Risk avoidance is not a strategy — and especially in business — not a viable option.
That was the underlying premise in 2001 when Neil Fergus and his co-founders David Nolan and Bob Costello launched their company Intelligent Risks in Sydney to help individuals and companies manage their risks in a more effective way.
NO NEED TO SPEND MILLIONS
In business for 18 years, the specialist advice and services company has grown from its initial three founders to a team of 22 personnel, and has worked in over 120 countries, flexing and contracting to suit the projects it takes on and winning a few awards along the way.
‘There are risks everywhere,’ Fergus asserts, ‘the difference is in the quantum and nature of them, but life is full of risk and we shouldn’t shirk away from it.
‘If you wanted to avoid all risk, you wouldn’t manufacture food at all,’ he adds, ‘there are so many risks of contamination present.
‘With the appropriate thought, planning and response tools, you can manage those risks in an appropriate way. And have a good business.
‘There are many civil court judgements in which the bench has confirmed that there is no expectation that a person or an officer of a company need spend limitless amounts of money to remove all risk from their business.
‘Investment needs to be proportionate and you do that using risk management precepts.’
CREDIBILITY BASED ON ETHICS
With a background in regional security and diplomacy for the Australian government, Fergus has helped build the credibility of Intelligent Risks into the global go-to organisation for crisis events and security.
The company has a strict set of principles.
‘While we don’t knock many jobs back, we do need to believe that a prospective project is both an ethical and useful exercise,’ Fergus says.
‘For example, several years ago we were asked by the Chinese government to do a project in Xinjiang Province and declined. Similarly, we were asked to do a job by the US State Department in Pakistan and we declined.
‘I suspect it cost us as we used to get a lot of anti-terrorism assistance projects from the US State Department in locations as diverse as Latvia, South Africa, Uganda, Vietnam, Sri Lanka, Indonesia, India and Peru.
‘We’ve never had a job from them since. But I don’t regret that decision at all. We still work for the Australian, British, New Zealand and other governments.'
A BRIDGE BETWEEN BUSINESS AND THE COMMUNITY
Another example was a job for a mining company was clearly planning to exclude the local community from any economic benefits of the project.
‘By the same token, we did an enormous amount of preparatory work in Papua New Guinea for a project which became a very successful L&G operation in the highlands.
‘We did the community analysis and engagement plan, and even though (the company) didn’t stick to it completely, it provided a foundation to move forward without disenfranchising the communities in the region.’
Fergus says Intelligent Risks intends to persist with a prospective contract in Riyadh because it is a ‘culture changing project’.
‘The venture involves building a sport city and facilitating sports education and fitness programs for girls and women,’ Fergus says.
‘That is a real seismic shift for Saudi Arabia, so notwithstanding that country’s involvement in some other activities, at this point we are still keen to get further involved in that project.’
At the time we speak, Fergus is on his way to Rwanda tasked with safety, security and medical requirements for the Commonwealth Games General Assembly, who will be attending a meeting there in September, and the Commonwealth Heads of Government who will be there next year.
For several weeks, he’d been liaising remotely with Rwandan authorities and will examine the accommodation and venues as well as conduct site trips planned for the spouse’s program.
At the same time, he was dealing with the World Health Organisation in relation to the recent Ebola outbreak in the Democratic Republic of Congo – near the border with Rwanda.
Fergus says at the time Intelligent Risks was founded, the team thought it would principally be assisting Australian corporations operating in medium to high risk area.
‘We did that and still do, but then in 2003, we were approached by a UK company asking us to be its contracted crisis management partner in the Asia Pacific region, initially for insured kidnap and extortion events,’ he shares.
‘Pretty quickly we were also applying our crisis management skills to the whole gamut of product recall cases.
‘Given the very important caveat that we’re not white coat technologists, we started doing that about 16 years ago, and currently work for 10 international underwriters across the Asia-pacific region.’
NEGOTIATING WITH KIDNAPPERS
While product recall events have become the company’s bread and butter, Fergus says there are times when kidnap and abduction cases move to the fore. Often, there are multiple cases running simultaneously.
‘The best estimate is that there are 30,000 people kidnapped every year,’ he says. ‘That factors in a estimate of unreported kidnaps, worldwide.’
Ten per cent of those kidnappings involve expatriates — foreign visitors to a country as workers or tourists. Fergus says they’re the ones that generally get reported.
‘I can tell you in the last three days there has been a boat taken off Nigeria, its crew kidnapped, and a kidnap in metropolitan Manilla, in which an organised crime gang lifted a Chinese gambler. It’s pretty well constant.’
Depending on circumstances, Intelligent Risks may deploy someone or coordinate the response including engaging the kidnappers.
While TV dramas have encouraged the belief that professional negotiators fly (usually by helicopter) to speak directly with kidnappers, in fact, it’s policy for a local communicator to act as an intermediary.
‘For example, I didn’t fly to Nigeria in 2016 to talk to an armed gang of kidnappers who had taken seven insureds hostage with two people killed and one wounded,’ Fergus says.
‘We didn’t speak their dialect — that’s the role of the local communicator we engage and direct.’
A LIFE-SAVING BUFFER
But Fergus says the main reason for the intermediary is to create a buffer between the parties.
‘On occasion, kidnappers have deliberately killed a hostage if they think there isn’t a sufficient ransom or if they are holding multiple victims and they think they need to send a message about how serious they are.’
The communicator tells kidnapper that rather than making decisions, he or she only has the power to communicate with the negotiator and receive instructions.
‘That mitigates the risk of the kidnapper saying, “I’ve got a gun at this person’s head and you agree to my demands now or I’m going to shoot”.
‘The communicator can then respond, “I don’t make those decisions, that’s not going to get us anywhere. You need to tell me what you want and I’ll communicate it to the negotiator. Then I will get instructions to give back to you”.’
HUMAN COST OF TERRORISM
Fergus adds that legal compliance is also a key aspect of the job.
‘We cannot negotiate with a terrorist group — ever. That would clearly be in breach of Australian and international law, unless we’re instructed to do so by the government.
‘Right now, there are three Australians being held by terrorist groups internationally and we’re not allowed to engage with the terrorists — even if they are insured by one of our underwriter clients.
‘We can still deploy and what we would be trying to do is influence government actions to get the best outcome for the clients and the victim.’
THE BABY FORMULA RECALL CASE
Despite his experience with kidnappings and extortions, it was the baby formula product recall case in 2007 that he says impacted him most.
‘This involved a Chinese New Zealand joint venture producing baby formula in which some local employees decided to substitute melamine into the product leading to the death of potentially up to 200 infants,’ he tells.
‘That was certainly something I will never forget. We talk the difference between malicious product tampering and accidental contamination, but this was a case that fell somewhere in between.
‘The perpetrators’ actions were deliberate, but they were not intent on killing children. They just stupidly did not understand the consequences of their actions. They were trying to make money from taking some of the product to sell illegally.
‘And frankly, the contaminated product continued to be distributed for way too long after the problem was detected and that is one of the great takeaways for me in terms of mitigating the harm.’
LIFE SAFETY ISSUES COME FIRST
Fergus says life safety issues must always come first.
‘Yes, you want to mitigate losses but the first loss you want to mitigate against is life and safety issues. Everything else will flow from that.
‘And yes, you want to contain financial losses, reputational harm, and ensure business resilience so that an insured can resume operation as quickly as possible with minimal disruption. But everything is secondary to the life safety issue.’
Fergus says when Intelligent Risks looks at the crisis management or product recall plans of its clients, the issue of whether the plan pays sufficient attention to mitigating risks to life or health is first on the agenda, irrespective of how a problem occurred.
While most food manufacturing and distribution companies have a product recall plan, he says this should be a subset of a crisis management framework and suggests both insurers and insureds think outside the narrow paradigm of a product recall plan.
‘The company crisis isn’t always necessarily a food contamination event, it could be an environmental accident, a hazardous materials accident or an industrial relations issue. It could be a fire at the plant, a workplace fatality or a cyber attack.’
THE ROLE OF INSURANCE
Fergus says time and time again, his company responds for its underwriter clients, only to find that insureds can cite the price of their policy but don’t always understand its wording.
‘Insureds need to know what it is they want insurance for and make sure the wording is fit for purpose.
‘They need to think a little bit more about what they are mitigating against when they’re talking to their broker or underwriter and finding a policy that suits them.
‘The cheapest is not always the best,’ he maintains. ‘Price is important of course but the wording is absolutely key.
‘It is heart breaking to see the disappointment on the faces of people in the corporate world when they realise something won’t be covered because of the wording.'
In terms of kidnapping, Fergus points to a relatively young person who was recently killed in the Philippines. Having been held for five years by his kidnappers, he was shot while trying to escape his captors.
‘He had no insurance. He went to an area he should never have gone to without insurance. I’m sorry to say that and sorry for his family,' Fergus says.
’There’s also a Japanese businessman that’s been held by that same Philippines group for seven years, who is also not insured. Nobody’s coming for him.
‘We can extrapolate the same concept to product recall, where a company doesn’t have the right policy, it is effectively on its own.’
Hear Neil Fergus speak at the 2019 ANZIIF Liability Conference.