Risk management’s role in countering global terrorism

Risk management’s role in countering global terrorism

Paton, Richard

Risk management involves all aspects of modern day life

Risk is at the heart of nearly every business, personal, and governmental decision made these days-from the risks of business travel to decisions involving foreign investments or sports teams visiting cities where terrorist threats or health risks exist. Risk is headlined on the front pages of our daily newspapers and in nearly every television broadcast. It colors the decision-making process in everything from school trips to our nation’s capital, to the family vacation destination. For example, a recent poll of vacationers indicated 27% would travel by air, down from 33% in 2001, while the number traveling by car increased from less than 50% to nearly 60% today, being influenced by the 9/11 tragedy.

Now is the time for risk managers and insurance professionals to step forward and help address some of these risks in a more logical and professional manner. Risk managers for companies with international operations south of the border should take special note; surprisingly, Latin America ranks #1 in frequency of terrorist attacks.

Often, simple risk management solutions can yield surprising results and assist in a logical decision-making process. The time-proven approaches of risk identification, risk analysis, evaluation, control, financing, and administration still apply. Coupled with risk management techniques focused on avoidance, prevention, reduction, transfer, and financing, large corporations and small concerns alike can craft better decisions and allocate resources more efficiently to counter actual risk.

Risk management and terrorism

At first glance, most people unfamiliar with either risk management principles or the darker corners of the global war on terrorism now being waged by military, police, and international intelligence services, might not see the close connection between risk management and anti-terrorism strategies and techniques. Surprising though it may seem, the same risk management techniques and skills which have been in common use in industry and insurance applications for years are now being employed in ways never before envisioned by the risk management and insurance industry. Intelligence and military communities are unwittingly employing some rather fundamental risk management applications in their attempts to identify, classify, and prevent terrorist attacks against U.S. citizens and facilities across the globe.

If intelligence and military organizations employed more sophisticated risk management techniques proven effective in industry, more headway could be made in preventing attacks and reducing the effects of terrorist attacks should they take place. In short, risk identification, analysis, and classification would lead to more efficient allocation of scarce defense resources.

Businesses-most at risk

Businesses are more likely to be attacked than government or military facilities. According to data from the U.S. Department of State, a total of 2,784 terrorist attacks were made from 1996 to 2001 against business, diplomatic, government, military, and other facilities across the globe. Of these, more than 1,902 attacks were made against businesses, while the total for government organizations including diplomatic facilities and military installations accounted for only 335 of the almost 2,800 attacks during that same period. Government targets accounted for only 12% of the total.

Clearly, the loss data suggest that business targets are 21 times more likely to be struck than government facilities; 39 times more likely than military targets to be attacked; and nearly 10 times more likely to be targeted than embassies, consulates, and legations.

If this message doesn’t raise alarm in the risk management departments of global and multinational corporations, nothing will. Even more alarming is that the trend in terrorist attacks launched against business concerns is growing at a rate far outstripping attacks against government targets. Attacks against business concerns grew by over 68% during this period while actual declines were seen in the diplomatic and military sectors and a near static rate held against government facilities. The frequency rates for attacks against business offices and facilities are increasing at very rapid and alarming rates, which can be expected to continue, if not increase, in the future.

Terrorist attacks-most frequent in Latin America

As an example of risk identification, despite the real and perceived risks for American interests in the Middle East, the actual data would suggest that the relevant terrorism risks to American citizens and business interests are far greater in our own hemisphere than might be expected. If we research the data on international terrorist attacks for the period 1996 through 2001 from a geographic standpoint, the data are even more telling. For this period, there were 831 attacks in Latin America compared to 19 in North America and 188 in the Middle East. Western Europe sustained 353 attacks while Asia was hit with 319 and Africa with 184. The likelihood of terrorist attacks at America’s back door in Latin America is in actuality more than four times greater than in the Middle East and 43 times greater than in North America. These statistics are unsettling, yet revealing and interesting from an international risk management basis.

A further look into the data on attacks against American facilities and U.S. citizens for 2001 reveals 191 attacks against U.S. citizens and companies in Latin America as compared with only eight such attacks reported in the Middle East. An incredible 87% of terrorist attacks conducted against American citizens and American companies took place not in the Middle East, but in our own hemisphere in Latin America. The vast majority, over 94%, involved bombings, the method of choice among terrorists, compared with only 1% by hijacking or 3% from kidnappings. By 2001, a full 93% of terrorist attacks were directed at U.S. businesses vs. a targeting ratio of only 7% for American diplomatic, governmental, and military interests.

New, updated information

The MIPT (Memorial Institute for the Prevention of Terrorism) utilizing the RAND-MIPT Terrorism Incident Data Base reported that for the period from January 1, 2000, to July 28, 2003, there were a total of 2,631 terrorist incidents accounting for 2,695 fatalities and 6,735 injuries. In Latin America the most recent data indicated the following number of incidents (not attacks): Columbia 432, Venezuela 20, Ecuador 11, Peru 6, Brazil 3, Honduras 2, Chile 1, Argentina 1, Bolivia 1.

Risk managers-take note

U.S. companies and American citizens, accordingly, should be extremely wary of the relatively high risk of terrorism in Latin America and should approach this area with the same or greater degree of caution than one would normally exercise in the Middle East. American citizens and American business interests conducting operations in Latin America should be aware of the severe relative risks of extremist terrorism and state-sponsored terrorism in this region and take necessary precautions from an avoidance and risk control standpoint.

The important point now is to recognize the high frequency rate of terrorist attacks in Latin America, the high frequency rates for attacks directed against American business concerns, and that the most likely means of such an attack will be by bombing. Another important trend in the global scenario is that the severity rate in terms of deaths has greatly escalated in the past few years. Risk managers need to employ some practical measures to avoid and reduce terrorism risks for American citizens traveling in Latin America and other regions and for companies conducting global business.

International risk management: What local agents, risk managers can do to fight terrorism

Local insurance agents, brokers, risk managers and consultants can be of vital assistance to not only their clients but also to local civic groups and organizations faced with making risk-based decisions in an uncertain and more often dangerous world. Who better in your community understands the concepts of risk and risk-based decision-making? Whether it may be a client with international operations or the local school board deciding upon the wisdom of an exchange concert, a foreign trip planned by a seniors’ group or a European vacation being considered by an important client, you can contribute in very meaningful ways to assist people in understanding relative risk and to help in some reasonable degree to better manage risk.

A few things you might consider from a risk management standpoint:

* Recommend that the U.S. Department of State’s Consular Information Advisories be checked for both destination and en route countries, well in advance of departure (during the planning stages) and again, just prior to departure, checking for local conditions and advisories.

* Check U.S. Department of State Travel Warnings (www.travel.state.gov/ travel_warnings) during the planning phase and prior to departure. The British Foreign Office also has a similar Web site that is less “politically correct” and is more likely to describe the situation in various countries in more succinct terms. Local English language newspapers are also a good source of information on recent developments in a particular city or country.

* Check the CIA’s World Book for background information on the country being visited. It is available to the public and is an excellent resource for international travelers and businesses.

* Check the Web site for the Centers of Disease Control (www.CDC.gov) on needed or recommended immunizations. (Click on Travelers’ Health).

* Determine the need for trip insurance, reviewing the need for travel and accident policies, life insurance and determining whether a special health insurance policy may be required for medical emergencies in foreign countries. Grant a power of attorney to an immediate relative or trusted friend.

* Determine whether a special service contract or policy should be taken out for special medical or political air evacuation and assistance.

* If your client is a business executive, determine whether the client’s company has kidnap and ransom insurance in sufficient limits and with a worldwide coverage territory.

* Make arrangements in more expensive hotels where security is more likely to be better than in budget establishments.

* Make copies of airline tickets, travel documents and credit cards to take with you in case they are lost or stolen.

* Maintain a copy of the front pages of passports in another location with you and a second copy with a contact person at home or at the office. This will greatly facilitate things in the event of a lost or stolen passport.

* Establish points of contact with office staff or family members on a scheduled, periodic basis. Establish a distress “code word” that can be used in a casual conversation to alert your contact of an emergency or duress situation.

* Prepare a list of contact numbers and the local numbers for the U.S. Consulate and Embassy in each country to be visited.

* Leave behind any government or military identification, (reserve or national guard I.D.s) security passes or phone numbers.

* Use only closed nametags on luggage, never a business card.

* Remember the first rule of international travel. Travel light and, if possible, do not check luggage.

* Carry prescription medication and eyeglasses with you and bring along a copy of the prescription itself.

* For international flights, insist upon hard copy (paper) tickets, not e-tickets. These are much easier to change if you must depart quickly or change your travel plans.

* Join and use airline clubs. Move quickly through the airport and don’t linger in waiting areas.

* Dress conservatively, blend in with the local culture and when traveling internationally, don’t advertise your patriotism with an American flag lapel pin or anything else that will target you.

* Don’t forget the first rule of risk management: risk avoidance. If you are going into a hazardous area for business purposes and the situation deteriorates, DON’T GO. Wait, cancel, postpone or reschedule. Consider a local representative or conference call, video conferencing, etc. Nothing is so important that you should jeopardize your safety or your life.

* Local air carriers in some parts of the world have very poor safety records. Be aware of that and try to stick with well-known international air carriers with good safety reputations. Again, this is no place to economize.

* Be wary of using taxicabs, particularly in Latin America and Turkey as they are unreliable, often dangerous and tend to greatly increase you chances of encountering a kidnapping or worse. Use transportation arranged in advance with a well-known hotel whose driver will meet you at the airport and present identification. The added cost is minimal and often in some Latin American countries this service is provided free of charge.

* Business clients with personnel traveling internationally frequently should be provided with an international cell phone and spare batteries.

* Business travelers should not publish or distribute their itineraries.

* Never use room cards while staying in hotels (Do Not Disturb or Please Make Up Room) as these cards advertise the fact that either you currently are in the room or that you are not in the room. Either is not good information to be broadcast in the halls of a foreign hotel.

* Business clients with facilities and employees overseas should consult an international risk management consultant to establish a risk management plan.

By Richard Paton, CIC, CRM

The author

Richard Paton, CIC, CRM, is managing director of the Coventry Consulting Group, L.L.C., management consultants, certified risk managers and international business development specialists in Coventry, Connecticut. He most recently served as senior vice president for international business development at the Phoenix Insurance Company. Paton was a commander in the U.S. Coast Guard Reserve and has served as an adjunct faculty member at several area universities in risk management and insurance. He recently received his CIC and CRM designations. For more information on the CRM Program, contact Certified Risk Managers International at (800) 633-2165 or visit www. TheNationalAlliance.com.

Copyright Rough Notes Co., Inc. Oct 2003

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