refrain I hear from directors and officers is ‘we have a great IT guy or CIO,’ and while it’s important to have them in place, as the board, they are ultimately responsible for cybersecurity oversight,” she said.

William Kelly, senior vice president, underwriting, Argo Pro

William Kelly, senior vice president, underwriting at Argo Pro, said that unknown cyber threats, untested policy language and developing case laws would all make it more difficult for the D&O market to respond accurately to any such new claims.

“Insurers will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure,” he said.

Going forward, said Larry Hamilton, partner at Mayer Brown, D&O underwriters also need to scrutinize a company’s compliance with the regulations.

“To the extent that this risk was not adequately taken into account in the first place in the underwriting of in-force D&O policies, there could be unanticipated additional exposure for the D&O insurers,” he said.

Michelle Lopilato, Hub International’s director of cyber and technology solutions, added that some carriers may offer more coverage, while others may pull back.

“How the markets react will evolve as we see how involved the department becomes in investigating and fining financial institutions for noncompliance and its result on the balance sheet and dividends,” she said.

Christopher Keegan, senior managing director at Beecher Carlson, said that by setting a benchmark, the new rules would make it easier for claimants to make a case that the company had been negligent.

“If stock prices drop, then this makes it easier for class action lawyers to make their cases in D&O situations,” he said. “As a result, D&O carriers may see an uptick in cases against their insureds and an easier path for plaintiffs to show that the company did not meet its duty of care.”

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One area that regulators and plaintiffs might seize upon is the certification compliance requirement, according to Rob Yellen, executive vice president, D&O and fiduciary liability product leader, FINEX at Willis Towers Watson.

“A mere inaccuracy in a certification could result in criminal enforcement, in which case it would then become a boardroom issue,” he said.

A big grey area, however, said Shiraz Saeed, national practice leader for cyber risk at Starr Companies, is determining if a violation is a cyber or management liability issue in the first place.

“The complication arises when a company only has D&O coverage, but it doesn’t have a cyber policy and then they have to try and push all the claims down the D&O route, irrespective of their nature,” he said.

“Insurers, on their part, will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure.” — William Kelly, senior vice president, underwriting, Argo Pro

Jim McCue, managing director at Aon’s financial services group, said many small and mid-size businesses may struggle to comply with the new rules in time.

“It’s going to be a steep learning curve and a lot of work in terms of preparedness and the implementation of a highly detailed cyber security program, risk assessment and response plan, all by September 2017,” he said.

The new regulation also has the potential to impact third parties including accounting, law, IT and even maintenance and repair firms who have access to a company’s information systems and personal data, said Keegan.

“That can include everyone from IT vendors to the people who maintain the building’s air conditioning,” he said.

New Models

Others have followed New York’s lead, with similar regulations being considered across federal, state and non-governmental regulators.

The National Association of Insurance Commissioners’ Cyber-security Taskforce has proposed an insurance data security model law that establishes exclusive standards for data security and investigation, and notification of a breach of data security for insurance providers.

Once enacted, each state would be free to adopt the new law, however, “our main concern is if regulators in different states start to adopt different standards from each other,” said Alex Hageli, director, personal lines policy at the Property Casualty Insurers Association of America.

“It would only serve to make compliance harder, increase the cost of burden on companies, and at the end of the day it doesn’t really help anybody.”

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Richard Morris, partner at law firm Herrick, Feinstein LLP, said companies need to review their current cybersecurity program with their chief technology officer or IT provider.

“Companies should assess whether their current technology budget is adequate and consider what investments will be required in 2017 to keep up with regulatory and market expectations,” he said. “They should also review and assess the adequacy of insurance policies with respect to coverages, deductibles and other limitations.”

Adam Hamm, former NAIC chair and MD of Protiviti’s risk and compliance practice, added: “With New York’s new cyber regulation, this is a sea change from where we were a couple of years ago and it’s soon going to become the new norm for regulating cyber security.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]