DENVER — A survey of senior executives at 300 companies in the U.S. and Canada shows most of those companies expect to expand overseas operations this year, even as that expansion increases risk.
The “2014 Multinational Survey” by Warren, N.J.-based Chubb Corp. showed 52% of the responding companies expect to increase overseas activities this year, while 48% said they had experienced at least one loss over the past three years related to overseas business activities, and 45% said they consider overseas risks a greater threat than domestic risks.
Chubb released findings of the survey Tuesday at the annual conference of the Risk & Insurance Management Society Inc. in Denver.
“With overseas expansion … there certainly are risks,” said Kathleen Ellis, senior vice president with Chubb's multinational solutions unit. Of those surveyed, 19% cited supply chain disruptions as the greatest risk associated with overseas operations, 15% cited the risk of “One reason we have for greater concern in the East is that earthquakes can travel longer distances without loss of energy because the Earth's crust in the eastern part of the country is denser and colder,'' Mr. Williams said. “So you have more earthquakes in the West, but in the East earthquakes are felt much further away, and we have generally lower construction standards in the East.”
Fellow panelist Tod Huddleston, St. Louis-based facilities manager for investment firm Edward D. Jones & Co. L.P., said earthquake risk was a primary concern as the company underwent a building boom in recent years.
Much effort went into ensuring the correct seismic design for each facility the company built, Mr. Huddleston said. For example, he said that while building codes focus on occupant safety and the integrity of structural components, much of a building's value is represented by nonstructural components.
Thus, for the company's most critical building they chose an enhanced design that stressed limiting damage, maintaining the continuity of business operations and reducing business interruption, as well as ensuring the safety of employees.
While the cost to retrofit existing buildings may not offer an appropriate return on investment for some companies, Mr. Huddleston said the additional cost to build new structures to an enhanced design was not cost-prohibitive.
“For structural components, we paid about a 3% premium for enhanced design,” he said. “For the nonstructural elements, the cost was nominal.”