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Ensuring that corporate risk management programs for expatriate employees are within industry norms can impact the appropriate level of corporate spending for those programs, a risk management expert told attendees of the Association of Corporate Travel Executives (ACTE) conference in Washington, D.C.
Risk management programs are typically not very high profile with a company’s senior management team, Bruce McIndoe, the president of iJET Intelligent Risk Systems, a provider of global intelligence and business resiliency services, said May 20, 2008, at the ACTE conference. Risk management programs are the types of programs that companies “wake up long enough to say, ‘oh yeah, travel risk management, rah, rah,’ and then go back to sleep for a couple of years until there’s a bombing somewhere and a number of expats are killed or injured,” he said.
However, new laws—such as the United Kingdom’s Corporate Manslaughter Act—are increasing the responsibility—and therefore the awareness—companies have for the safety of their employees who are required to travel, McIndoe said. The new laws and regulations place corporate and personal responsibilities on company officials for the health and safety of traveling employees, he said.
How Much To Budget
The increased responsibility companies have for the safety of employees on overseas assignments is requiring companies to implement complex travel risk management programs, McIndoe said. However, the problem a company faces when establishing a travel risk management program is how much to spend on the program, he added. If a company overspends on a program, the firm puts itself at a competitive disadvantage, but if it under spends and something happens resulting in the death or injury of an employee, and it turns out the firm’s risk management budget was a factor, “that company will get hammered in court,” he said.
If an incident occurs overseas and results in the death or injury of an employee, and the employee, or the employee’s surviving kin sues the company, and it turns out the company was under spending on risk management, the plaintiff’s lawyer is going to argue that the company was trying to gain a competitive advantage at the expense of the safety and security of its employees, McIndoe said. Determining an appropriate budget for a risk management program can be achieved by gauging the level of spending on risk management within specific industries, he said.
Risk management spending within specific industries creates a “standard of care” for the employees working within that industry, including those who travel overseas, McIndoe said. Companies that observe the standard of care can avoid paying too much for their risk management programs, and it might help them avoid paying multi-million dollar lawsuit judgments that could result from paying too little for risk management, he said.
Corporations are realizing that risk management is part of the broader business continuity, emergency management, crisis management and endemic planning companies need to have today, McIndoe said. However, while risk management is growing as a business policy, travel managers are still under “constant cost pressure” to keep those programs at a “controllable expense,” he said. The paradox is that while travel managers are expected to “negotiate hard” to cut travel costs, no company official wants to testify—especially when an employee has died and the family is in the courtroom—that all the firm did to prepare the employee for the overseas trip was buy the airline ticket and wish them “a nice trip,” McIndoe said. “That level of care is not going to cut it any more,” and companies that provide their employees with such a lack of care are going to want to settle any claims out of court, he added.
Duty of Care
Just as the amount companies should spend on risk management programs is determined by the industry, the level of care—also called “duty of care”—companies provide traveling employees is determined, in part, by the destination, McIndoe said. Duty of care is the responsibility of the company for their employees, usually at a traditional worksite, but courts often interpret that a business traveler’s destination is their worksite, he said. Therefore it is a company’s responsibility to be aware of the conditions an employee is being sent to, he said. For example, a company needs to know if the hotel where an employee is housed at meets basic fire safety standards. If an employee dies in a fire at the hotel, a judge, or the surviving kin’s lawyer, is going to ask why that hotel was included in the company’s preferred hotel program. If the company’s response is that the hotel was selected because it provided free Internet access and it was the cheapest lodging at that location, it will be argued that the company’s priorities for lodging an employee at that hotel were the cost and amenities, and safety was not considered, he said.
International travel and safe lodging are not the only areas where companies are required to provide levels of care, McIndoe said. “Risk exposure” is an area in which a “prudent individual”—which is interpreted to be a corporation—is expected to have known about risks that were present at a location where an employee has been sent, he said. An actual example involved an American female employee who had been sent to Guatemala and had to travel between two Guatemalan cities to do the job, he said. However, the road connecting the cities was notorious for crime, and the employer did not review the crime situation in the Guatemalan countryside because if it had, the risk motorists’ face on that road would have been apparent, he added. So without being informed of the risk, the employee rented a car and took to the road where she was stopped by thugs who robbed, raped and beat her, but she survived the ordeal, he said. Because of the crime, the company became aware of the road’s notoriety, which it would have found out about if it had conducted a rudimentary inquiry. The firm also became aware of the level of risk the employee was exposed to and settled out of court with the employee because the company determined the level of risk to be unacceptable, he said.
J.J. Smith is manager of SHRM Online’s Global HR Focus Area.
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