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The Multiple Facets of the Traveler Protection Problem

  
 Gavel and Handcuffs
 
By Dr. Daniel Diermeier, IBM Professor of Regulation and Competitive Practice, Kellogg School of Management, Northwestern University. This article was produced in partnership with On Call International.

There are multiple types of travel risks with large potential consequences for organizations. This makes traveler protection an enterprise-wide issue.

Types of Risk
Many organizational leaders think protecting travelers is as simple as buying travel insurance to supplement their health insurance plans already in place. Indeed, travel insurance is suitable for addressing direct financial risk if self-insurance is not an option. Such financial risks include medical costs for overseas treatment, emergency transportation, short- or long-term housing, travelers’ documents (passport-related and other fees), repatriation, and others. For example, the Chinese student who was injured in the New Mexico motor vehicle accident required air ambulance transportation, advanced life support, and a long hospital stay, along with subsequent repatriation to China. This likely totaled hundreds of thousands of dollars in out-of-pocket expenses for the family and/or the university (if adequate risk mitigation programs weren’t in place). Covering these direct costs and providing travelers with everything they need during an emergency requires not only comprehensive international health insurance, but also additional protection through travel risk management programs.

Likewise, direct costs incurred by an individual traveler or a group are just a few of the potential travel risks. Insufficient protection and response carries significant risks ranging from legal exposure to reputational damage.

Countries including those in North America (United States, Canada), the European Union (France, Germany, Belgium, Spain), and Australia have developed comprehensive Duty of Care legislation that applies to both in-country and travel situations.1 Courts worldwide have awarded damages to employees of organizations based in these countries when the employees have been harmed either while in their home countries or abroad. This means organizations must be concerned about all travelers, including those doing work in regions without established Duty of Care regulations, such as China or South Asia (including India, Pakistan, and Afghanistan). In numerous cases, travelers harmed in these and other countries, or in transit, have successfully brought complaints or claims against their organizations based on home-country legislation, often receiving large damages or settlements.2

For example, one implication of the UK Corporate Manslaughter and Corporate Homicide Act 2007 is that an organization (rather than an individual) may be prosecuted for failing to adequately protect its travelers from fatality on UK soil or while on British ships or aircraft. The legislation applies to organizations registered in the United Kingdom or overseas, requires evidence of failure at a senior level within the organization, and involves no limit on potential fines. Thus, a failure to appropriately assess, communicate, or otherwise prevent travel-related risk for UK-bound travelers could result in prosecution for any organization. This includes organizations based outside the United Kingdom but sending their people to that region for work. By late 2012, four organizations had been prosecuted under the UK act, including Cotswold Geotechnical Holdings (and its company director), after a junior geologist was killed by a pit collapse near Stroud in Gloucestershire; the director faced potential jail time for gross negligence manslaughter.3

Other traveler protection mandates are more specific than those stipulated by Duty of Care provisions. For example, through the Defense Base Act, US regulations require a certain level of protection for private-corporation employees working overseas on government contracts related to the military or other areas. Failure to adhere to these rules can result in costly legal proceedings and damages, for example, as related to workers’ compensation lawsuits for inadequate protection.

This obligation applies to acts of commission (doing something that increases risk) and omission (failing to do something that reduces risk). When asking their people to travel across borders, organizations are expected to take additional steps to protect their welfare, commensurate with the additional risk due to travel. The costs of failing to take on adequate Duty of Care can be extensive: an article published by the Canadian Trade Commissioner points out that for a mid-sized company, “one [Duty of Care] incident can be enough to put them out of business.”4 Still, in most cases, employers respond reactively to Duty of Care incidents, even if the cost of prevention would have been much smaller than the after-the-fact losses.5 Employees are often unaware of or naive about the risks they face, but they also believe the company has a duty to protect them. This sentiment is summed up in a recent Business Travel Executive article: “Interestingly, many employees blindly listen to their employers, even when it involves their own safety. There is an incorrect belief that ‘if my employer asks me to do something on his behalf, then it must be the right thing to do.”6 This means that travelers will tend to blame the company if they have been injured during a business trip abroad, potentially leading to litigation. For example, a US-based General Electric (GE) employee’s family was awarded workers’ compensation benefits when the employee died in a plane crash while returning from a Paris conference.7 GE appealed unsuccessfully. A well-designed travel risk management program on the other hand, could help to mitigate this type of legal exposure. When the relatives of four US oil company employees murdered in Pakistan alleged breach of Duty or Care and failure to provide adequate security on the company’s part, the jury found the company innocent of these charges, in part because it had taken adequate precautionary measures, such as hiring a risk management firm.8

People risk may be thought of as potential damage and costs related to the human dimension of the organization, specifically with regard to its talent. Companies tend to primarily focus on lost productivity or working hours. For instance, a single day of missed work abroad costs corporations an estimated $1,200, on average.9 But productivity loss is only one dimension of people risk. The issues of greater consequence have to do with employees’ perceptions of the organization and how these contribute to their longer term engagement, performance, retention, and willingness to serve as advocates with external audiences. Business leaders have long recognized that people are a core asset for today’s companies--not only in the rising global service sector, but in every industry. The competition for talent remains fierce, with sharp focus on attracting, developing, and retaining the right people. Consulting firm McKinsey, which coined the term “The War for Talent,” suggests that there will be a 35 million shortfall in high skill, college educated workers by 2020.10 A recent Harvard Business School survey of more than 1,000 corporate directors showed the war for talent is further escalating, with a high proportion of companies in every sector--from healthcare to financial services to telecommunications--hiring at double digit rates globally.11

Attracting top talent is only one dimension of a people-driven business. To perform at high levels, employees need to be fully engaged and motivated. Research suggests that informal dimensions--especially corporate culture, purpose, and meaning--are crucial for sustained engagement, which in turn relates to individual and collective performance.12 Such dimensions are based on trust. Employees need to know that their organization takes care of them, especially in tough times. During crisis situations, employees tend to pay particular attention to company actions; the company and its leaders are on stage and their actions will leave a lasting impact. These decisive moments not only shape the perception of directly affected employees, but of the workforce as a whole. By observing and evaluating the company’s conduct during tough times, employees will reassess whether the company’s stated commitment to its people can really be trusted. It is such critical moments that shape corporate culture and engagement significantly.13

Incidents that affect personal safety and well-being are especially likely to create such pivotal moments. They trigger strong emotional reactions and tend to be remembered for a long time. Being harmed or injured in a foreign country is a particularly potent example, one that touches on deep seated fears and concerns. Companies who are taking good care of their people in these and similar situations can leave a lasting impact on the entire workforce, leading to a greater sense of belonging, engagement, and goodwill, along with enhanced performance. However, managing crisis situations (such as a severe travel-related incident) is not easy. As in other crises such as natural disasters, companies are expected to act more as community members who help people in need rather than as profit-driven entities. For example, in the aftermath of Hurricane Katrina in 2005, Walmart, FedEx, and Home Depot were praised for their authentic, effective relief efforts, in contrast to the much maligned government response.14 Effective corporate responses follow the Good Samaritan Principle, named after the biblical story of the Samaritan who helped an injured victim that others had merely passed by. Like the Samaritan, companies offering their help should be seen as motivated by altruism rather than self-interest. A low-key approach is best. In fact, blowing one’s own horn too loudly is viewed as inappropriate and self-serving, with negative consequences for the organization.15 Research shows that people evaluate companies more positively when they see evidence of both competence and warmth. But help must be administered effectively; it is not just the thought that counts. In the context of travel this means the development of comprehensive traveler protection and travel risk management programs and the ability to deploy them based on the immediate needs of the victim. Reputational risk is typically the most overlooked of the risk types associated with traveler protection. Reputational risk may involve an internal audience’s perception, such as that of employees. But it’s primarily about outsiders’ perceptions of the company, such as those of customers or business partners. Reputational damage, including that related to travel incidents, can be very costly and long lasting. Companies need to be particularly careful to avoid it.

In general, CEOs and board members routinely list reputation as among the company’s most valuable assets.16 Yet despite a dramatic increase in recent corporate crises and a growing emphasis on managing reputational risk, companies are continually caught unprepared to handle threats to their reputations. Overall, there is a surprising mismatch between organizations’ risk management capabilities and their risk profiles, especially for reputational risk. The challenge is that reputation is no longer a truly bilateral engagement between the company and its customers, where customers’ direct experience with the company determines much of their perception of the company. In today’s media-saturated landscape, reputation depends largely on the nature of the media coverage, whether traditional or user generated, with negative news stories gaining a disproportionate amount of public attention.17 This can help mitigate reputational damage should a negative event be publicized, as it provides direct evidence that the company takes travel risks seriously and has a system in place for protecting its people. That is, by having a comprehensive travel risk management program in place, the company demonstrates a caring attitude toward employees and safeguards against potential legal issues (because it can show that a company took all necessary protective steps for travelers). All of these measures ultimately help to protect the company and its reputation. In this context, it’s important to recognize that not every traveler protection issue will attract the same level of coverage. Coverage is driven by two factors: audience interest and societal importance. Even the most seemingly harmless issue can attract significant coverage if it rates highly on one or both of these dimensions. Extended coverage tends to simplify issues and create an environment more hostile and critical of corporate conduct, further enhancing reputational risk. In such cases, companies need to portray themselves as “heroes” that have helped an identifiable and sympathy arousing victim. Otherwise companies are placed in the “villain” category, a perception that can quickly erode trust with internal and external audiences, especially with today’s fast-paced social media landscape shaping opinions and fueling traditional media outlets.18

High Reputational Risk Factors
1. Travel involves a high-risk, high-profile region. If employees are traveling to regions known for civil unrest, violence or hostility directed at their home country, the burden of providing adequate protection will be higher, and media coverage more likely for any safety incidents. Thus, travel to the Middle East or certain parts of Africa will involve higher likelihood of coverage (and associated risk) than travel to most of the European Union.

2. Travel involves a high-profile, risky event. Travel incidents related to high profile events are more likely to attract coverage. For example, stories of foreign reporters attacked during the violent protests in Cairo’s Tahrir Square in 2011 gained significant media attention.19

3. The organization’s core mission or business has to do with travel, tourism, or security. If an organization is in the business of travel or protection, it is more likely to come under public scrutiny for a traveler protection issue than those that are not, due to the overlap of the issue with its core offerings. Thus, tourism businesses and cruise lines, for instance, are more likely to attract media attention for traveler protection issues than consumer goods firms. Comprehensive travel risk management programs can help organizations address these and other types of situations proactively.

An Enterprise-Wide Issue
Based on the significant risks associated with traveler protection, it should be considered an enterprise-wide issue, rather than one referred to a specific department or division. Complete protection of employees, especially those representing the company’s interests outside of its home region, is now expected by the public. Moreover, negative assessments of companies that fail to provide this can result in reputational damage with significant, long-term costs that extend beyond financial or legal penalties, and can damage trust with internal and external constituencies. Thus, the issue of traveler protection needs to be addressed at the enterprise level and not simply relegated to a certain function.

References
1
See for example "Duty of Care: How to Protect Your Workers Abroad," Canadian Trade Commissioner Service, January 2013; retrieved November 1, 2013; "Duty of Care High on the Agenda of the Business Travel Show," Business Travel Show, January 28, 2013; retrieved November 1, 2013.
2 See for example Markohaltz v. Gen. Elec. Co. 193 N.E., 2d.636 (N.Y. 1963)
3 Jan Burgess and Rosalind Morgan, "Fourth prosecution under the Corporate Manslaughter and Corporate Homicide Act 2007," Lexology (from the Association of Corporate Counsel), December 6, 2012; retrieved October 29, 2013.
4 "Duty of Care: How to Protect Your Workers Abroad," Canadian Trade Commissioner Service, January 2013; retrieved November 1, 2013.
5 Themba Mthombeni, "Duty of Care for Company Travel," HR Future; retrieved November 1, 2013.
6 David Kaufman, "The Call of Duty," Business Travel Executive, July 2013; retrieved November 1, 2013.
7 Markohaltz v. Gen. Elec. Co. 193 N.E., 2d.636 (N.Y. 1963).
8 Enlow et al. v. Union Texas Dec. 21, 1999 U.S. Federal Court Fifth Circuit (Houston; unreported jury trial).
9 Caitlin Bradford, "Travel Medicine and Travel Vaccines: An Investment with a Healthy Return," Passport Health; June 3, 2013; retrieved November 1, 2013.
10Max Nisen, "There's One Big Trend Driving the Coming Global Talent War," Business Insider, November 23, 2012; retrieved October 30, 2013.
11 Boris Groysberg and Deborah Bell, "New Research: Where the Talent Wars Are Hottest," Harvard Business Review Blog Network, June 21, 2013; retrieved October 30, 2013.
12 See for example John Kotter and James Heskett, Corporate Culture and Performance, 2012, Free Press.
13 For more details see Diermeier, Reputation Rules, especially Chapter 9.
14 See for example Devin Leonard, "The Only Lifeline Was the Wal-Mart," Fortune, October 3, 2005. For more detail on expectations of companies during natural disasters see Diermeier, Reputation Rules, Chapter 5.
15 Daniel Diermeier, Adam Galinsky, and Jennifer Jordan. 2012. "The Strategic Samaritan: How Effectiveness and Proximity Affect Corporate Responses to External Crises." Business Ethics Quarterly 22(4): 621-648.
16 As examples consider "Concerns About Risks Confronting Boards: First Annual Board of Directors Survey," Eisner LLP, May 2010; retrieved October 23, 2010; The Economist. Risk Reputation Report. (Economist Intelligence Unit, December 2005); retrieved November 29, 2010.
17 For more details see Diermeier, Reputation Rules, especially Chapter 3.
18 For more details see Diermeier, Reputation Rules, especially Chapters 1 and 2.
19 "Egypt: Another Western Journalist Sexually Assaulted in Tahrir Square," Examiner.com, October 12, 2012; retrieved September 27, 2013.

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