Recent terrorist events around the world, from California to Paris, have forced multinational companies to think more seriously about security and nonmarket risks, and the impact of threats on their operations and business continuity.
“Taking into account the Paris attacks, active shooters and terrorism, the implications are enormous,” says Michael Moran, managing director, global risk analysis, at Control Risks, a global risk consultancy. “We see the acceleration of the complexity that has been with us since the financial crisis.”
Multinational companies have already started to address these concerns. Moran confirms that there is growing demand for risk managers and travel-and-security specialists, as well as executive protection and travel assessment. But human resources screening of employees is not enough, he says.
The stakes are high. In addition to the potential human and property damage, shock events can lead to business interruption and legal liability, risking corporate reputations.
Additionally, the intersection of financial transactions and terrorism has led to increased scrutiny of bank compliance and third-party risk, adding to the already enormous costs of legal compliance.
Since shooting events and terrorist attacks are now perceived as probable risks, companies are expected to integrate these new risks into their general risk management strategy. Several insurance companies offer stand-alone terrorism and political violence insurance for property damage, business interruption losses and legal liability.
The Insurance Information Institute estimates that the total insured losses from the terrorist attacks on the World Trade Center in New York City and the Pentagon were approximately $43.4 billion, including property, life and liability insurance claim costs.
On the immigration side, several governments have already announced changes to their visa policies. The US, for example, has adjusted its visa waiver program for visitors from many European countries. Moran says companies need to adapt to these new policies and assume longer periods for executive relocation.
Moran says executives follow the US’s rhetoric on immigration closely. Yet they generally understand, he notes, that “public discourse is driven by presidential election campaigns, while the actual changes are incremental and not draconian.”