Chapter 8 - International and Multinational Risks Flashcards
Various Business Arrangements
Exclusive Distribution Arrangements, Joint Ventures, Global Co., International Co., Multinational Company, Transactional Enterprises
Exclusive Distribution Arrangements
Distributors. Rolex example.
- Parent company partners with another company in a different country that will distribute their produce in the new market.
- Allows parent co. the opportunity to enter a new market quickly, but at the risk of losing control of product or service to the distributing co.
Joint Ventures
- Some countries do not allow US companies to have ownership of property in their country.
- Other laws may be highly restrictive or prohibitive on Americans or other foreigners wanting to do business within the country.
- Formed between a foreign party and a company of the home country
- Allows entry into a foreign market without expense of another branch or subsidiary
- Due diligence is required by the Foreign Corrupt Practices Act to establish relationship with foreign parties.
Global Company
Centralized production and cost sharing, including shared services for certain functions, such as acctng treasury and real estate
- investment in other countries
- consistent brand and image with products and markets controlled by a home office.
- Microsoft, McDonald’s
International Company
Is an extension of a parent company.
- Operate from a home country only
- import and export goods to and from other countries
Multinational Company
J&J, Starbucks….
- Investments in other countries
- Products and services focused on local market
- Not just one country headquartered in different parts of the world.
Transnational Enterprises
- A commercial enterprise that operates substantial facilities
- Does business in one or more countries
- Does not consider any particular country its national home
Nestle
Types Operations
- Organizations with assets, operations, and employees outside their home country may include: Manufacturing, Home Offices, Corporate Apartments, Retail Locations, Land Ownership, Satellite Offices…
- Products or services which are exported to other countries outside the organization’s home country. Although most GL program provide “worldwide territory” coverage, a suit may need to be brought in the organization’s home country.
- Organizations that engage with foreign suppliers or service providers: Client technical support, call centers, components, raw materials, outsourcing product assembly.
- Employees who travel outside their home country for business purposes. Auto accidents, medical issues and personal security are some of the risks for this exposure. Servicers such as repatriation, travel security information and medical assistance are normally provided by the company.
Exposures related to international Travel
- Legal Documents (Current passport, Travel visas if required, Registered traveler programs - global entry, clear, TSA PreCheck, etc)
- Credit Cards
Alert banks or CC companies of travel plans
Learn what forms of payment are accepted - cash only? chip cards?
Company credit cards - Are there foreign transaction fees? How is currency converted? - Exchange Rates
Currency conversion apps assist with currency calculations
Know if currency exchange will be required
Prepare for transactions that require local currency - Transportation
Know safe travel options - public transportation, hired cars, etc.
Car rental
-Driving Permits required
-Insurance requirements
-Damage waivers
Carry a business card from your hotel or office to show taxi driver - Communication
Cell phone coverage
Internet access - Packing & Luggage
Chargers and adaptors
Extra clothes in carry-on
Luggage restrictions - checked bags or carry-ons
Luggage delays/lost luggage - Health and safety
Research (recommended vaccinations, check alerts and advisories)
Prepare (carry basic meds and first aid supplies, insurance coverage, have exit strategy, know what embassies and consulates are available to you in which countries.
Culture sensitivities
- Language and communication styles - country’s official language? Do you have translation available? Is communication more formal or informal?
- Customs - religious observances, holidays, beliefs or superstitions.
- Etiquette
-Behavior - proper greetings, hand gestures, hand holding, table etiquette at meals.
-Dress - head coverings, legs exposed, traditional costumes, colors
-Activities
Chewing gum, Feeding Birds, chickens cross the road - Alcohol, tobacco and drug regulations
- LGBTI
Available Insurance Programs
Compulsory Insurance - any line of coverage which is required by law in a specific country for a company with operations int he same respective country.
Regulatory Insurance - A body of statutory law, administrative regulations and jurisprudence that governs and regulates insurance coverage requirements within reespective country. The rules governing requirements for “admitted” coverage in a country is an example of regulatory compliance.
Admitted Coverage - Policies are covering risks in a county. This is underwritten by an insurance carrier licensed to write coverage in the same country where risks exist. Admitted insurance programs are typically “local policies” issued in the native language.
Non-admitted coverage
3 types of program structures utilized in most multinational risks are
global, controlled master program, local policy program
Global Program
Policy covering all exposures worldwide: coverage may not be admitted in certain countries
Controlled Master Program
Easier, consolidates, not a lot of people can do it.
Local Policy Program
