Global risk management: The top risks you need to know about

By Higginbotham on August 22 , 2016


The world has never been more connected than it is today. The exploding globalization of trade and commerce has been a boon to businesses, economies and people around the world. But internationalization has also increased business’ exposure to global risks. It’s a more complex and ambiguous environment, with supply chains sometimes spanning many countries, making long-term investment decisions increasingly unpredictable. Before you make the leap and “go global,” beware of the risks you’ll be facing.

No matter where you’re operating, you’ll face the standard risks of legal complexities, language barriers, cultural differences and challenges in supervisory oversight. As if that’s not enough, you’ll also face risks unique to each country.

How do you know what to prepare for?

The World Economic Forum’s Global Risks Report 2016 is a good place to start sorting it all out. Combining the responses of over 13,000 business executives from 140 different economies around the world, the report highlights the global risks that businesses consider to be of highest concern. Here are some of the findings:

Top 10 global risks by potential severity:

  1. Failure of climate change mitigation and adaptation
  2. Water crises
  3. Weapons of mass destruction
  4. Large-scale involuntary migration
  5. Energy price shock
  6. Biodiversity loss and ecosystem collapse
  7. Fiscal crises
  8. Spread of infectious diseases
  9. Asset bubble collapse
  10. Profound social instability

Global risks that are of the highest concern to business leaders within the next 18 months:

  1. Large-scale involuntary migration
  2. State collapse or crisis
  3. Interstate conflict
  4. Unemployment or underemployment
  5. Failure of national governance

Global risks that are of the highest concern to business leaders within the next 10 years:

  1. Water crises
  2. Failure of climate change mitigation and adaptation
  3. Extreme weather events
  4. Food crises

These are all serious risks that can disrupt supply chains and spell disaster for your international operations. And no business can afford to expand into international markets only to discover it hasn’t taken the necessary risk management steps to mitigate these potential problems.

Serious risks need forward-thinking financial protection.

Getting the right insurance coverage for the risks you may face when entering international markets is crucial. You’ll be especially thankful for the right coverage if you ever inadvertently violate another country's business requirements or laws. Work with an insurance broker that understands the complexities of doing business globally. Your broker should:

  • Provide you with the insurance regulations for every country you plan to do business in.
  • Access local insurance experts on your behalf in the event of a claim or to place local coverage on your behalf.
  • Supplement your local coverage with a Difference in Conditions (DIC) policy that fills in the gaps and brings all local policies up to the same level of limits and coverage.

Ready to take your products or services to a global market? Partner with the international business insurance experts at Higginbotham Insurance, and we’ll make sure you’re covered no matter what corner of the globe your business takes you.


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Tags: Risk Management


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