Risk management of operations in emerging markets

Agenda What do we do Where do we expect growth What problems do we see Best practice approach Final thoughts Questions 2

Crisis Management Team Fully integrated, multifunctional business that combines traditional insurance broking with consultancy services 6 Insurance peril lines A unique consulting capability Centre of Excellence in London Global presence 4

Risk Analytics - Sunstone 5

Risk Analytics - Sunstone 6

Risk management in hostile environments Our clients have: People - Kidnap Ransom & Extortion Asset - Terror / Political Violence Operations / IT - Cyber Contract - Political Risks Insurance exposures in hostile environments. We assist with identifying and managing those risks, and specifically advising on issues relating to duty of care. 7

Do you have exposures in emerging markets? Extractive industries & third sector organisations versus services companies. Travel assistance firm International SOS has recently found that in three quarters of companies they surveyed, employees had experienced a medical emergency whilst travelling. However more than half of those indicated that the affected employee had a lack of access to appropriate health care. We conduct resilience reviews to assist clients in matching corporate governance measures to exposure. We are retained by clients on an annual basis to maintain policies and procedures and advise during incidents. 8

Correlation is not causation Emerging Market: According to Enderwick (2007) emerging markets are quickly growing economic zones where investment would be expected to generate higher revenues. Those countries are characterized by political and social instability, a broken rule of law, high illiteracy, corruption, bribery, high physical crime rates, poor infrastructure, low output and large agriculture and high risk, but still predictable risks for foreign investors. Hostile Environment: A location, country or region where people, organizations, infrastructure, reputation, morale or information are likely to become a target of criminality, bribery, corruption, terrorism or other threats due to a lack of governmental control or sovereign government (Sandschneider, 2011, p.50). 10

World Bank 2008 2012 GDP Statistics 11

Emerging markets top performing nations Country 2008 2009 2010 2011 2012 Sierra Leone 5.3 3.2 5.4 6.0 15.2 Mongolia 8.9-1.3 6.4 17.5 12.3 Niger 9.6 -.9-8.0 2.3 11.2 Turkmenistan 14.7 6.1 9.2 14.7 11.1 Liberia 10.5 13.8 10.9 9.4 10.8 Panama 10.1 3.9 7.5 10.8 10.7 Burkina Faso 5.8 3.0 7.9 4.2 10.0 Macau SAR 3.4 1.7 27.5 21.8 9.9 Cote D Ivoire 2.3 3.7 2.4-4.7 9.5 Bhutan 4.7 6.7 11.7 8.5 9.4 Timor-Leste 14.6 12.8 9.5 10.8 8.6 Ethiopia 10.8 8.8 9.9 7.3 8.5 Iraq 6.6 5.8 5.9 8.6 8.4 12

Red24 2013 Global Travel Risk Assessment 13

Risks that we see People: Assets: Contracts: Road traffic accident Illness Accident Violent Crime Kidnap for ransom Theft or loss (including cyber) Accidental damage Terrorism Fire Political risk Nationalisation Bribery and corruption Business interruption 15

Kidnap for ransom Source: Control Risks 2013 16

Focus on operational component Activity Brand and Initial Impacts reputation exposure Consequential Effects Time 17

Resilience toolkit Awareness Prevention Response Recovery Activity Threat and risk Travel tracking Asset tracking Cyber risk Policy Process Collaboration Alerting and agility Escalation Invocation CM Team Lessons Adjustments Insurance Time 19

Resilience opportunity 20

Duty of care Obligation not to create unreasonable exposure, and corporate liability can be created through negligence. Risk assessment Traveller preparation Risk monitoring Response Obligations also extends to nonemployees. Situational Awareness Action & Comms Decision Action Cycle Decision & Direction Common Recognised Information Picture 21

Considerations Ownership & governance: who owns it at board level? Internal resourcing: Involvement of appropriately experienced and qualified individuals 24/7 component and duty of care liability Need for cross department liaison Importance of rapid and agile response External partnerships: security and crisis management vendors, where possible with indemnified response Use of technology: Situational awareness & common recognised information picture (CRIP) 22

Resilience considerations for hostile environments We re all going to be operating in unstable environments. Duty of care is a board level issue. The approach is uncomplicated, but requires appropriate resourcing. 24