A midsize company must set its international strategy and mine its resources before deciding how to manage its risks when expanding abroad.

Those steps will lead to an informed decision about whether a new insurance broker and different underwriters are needed, as well as the types of internal talent that need to be developed.

Sixty-nine percent of midsize companies plan to increase their international business in the next year, with 79% citing a competitive domestic market as the top reason they plan to expand internationally, according to a recent survey.

“I look at a risk management continuum” for businesses expanding outside the United States, said James A. Swanke, Minneapolis-based director for risk consulting at Towers Watson & Co.

Mr. Swanke, who also is a lecturer in the graduate program at the University of Wisconsin-Madison School of Business, visualizes the continuum as five boxes. The first box represents companies that have guaranteed-cost insurance, and the last box on the continuum represents those using captives and other risk management alternatives.

In between are the second box, which represents retrospective rating; the third, which is large-deductible plans; and the fourth, which is unfunded self-insurance.

“All organizations need to figure out where they are on that continuum,” Mr. Swanke said.

Then, he said, the question is, “Can they move down the continuum with their current broker” if necessary to manage their international risks in a cost-effective way?

Rick Betterley, president of Betterley Risk Consultants Inc. in Sterling, Massachusetts, said midsize companies need “a broker that already has been where they want to be in the future.”

The broker must make sure the midsize company facing its first international exposures knows the right questions to ask to identify potential non-U.S. exposures and ensure that the optimal insurance coverage is in place, he said.

“The broker decision is more important than what you do with the current insurers,” said William Austin, a Providence, Rhode Island-based consultant at Austin & Stanovich Risk Managers L.L.C.

The transition to covering international risks must be as seamless as possible, and the broker should review the total program to ensure there are no coverage gaps between master and local policies, he said.

“If a company is not happy with that broker, it might be time to put it out to bid and ask for conceptual-type proposals,” Mr. Swanke said.

He described a conceptual program as “one in which you talk about financing on the most cost-effective basis. You don't want cost-savings at the expense” of a program that offers adequate protection and makes financial sense.

Midsize companies, which may have as few as 100 employees, may not have a risk manager but rather a chief financial officer who is responsible for risk management. As the company steps into the global environment, it must “know when to bring on a traditional risk manager and when to add (risk management) staff,” Mr. Swanke said.

It's also best to take an enterprise risk management approach to preparing for international risk management.

“All areas of the company have to be allowed to use their networks of experts to identify risks” before expanding abroad by, for example, buying a factory or establishing a sales force, said Joe Underwood, principal consultant at Albert Risk Management Consultants in Needham, Massachusetts.

For example, he said, the company's legal counsel should handle compliance issues, human resources should establish travel policy and procedures and identify labor-related risks, and the engineering department should look at a potential international location's resiliency from natural catastrophes and crisis management capabilities.

“The first thing a risk manager should do, whether expanding inside the United States or outside, is determine what the changes in the organization mean to the company's risk exposure. You can't make any solid decisions on changes in the insurance program until you find that out,” Mr. Austin said.

The pace of going global has accelerated, said Chris Baudouin, CEO of Aon Global Client Network in Chicago.

Not only are companies under competitive pressure to quickly establish themselves internationally, the risks are more complex due to longer supply chains, Mr. Baudouin said.

Companies “need to be aware of natural disasters, political unrest or just regulations that can affect suppliers,” Mr. Baudouin said.