RISK MANAGERS ADVISED TO CHOOSE PARTNERS CAREFULLY

Size does matter to risk managers looking for international partners, but it isn't everything.

Risk managers often end up partnering with the Godzillas of the insurance world, but the decision shouldn't be based on global reach alone, says Fred Travis, director of corporate safety and risk management at Anheuser-Busch Cos. Inc. in St. Louis.

He suggests several steps risk managers should take when deciding which insurers, brokers and other providers of risk management services should be a part of their international programs.

Picking the right partners "is a fairly involved process, at least from our view," Mr. Travis said.

"When you're talking about an international program, it's a lot harder to get the communications right than with a domestic program," Mr. Travis pointed out. "First, you've got to communicate well, and you've got to trust them to execute when you can't talk to them."

Risk managers should answer some questions that will help determine the qualities and capabilities they need in a partner, Mr. Travis said.

"Clarify what your risk management strategies and philosophies are for international programs," he suggested, and detail the risks to be insured in overseas operations. Address issues such as how much of the risk will be assumed and how much insured.

W. David Little, vp-risk management at Hilton Hotels Corp., agreed that a partner has to be very familiar with the company's philosophy. "I need someone to be my eyes and ears over there, someone who can help to transfer my risk management philosophy internationally. That's why we partnered with Winterthur" in a global insurance program covering 15 to 20 countries where the hotel chain has properties.

Mr. Travis suggested that once the risk manager determines the company's strategies and philosophies, the next step is to "get the partnership requirements on paper." The responsibilities of the partner, "what needs to be done, how it will be done," are areas that should be addressed, he said.

Then risk managers should determine what they are willing to pay for those services and how much of the payment should be contingent on the partner's performance, Mr. Travis said.

He suggests looking for partners that are willing to "learn your business, those who know who the competition is, what it is you make or sell."

Mr. Travis said he spends a lot of time with brokers when making these choices. "Producers are who you see in this business. I insist that producers bring at least one technical person with them" who knows about Anheuser-Busch and the markets where it operates.

Check with colleagues, Mr. Travis urged. "Just do a lot of homework. Find out who's good in the business and who's not."

It's critical, he added, to include local managers in the process. "If you're meeting with people, have people from the local operations involved. They often have better judgment about people than you do. You've got to get the operating people involved in the selection process."

Mark Charron, a partner in charge of national risk management consulting at Deloitte & Touche in Hartford, Conn., emphasized that many risk managers "are not spending enough time in the foreign countries looking at the needs of their facilities there" when considering who should meet those needs.

"It's easy for me to sit in Topeka, Kan.," Mr. Charron added, "and say I want a broker, then look at Aon or J&H Marsh McLennan and say, 'That matches up with what we have in Dublin' " simply because the broker has offices there.

That approach won't work, he warned. "I need to see what's going on in Dublin and do a needs analysis."

He pointed out that risk managers often will need to use local vendors to supplement the services insurers and brokers provide. Engineering services, for example, often need to be arranged with local companies. "Fire protection is one that is most common to all countries."

It may not be clear what types of vendors are needed if the risk manager doesn't spend time learning the facility's operation, Mr. Charron emphasized.

Selecting partners shouldn't be done hastily, Mr. Travis said. "Keep that selection process going. When you find there are ones you don't like, cross them off the list. Are there any new ones you can add?"

Once the legwork is done, risk managers can "draw up a list of candidates" they believe can meet the criteria "and start winnowing through them," he advised.

"Narrow it down to two, and ask them to put on a real dog-and-pony show," Mr. Travis said, letting those who were involved in the selection process score the candidates and comment on who they think should be selected.

Because the process can take months, Mr. Travis said risk managers who need to get a program in place quickly may have to rely on a broker "to get you something" right away to cover foreign exposures. The risk manager later can take the time to put together a more formal program and determine which partners are the right ones.

Insurers and brokers that have a wide global reach make it easy for risk managers to establish programs with consistency throughout the world.

"We prefer to deal with insurers who are global," Mr. Travis said. For its risks in the United Kingdom, Anheuser-Busch this year ended a local insurance program and rolled the risks into its global program.

David Hennes, director of risk management at The Toro Co. in Bloomington, Minn., said: "We tend to deal with the major brokers. They all have the capability to service us in the international arena."

With manufacturing operations in Italy and Australia and distribution centers in Belgium and the United Kingdom, Toro relies on J&H Marsh & McLennan to provide international services.

Consolidation is making the choice among global brokers easier for risk managers.

In Toro's case, it worked to the company's advantage when it acquired an irrigation equipment company near Adelaide, Australia, according to Mr. Hennes. The decision on whether to use the acquired company's local broker was made moot when, soon after the deal, J&H Marsh & McLennan acquired that broker.

Consolidation has "narrowed the field for us," said Michael Eremchuk, director of risk management at First Data Corp. in Atlanta. With operating units in Europe and Hong Kong, First Data settled on Aon Group Inc. to handle its international brokerage duties.

"Because of our size and the nature of so many different locales, we were looking for a broker with a presence in as many of these as possible," Mr. Eremchuk noted.

Using a global broker means "ease of administration," he explained. "We have one coordinator we can call in the States and have them trouble-shoot" if there's a problem at a foreign location.

The same criteria used to select a broker are in place for insurers on international risks, Mr. Eremchuk said. Those that can provide efficiencies by being in many places get the business. First Data has coverage on its international risks with Allianz A.G., Zurich Insurance Group and Chubb Corp.

"For someone like myself," said Mr. Little of Hilton Hotels, "you want consistency around the world. You need a brokerage that's international, too, to gain that consistency. . . .You need one in the countries you operate in and the ones you are thinking about operating in."

When risk managers do settle on their international partners, Mr. Charron of Deloitte & Touche emphasized that it is "absolutely critical" that risk managers engage in "regular and continuous follow-up" with their partners. That way, he said, risk managers can "make sure what was promised is being delivered.'