This article was initially queued for December however, the recent headlines have moved it forward. I am glad my past organizations had K&R insurance in place.  I am even more thankful that some of previous business owners I worked with had the foresight to put these policies in place for all company personnel worldwide and not just as an executive perk. 

K&R insurance provides a combination of financial indemnification and expert crisis management.   The premiums are based on a variety of variables: geography, travels, past ransom incidents.  Most coverage can be purchased for <$600/year.  Most kidnappings are not reported publicly so data is rare.  90% of cases are not reported.  Kidnapping is a well organized crime enterprise.  Lloyd’s of London compiled statistics organized enterprise.  The latest data I could find was 1992-2002:

• 77% occurred in Latin America
• 15% occurred in Asia
• 3% occurred in Europe
• 2% occurred in North America

Since that time there has been a rise in kidnappings in Iraq, Afghanistan and Africa as armed conflict has risen there.

Kidnap outcomes:

• 67% there is a ransom paid
• 15% the captives are released without payment
• 9% are killed
• 7% are rescued
• 2% of the captives escape

Corporations have become a bigger target of kidnappers than celebrities and political figures.  Companies are perceived as having deeper pockets than individuals.  Paying a ransom is solving the problem after it has occurred.  There is still the support for the victim’s family, management disruption and stress that occurs after the kidnapping fact.  A fuller risk management approach would be preventive and include:

• Appropriate security training to employees and family members
• Appropriate security measures are in place
• Risk assessments of individual geographic areas

The existence of K&R insurance is an employee benefit, however, knowledge of the existence of such policies should be on a need to know basis only.  It should not be discussed externally as it increases the probability of a kidnapping incident and may be cause for coverage termination.  My research indicates that AIG, Chubb and Travelers Group are prominent insurers offering this type of coverage.  Consider K&R insurance as a cost of doing business abroad.  You may want to refer to the post below:
http://www.olivegroup.com/contents.php?contid=191

​I do not pretend to be an insurance expert, I do pretend to be an expert on international business development topics so please contact me in that vein.  Have a great Thanksgiving!
 

During a recent peer group collaboration at a local University one of my colleagues related that his global clients were finding it harder to compete in global markets in 2015.  The financial press is rife with US domestic companies reporting lower 2015 sales due the strong $US.  These negative trends are caused by two phenomena:

1. It is harder to price compete with local manufacturers in export markets.  Your imported goods have increased in price with no perceived upswing in value.
2. Foreign subsidiary sales are now converted from local currency to $US at a reduced foreign exchange rate making consolidated sales appear weaker.

These trends are today’s reality.  Exporters generally have products with higher brand recognition, greater value perception and premium pricing.  They also have to compete with local manufacturers who don’t have the added import costs: freight, duty, differentiated packaging and literature.  You now need to dig in your heels and compete at a higher level…or lose share.  So what to do?
You need to support your channel to win.  Consider:

1. Specifically targeting two-five end user target accounts (your distributor’s customer)
   1. Accounts that re-export their good will become more price competitive in their segment.  Their volumes will increase, due to their improved ability to export, and you may be able to partner with these premium accounts.
   2. Sizable accounts that are vulnerable to local competitors.  Financially support the distributor with a time detailed plan to keep the end user current pricing programs intact.
2. Implementing a foreign currency sharing program with distributors.  Install a foreign exchange base rate with upper and lower boundaries so that end user pricing is stabilized within a range and costs are shared both high and low.
3. Reviewing your total value proposition.  Have you heard from customer testimonials and field feedback that there are further product benefits that were not completely understood at product launch.  It may be time to accent these additional benefits into your customer ROI equation.
4. Provide limited, short term benefit programs to shift expenses away from distributors, e.g. greater cost sharing for trade shows, product literature or training programs.
5. Consider special targeted VIP factory visits, customer in-house training seminars or other services that would boost end user customer intimacy.

The important issue is winning market share and retaining profitability locally.  Consider:

1. Increasing local market sales by expanding production overseas to meet market needs.
2. Reduce freight costs through carrier negotiations while gas prices are falling.
3.  Source final stage commodities overseas and assemble in bulk locally.
4. Shifting sales responsibilities to overseas subsidiaries to retain those accounts and not lose them due to uncompetitive pricing issues.

I don’t recommend a wholesale price change without analyzing the full impact to your bottom line.  There is no magic bullet to solve this $ currency problem, however, we all know it is less costly to retain an account than to go out and a find a new one.

If you need assistance designing a specialized program or exchange rate agreement let’s figure out together how we can reach your objectives.