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Good Business Through Bad Times

By: Nienke Hinton

Terrorism attacks and the threat of epidemics are prompting companies to look beyond the benefits they provide to protect their employees, writes Nienke Hinton, Benefits and Pensions Monitor’s assistant editor.

It’s not whether you win or lose, it’s how you play the game. That seems to be the case for business too, when it comes to risk management.

The terrorism attacks of September 11, 2001, severe acute respiratory syndrome (SARS), the war on Iraq, as well as poor corporate leadership, executive malfeasance, and misappropriation of funds have dominated headlines and brought attention to the way organizations have handled themselves in these situations.

These global crises “have caused a great deal of harsh reality to be exposed and transparency to be encouraged,” says Robert Wesselkamper, practice director of international consulting with Watson Wyatt Worldwide. Wesselkamper considers ‘transparency’ the new buzzword that is impacting all levels of society.

A case in point is the findings from a recent survey by Watson Wyatt where 81 per cent of multinational organizations said they perceive Asia as the greatest area of risk in the world compared to 50 per cent who indicated the Middle East. The survey, Managing Risks Faced by Expatriate Employees, was conducted in July 2003, after the global SARS outbreak. However, Wesselkamper does not blame SARS alone for this concern.

“Clearly, it’s SARS-related,” he says. “But, it’s probably the conditions that were exposed by SARS – the lack of transparency in certain governments and the associated instability. What SARS did was expose the total lack of transparency in, for example, China. It exposed the vulnerability of certain economic centres like Singapore.” In essence, the respondents seem to be concerned about how these areas within Asia handled the situation rather than just the situation itself.

Faced With New Challenges

Canadian employers were also faced with new challenges in handling SARS. Suddenly, healthy individuals had to take time off work. However, healthy individuals who had to be in quarantine would not be considered disabled under a weekly indemnity policy.

Surprisingly, only 11 per cent of employers had a policy in place for healthrelated emergencies such as the SARS quarantine, says a survey by Mercer Human Resource Consulting conducted in April 2003. But, that didn’t thwart employers from responding to the epidemic.

Almost 90 per cent of surveyed employers said they would pay for SARS quarantinerelated absences. On top of that, 30 per cent of those who would pay said they would use the honour system.

Before SARS, the events of September 11, 2001, had also drawn concern about crisis management, especially in terms of insurance. Employers were concerned about issues of vulnerability and the safety of employees and business operations. How would claims be handled? Would terrorism become an exclusion in health insurance as it did in property and casualty insurance?

Fortunately, most group health policies didn’t – and don’t – have terrorism exclusions, although most do have war exclusions. So, claims in Canada related to the September 11 attacks were, for the most part, covered. However, insurance providers could not promise anything for future situations of a similar nature.

Employers were forced to review their health policies and organizational policies concerning risk.

Limit And Mitigate Risk

Before September 11, “the development of (risk) policies was unco-ordinated and frequently inefficient, resulting in gaps,” says Wesselkamper. “The company has an obligation to its shareholders and employees to ensure, from a prudent governance rule, that it does everything to limit and mitigate risk. And, because we now live in a world where it is imaginable that large populations of workers and individuals may be impacted, it is to the company’s advantage to close the gaps.”

Irene Klatt, director of health insurance policy with the Canadian Life and Health Insurance Association (CLHIA), recommends employers review their insurance policies and talk to their insurers about the provisions they have in place for any aspects of their business they may have some concern about. “Employers will want to review themselves as a whole – not just the benefit package, but everything about their operations.”

Wesselkamper says it’s very difficult for any one event to change culture. However, there are subtle changes and modifications over time within the cultural infrastructure. “It’s demonstrated by, and actually gave legs to, so many things like the Sarbanes-Oxley Act of 2002 (U.S.) and the governance initiative that’s going on. There is a dramatic desire for transparency.”

Vincent Gauthier, who heads Hewitt Associate’s Hong Kong operations, agrees. “Dealing with SARS has re-inforced the need for companies to conduct clear and transparent communication with employees,” he says. It “has also taught companies the need for constant and consistent efforts to ensure that the leadership is equipped with the skills to guide the organization and unify employees so that in the time of crisis, it experiences minimum chaos.”

Nienke Hinton is assistant editor of Benefits and Pensions Monitor. 38 Benefits and Pensions Monitor – August

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