In August, the Office of National Statistics revised up its UK economic growth figures and announced that exporting is playing a bigger role than expected in this. With more companies starting to trade overseas, and given the many and varied risks they face, it is vital that UK businesses are adequately protected.The first step is to understand what to protect, be it employees, goods being manufactured abroad, goods being shipped abroad or the supply chain. A standard UK policy is unlikely to cover all of these risks, so you need to work with an experienced broker and insurer who understand your business. Key considerations include:
1. Local knowledgeEvery country and region has its own laws, regulations, standards and norms that can affect a UK exporter, from construction and health and safety standards to severe seasonal weather and civil unrest. If you?re dealing with companies in North Africa and the Middle East, for example, you need to be prepared for any impact that political unrest could have on your suppliers and customers there. We have also seen a lot of cases involving satellite offices in China and South America where UK companies are required by the local authority to have a local insurance policy. The US is a lot more litigious than the rest of the world, but a legal partner can protect you from reputational damage and cost.
2. SuppliersWhether you source materials from abroad or supply foreign customers yourself, there are three main things to consider. First, if you are critically dependent on a company then you need to ensure you can continue to trade if they produce poor quality goods, no goods at all or experience delays. For example, we helped a manufacturer to reduce its downtime when transformers in Spain were damaged, by renting them from a competitor. The second consideration is location. Businesses operating in earthquake and flood zones are high risk. As part of your contingency plan, the same issues that affect your primary supplier should not affect your secondary site ? although they don?t necessarily need to be based in a different country or region. Thirdly, you can boost your appeal to customers by having your own contingency plans in place. The UK has a global reputation for good quality products and services, consistency and honouring contracts, but a solid business continuity plan will give them the necessary reassurance. There are some straightforward checks that all businesses can undertake to manage risk with suppliers: their size (often, different regulations govern local and multinational companies); their certificates, awards and financial stability ratings; and their contingency plan.
3. LiabilitiesBusinesses must enter a dialogue with their broker and insurer to understand how their policy would respond to different risks when exporting. While some liabilities will be familiar, such as protecting employees, others such as fraud and malpractice are more complex. It is important to scrutinise the terms and conditions of your contracts so that you know the extent of your liabilities. If you are a legal professional operating overseas, you may also need extra cover in case of being counter-sued by foreign parties.
4. Transport and storageAny interruption to the transportation of goods abroad can have a serious impact on your business. There is also a real risk of goods being damaged or lost in transit and in storage, due to human, mechanical or environmental risks. In addition to contingency planning, businesses must consider liabilities in the supply chain and ensure that they have adequate cover. For example, a haulier?s insurance is unlikely to cover the full cost if you are dealing in low weight, high value goods.
5. EnvironmentUK businesses are familiar with the impact extreme weather conditions such as floods, snow and ice can have on their balance sheets. However, they may be less familiar with seasons abroad and how to minimise the impact of less predictable environmental risks such as earthquakes and tsunamis on their business. Companies must consider how their business would respond to these risks, and minimise their exposure by ensuring that buildings can withstand these events and that employees and assets are located inland as opposed to at the waterfront, for example, where risk is high.
Tara Kneafsey is SME director, and Owen Thomas is sales director for Global Specialty Lines at SME insurer RSA.Image source
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