Archive for the ‘Contractual Liability’ Category

Multi-National Business and Risk

November 9, 2009

Does a corporation overlook proper “due-diligence” when expanding their operations and, if so, how often might this occur?  I don’t mean the normal, everyday analysis, but a significant Risk Management concern; the legal framework one must consider when crossing borders!

European businesses have become very familiar with establishing new ties with various professional services when they open subsidiary operations in the northern part of North America, particularly in their understanding that Canada is completely different from Europe (and, again, different from the USA).  They locate legal, accounting, banking and insurance specialists who, many times, do not have direct ties with their European operations.  They realize that NAFTA (North American Free Trade Agreement) can benefit their Canadian subsidiaries in allowing an opening into the greater American marketplace, a major advantage to locating in Canada, and then look for the most suitable expertise to assist them.

Examples that I have seen include the contacts made through the various European-Canadian Chambers of Commerce with one lawyer (friend of mine) being especially adept at being able to obtain clientele in this manner.   There are numerous other examples but I will only provide one to whet the appetite for connecting with me.

Why do they like to enter America through Canada?  Many Europeans realize that Canada is significantly closer to our European “roots”, as opposed to our American “neighbours”, in areas like politics (should I term it “social democracy” and multi-party governing, as opposed to a true 2-party form?).  Maybe, for them, it is a gradual change from Europe to America.  And yes, many Europeans do love America.

Now what about American corporations; do they prepare themselves in the same manner?  Do they understand that Canada is not the 51st state?  Reality tells us that many American corporations do not fully comprehend that Canada has distinct laws, particularly in the areas of Health & Safety, Workers’ Compensation, Vacation/Paternal Benefits, Unionization, the “Duty to Accommodate” in areas of Disability and, surprisingly, “Francophone” issues, among many others.  They do, however, realize that we have a “Government Health Care” system in place, unlike their home country (and, yes, there can be major cost savings from that associated with employer provided “group medical insurance”).

Sure, Canadian media is driven by American news events (CBC often reports items faster than CNN, by internet) and Americans residing in Canada don’t recognize that they’re living in a foreign country because of so many similarities (we also watch the same television programs and movies) but there are, in fact, major differences!

What is the significance of some of these issues that can be so different?  An example mentioned to me, over a recent coffee meeting, gave rise to an item that was publicized significantly in Canada not too many years ago.  See the following for one example: http://www.ogilvyrenault.com/files/unionfreespeech01oct04.pdf

Knowing that some corporations do not see the “negative press” (“Reputation Risk”) as something to be of concern may be one issue to debate at another time but as a “new employer” in a different country it should give rise to discussions in the Board room, should it not?

Or, what about language issues or a “Napoleonic Code” legal system which should also be Risk Management concerns?  You may ask what the Napoleonic Code is but it heralds back to the times of Emperor Napoleon and still is the legal system in use, today, in the Province of Quebec, a part of Canada that is also the reason that we are a legally “bi-lingual” country.

There are a large number of differences between Canada and the USA that cannot (or should not) be overlooked by an American subsidiary operating in Canada.  Anyone who recommends that their subsidiary operate as a “branch” of the parent will be confronting many major issues never contemplated at home.  Quite possibly now, a majority of American firms operating here, treat their operations in this manner without fully realizing the many Risk Management issues they face.

The most significant, in my mind, was Bill C-45 and the debate it caused in 2003, when Directors, Officers and Management could be fined and imprisoned for the most serious of health and safety violations!  I had clients who wanted to buy insurance protection which was not available because these are considered “uninsurable” (criminal) events.  What could they do?  We provided training and consulting from a Risk Management capacity which lessened their concerns.  This needs to be an ongoing function.

To conclude, it may be better to obtain the expertise of local consultants when expanding multi-nationally.  Good Risk Management practices would indicate that, instead of assuming that everything is the same as to what one has become accustomed, businesses should take a few moments to contact us.

Legal Agreements and Risk Management – Franchising, Leases, Contracts, etc. & Compliance or Non-Compliance

October 29, 2009

Have you ever really given any thought to that legal agreement you have signed or are about to sign?  Have you thought about the insurance and risk management consequences you have or are about to assume on behalf of your business?

An example is a lease that requires $X Million in Liability Insurance – do you have adequate protection currently?  If you are non-compliant with your Landlord’s lease, what consequences might you face?  I know of an instance, several years ago, where the seller of a business had previously provided me with a copy of his lease; the requirement was for $5M (they were serving alcohol) and, to nobody’s surprise, the cost of the insurance was significantly more than it would be for $1M in Liability coverage.  The buyer of that business refused to purchase the mandated insurance from me – and went elsewhere for less cost because his choice of insurance providers did not request to see a copy of the lease.  What happened?  When the lease was to be renewed, the Landlord did not renew it, having chosen to replace the Tenant with a National Franchisee that provided an insurance policy in compliance with the terms of their lease.  And yes, the tenant was required to vacate, not relocating, thus risking the closure of the business.

What about Contracts?  Have you ever contemplated the consequences of a “Hold Harmless Agreement” or an “Indemnification Clause”?  Are you aware that you may be assuming the risk of a supplier or a customer by agreeing to those terms and driving the cost of your insurance policy higher?  Examples abound here with Property Managers, Contractors, etc.

And we all love Franchises, correct?  Did you know that some firms will require that your policy have coverage that may be difficult to find, on a “stand-alone” insurance policy?  This means that you should investigate what conditions are being required and how easy it might be to purchase a policy on your own as opposed to that of the “Master/Franchise” policy.  What about terms relating to the Financial Strength and Rating of your Insurance Carrier?  That “B” rating that your insurance company carries may not be sufficient to retain your franchise.  Or, what if you have a “protected territory” where your risk could be that you face the introduction of another Franchisee into your region because you were in default of the conditions of your Agreement?

Don’t just assume that what you have is the “norm” and that everyone must sign the agreement.  I have seen Loan Agreements with terms that can be amended, no different than Leases, etc.  The best Risk Management decisions should only be made when discussing your risks and options with an expert in the field.  Don’t assume that your present insurance provider can handle your business adequately and don’t be afraid to ask for a 2nd opinion – from a Risk Management consultant like ourselves.  We are not paid a commission to sell but a fee to offer our professional advice, including to lawyers and accountants who are not trained in insurance issues but their own expertise.

Another update to my exciting week!

October 23, 2009

What is of special interest this week, my friends?  Well, let’s begin by thanking the online friends I have south of the Canadian/USA border.

One terrific connection provided me with the contact information for 50 lenders he uses in his brokerage business.  Where did this lead?  I always like to return the favor (favour here in Canada) and am now trying to introduce him to another friend who has a very interesting concept to discuss where I will relish helping both of these fine gentlemen.

This evening, I spoke with another American friend who has connections to Lenders, Accountants, Lawyers and the Franchise Industry – meaning I can emphasize Lender Reviews with the Commercial Lenders, financial issues (including employee dishonesty with CPA’s), suggested/recommended(?) insurance requirements for contracts, leases and Franchise Agreements – 3 of my enjoyable aspects of Risk Management consulting.

I also had 1+ hour of wonderful “free” motivational consulting from “Linda” today and I so appreciate that.  I’ve set-up a “fan page” (is that what it is termed?) on Facebook now – WRiskManager – just like here!  I hope these efforts to “brand” me as the North American “expert” (sorry but my competition is reluctant to utilize the internet and find it a waste of their time 😉 ) will pay huge dividends (and I am very optimistic).

Well, that appears to be it for a Thursday evening.

RISK – My 1st Post! – Well, at least it is #1 for here (and maybe better than my other attempts)

October 22, 2009

This is my first blog attempt here and I hope better than my previous efforts 🙂 .

I have just had the most amazing week in so many ways that my excitement is bubbling over, hehe.  Reason for this is that I wished one of my many online friends a Happy Birthday on Friday last week and he (Craig, you know who you are) then proceeded to offer me immense advice on blogging and setting-up my blog on this site 🙂 .  He explained that I should be blogging every time I see, meet or hear something about “risk” since that is my expertise.  Well, here goes my effort then.

So, what else made my week so spectacular?  Well, one call to a friend of mine (Mike B.) that led to a request to speak to a group of bankers, accountants, advisors, etc. and then an e-mail from another good friend of mine (Mike A.) to gauge my interest to speak for 1.25 hours early next year to a group of Managers and then a follow-up Skype message (Andy – No, not another Mike hehe) re another speech to a group of independent management advisors – this all on Friday!

I then proceeded to mentor another online friend (Victoria) who is making a career move from agent to commercial broker and I offered my years of experience and continuing guidance to assist her.  Even in the same geographic area, it is much easier to use phone/computer communication than managing the headaches derived from fighting traffic to meet face to face.

What else has happened since Friday, then?  Well, I’ve been working with a management consultant friend of mine on his one client’s insurance requirements and ensuring that they’ve been met at affordable premiums.  I’ve provided two contacts’ names/info to another contact of mine who is in need of their services, been provided a list of 50 lenders by a new online connection (sure is nice to share contacts who can recommend me) so that my work during the next week will be quite busy in prospecting.

Well, you can see where my excitement originates from, correct?

What do I do, though?  I work in Risk Management – identifying and analyzing risks, controlling and financing risks.  My expertise is derived from nearly 20 years of Retail Commercial Banking and 20+ years of Insurance/Risk Management.  I work in the realm of Legal Contracts & Leases to Financial Statements through the spectrum of Property, Liability, Income and Human Resources and include Currency, FX, Interest Rate (yes, I did work in Banking), Employee Dishonesty, Media, Trade Credit, Business Continuity and Continuation Planning, Workers’ Compensation and Occupational Health & Safety – a broad spectrum.

Where do I spend the bulk of my time?  I review various Lenders’ Loan Agreements and Borrowers’ Insurance Policies for compliance with the terms/conditions of a Loan, recommending improved security where appropriate and knowing when a particular condition may be waived, as needed.  I even was called upon by a Lender during this week to recommend whether a loan condition for a “seismic report” be required or not – the Borrower already had Earthquake insurance and was located in a zone known to have activity so that I recommended the file be notated to never allow the Borrower to not include “quake” coverage on the policy.

As you can see, a busy and interesting week.  Not knowing when to curtail my comments, I will sign off now and be back later in the week to add something new.