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Small Business Digest


Smaller Companies Are More Likely to Experience a Loss Overseas

As businesses continue to grow their foreign operations, small to mid-size companies are more likely to experience a loss to corporate assets outside the United States or Canada than larger companies.

This was the reported in Chubb’s 2008 Multinational Risk Survey.

Compared to companies with annual revenues of more than $1 billion, smaller companies experienced at least a 50% higher frequency of foreign losses during 2007 for liability lawsuits, theft of intellectual property/piracy and theft of goods in transit.

Smaller companies also experienced at least a 35% higher frequency of losses for crimes against and injuries to American and Canadian employees traveling or working overseas.

“Larger companies often have the resources needed to take the global patchwork of different laws and languages, currencies and styles of conducting business and create corporate risk management standards throughout the world,” said Kathleen Ellis, senior vice president, Chubb & Son.

 "Small and mid-size companies that do business overseas need to look to their business partners to help them create standards that will help reduce foreign property and liability losses and injuries to employees,”  added Ellis, who is also worldwide manager of the Multinational Risk Group for Chubb Commercial Insurance

Top threats shift from terrorism to economic issues
Survey respondents reported that their companies will continue to seek additional revenue outside the United States and Canada in 2008.

 A majority of the respondents (71%) expect revenues from foreign
operations, foreign sales and/or imports to increase, and three in four companies plan to expand their operations outside the United States and Canada this year.

Companies will grow their foreign business by introducing new products (71%), increasing employee headcount (62%), acquiring another company (47%), and increasing the amount of imports (41%).

In addition, 68% of respondents indicated their organizations will increase employee travel outside the United States and Canada.

This year senior-level executives and risk managers agreed that the top three threats to their business operations or business conducted outside the United States and Canada are:

  • Currency risk (23%),
  • Supply-chain failure (16%) and
  • Credit risk (13%).

In the 2007 Chubb Multinational Risk Survey, the top three threats were terrorism, natural catastrophes and political instability.

Companies seek protection from foreign products liability
This year’s survey also found that 39% of companies acquired final products and product components from foreign suppliers. Forty-one percent expect to increase the amount of imports in 2008.

Although a vast majority of survey respondents (85%) indicated that their companies have not been affected by recent reports of defective products from China and other countries, 41% of all respondents are taking action to help avoid a products liability event.

One in four of all respondents are implementing new policies and procedures to qualify suppliers.

Companies are also testing imported products (13%) and requiring foreign suppliers to carry products liability insurance in the United States and/or Canada (10%).

Fewer companies have halted importing certain products and components or have changed or stopped using foreign suppliers.

Professional liability lawsuits migrate to Europe and Asia
The survey also indicated that nearly one in four companies have experienced a directors and officers liability, employment practices liability, fiduciary liability and/or errors and omissions loss outside the United States and Canada.

“Countries in Europe and Asia have undergone significant changes in their laws and regulations over the past decade, and the impact is beginning to be felt around the world,” said Jeffrey Grange, senior vice president, Chubb & Son.

“Companies of all sizes need to keep a close watch on the evolving foreign legal landscape. They also would be wise to incorporate the resulting professional and other liability exposures into enterprise-wide risk management programs,” added Grange, who is also worldwide manager of professional liability insurance for Chubb Specialty Insurance.

The 2008 Chubb Multinational Risk Survey was conducted jointly in February and March 2008 by Opinion Research Corporation, a worldwide research and consulting firm in Princeton, NJ, and the Chubb Group of Insurance Companies in Warren, NJ. The Internet survey queried chief executive, operating and financial officers and risk managers at 212 U.S. companies.

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