The case for resilient EB global programmes: Mitigating Systemic risks!

Managing a global workforce is not just about bridging varying benefits, cultural differences and languages. Nor is it anymore a straightforward strategy to help you engage employees and improve retention, health and performance. If you wish to get anywhere close to addressing this, please remember that you are now dealing with Systemic risks and not just employee benefits (EB) risk/s per se. My first lessons in structuring and running global programmes – out of the London Market – were rather siloed. Each component of a multinational customer’s diverse geographic presence would generally have a different set of brokers, carriers and design. All mutually exclusive and hermetically sealed. Assets, cargo, liability, at best some element of cross class. Benefits would sparingly figure in the list. Yes, an occasional cover for a handful of expats.

The virus that haunts us today – origins zoonotic or manufactured – has forever mutated the physics and chemistry of the EB business. It has brought two things to the foreground – Climate Change and ESG (environment, social and governance). These two intertwine and overlap with the pandemic in ways that EB underwriters do not have the luxury of grand isolation anymore.

So, what’s happened?

The focus of this piece is on Asia. The reality again is diverse – from South Asia to the Far East. Hard core manufacturing ranging from sweat shops to high tech. Services from body shops to the high-end application development centres. Not just the politics and economics but the ESG interplay.

The Pandemic has an expiry date but then it is expected to become an endemic. It’s all set to widen protection as well as the benefits gap. Health resilience to vary depending on the health infrastructure and virus containment policies, as Swiss Re affirms. If affected employees of a top-notch global brand were in an Indian city that turned into a hotspot during the second wave of the pandemic – getting a hospital bed, oxygen and critical medicines et al – notwithstanding the best-in-class benefits programme – could be as challenging as it would for anyone else. The TV channels were full of images including a diplomatic setup in the capital desperately trying to procure an oxygen cylinder for a sick staff. Fancy work places do not preclude them from a Sick building Syndrome. While the affected employees struggled for a treatment or whilst undergoing it, what was the impact of this on the global business that they work for – on rolls or off rolls? Is an outreach a solution? Many Indian corporates, for instance, have been offering benefits no less than the most enlightened multinationals. The challenge is far bigger.

Climate Risks

Economies in south and southeast Asia are most vulnerable to the physical risks associated with climate change. Climate change also poses transition risks, and once again Asia may be most impacted, according to Swiss Re. Climate change has no expiry date nor a vaccine. Remember many S. Asian cities including India have the worst AQIs (air quality index) in the world. Which would mean that employees are not living and working in an ideal environment. The escalating heat and humidity levels in northern India would trigger higher frequency of cardiac and neurological conditions. One, therefore, needs to watch out where you locate the business and thereby the workforce. Needless to mention the return periods of floods and droughts due to overall global warming and poor civic infrastructure and safeguards.

Climate Change impacts lives, health, and supply chains. Unlike the pandemic, assets too. It invokes intergenerational and transregional justice. “A new, highly complex and destabilised ‘domain of risk’ is emerging – which includes the risk of the collapse of key social and economic systems, at local and potentially even global levels,” warns the Institute for Public Policy Research. “This new risk domain affects virtually all areas of policy and politics, and it is doubtful that societies … are adequately prepared to manage this risk.”

ESG

In 2021, investors are under renewed pressure to consider the “S” (social) performance component in their investments. Yet in the world of Environmental, Social and Governance (ESG) investing, the integration of social performance assessment has seen insufficient progress. For all investors, it is important to proactively address these questions because, as the ESG Working Group found, social issues can create key risks. They are salient and will be increasingly relevant in the future according to the Working Group – a pro bono partnership that brings together civil society, experts and private sector.

With ‘Social’ assuming the centre space under ESG, the employee has emerged as a key stakeholder in any business. ‘Zara’ for instance has been under global media scrutiny for its alleged exploitative practices in the Xinjiang province, China. Employees of sensitive components also play a critical role in supply chains and just in time functions. Any weakness in the global chain would only seriously impact the end product. Deficiencies in employee care, therefore, spill well beyond the realm of traditional EB boundaries. In extreme situations triggering issues around human rights, slavery, reputation, employee morale and employee value proposition. Thereby bringing management liability into play.

In conclusion

What may the future manifestations of the overlaps be is anybody’s guess. To be able to address them, risk managers need to anticipate them. This web will only get more intricate by the day. Last week’s action in the courthouses and boardrooms relating to Shell, Exxon Mobil and Chevron moved the ground significantly. This is the beginning of a lot more waiting to happen. Given the dynamic nature of risks, reminds Swiss Re, we are now in an age when forward rather than backward-looking data analysis is paramount. This equally applies to the benefits business and all its systemic entanglements. Silos wouldn’t work!