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When Crises Hit: Why Companies and Assignees Should Prepare and Plan for Worst Case Scenarios

by Glen Collins, KPMG LLP, McLean, and Molli Hull, KPMG LLP, Washington, D.C.
(KPMG LLP in the United States is a KPMG International member firm)


Once upon a time, it was rare to hear of an assignee that had died while on assignment, and more often than not, the death was "accidental" (e.g., health/age, transport, or work related). Now, with heretofore unseen frequency, assignees and their family members might be the victims of assault, injury, kidnapping, or murder. The risks are not limited to war zones and natural resource mining areas. Attacks also have injured and/or killed assignees — whether intentional or accidental — in major developed countries in North and South America, Europe, and Asia.

The perpetrators may be motivated by political, religious, ideological, or financial aims. Perhaps the perpetrators are "anti-multinational" or anti-foreigner, and seek to obtain a larger share of the profits resulting from the companies' activities in the area. Perhaps they are seeking to topple the current government or governmental leader and/or achieve an independent state. Or, perhaps they aim to impose a different political/ideological or religious "world" view.

Since 2001, The Expatriate Administrator has published three articles regarding the issues surrounding employees on assignment in dangerous locations, as well as employees that die while on assignment.1 The ongoing wars in Afghanistan and Iraq, and increasing terrorist attacks and kidnappings around the world, make the attendant issues even more relevant today. It's time to take a fresh look at the need for international assignment policies that address the emergencies and crises that an employee on assignment may face and some of the related issues. This article discusses what could happen if the "worst case scenario" were to strike an international assignee, the general needs and concerns of the assignee and his or her family, and what the assignee — particularly prior to his or her departure — and the employer can do to potentially mitigate the difficult consequences of worst case scenarios.

Threats to Assignees and Impact

The physical and psychological traumas inflicted on the victim of an assault, grave injury, kidnapping, or terrorist attack, can affect the victim and the victim's family for a long time after the incident occurs. In addition to medical treatment to address any physical injuries, both the victim and his or her family may require trauma counseling, grief counseling, and/or psychological treatment. Indeed, it is possible that counseling or therapy, or more serious psychological treatment, may be required simply as a result of living and working in a high-risk area, even if the assignee experiences no specific attack.

Considering more practical aspects, in the case of the death of the assignee or an accompanying family member, the family will also have to work through the foreign country's requirements regarding repatriation of the deceased's remains, removal of assets from the country, and (potentially) estate or death taxes — all in a possibly unfamiliar foreign language and complex foreign legal system.

Impact on Employers

Sending employees to locations overseas where the company does business or is expanding its business is already hard enough. But add to that the difficulties encountered when the locations pose certain threats and risks to the employees!

In some locations, employers are facing higher compensation costs to entice the employees to accept assignments in high-risk areas. They are also facing higher costs to provide security for the employees, to evacuate families, and — should they take this step — to pay ransoms to kidnappers. Companies may even be forced to withdraw from an area due to the exceedingly high costs (and risks) and the employees' unwillingness to assume the risks entailed. When asked about the likely responses of an organization's perceived increases in danger for its international assignees, nearly one-half of the 300 global organizations participating in KPMG's 2007 Global Assignment Policies and Practices (GAPP) Survey reported a probable future reduction in the number of assignees in high-risk locations.2

Steps for Employers

In light of the ever-increasing risks faced by assignees and their families, as well as the ever-escalating costs of "managing" those risks, it is important for employers to develop and implement policies and procedures that can address the risks and provide their assignees with assistance when an assault, grave injury, kidnapping, or death occurs during an international assignment. However, a surprisingly low number of employers have crisis management plans and policies in place for specific assignment locations. Only 15 percent of KPMG's 2007 GAPP Survey participants confirmed having a specific emergency plan in place for each country where assignees were located. Only one-third confirmed having contracted with a service provider to assist in emergency evacuations or to provide assistance during a crisis.

Indeed, very often the assault, grave injury, kidnapping, or death of an assignee is dealt with on an ad hoc or on-the-fly basis, resulting in confusion and frustration for both the family of the injured party or deceased and the employer. In today's world, it is truly surprising that more employers are not addressing the issues in a systematic way.

Critical Role of Human Resources

The International Human Resources Professional (IHRP) can play a critical role when it comes to preparing for and dealing with the assault, grave injury, kidnapping, or death of an assignee. Indeed, it is usually the IHRP that will receive most of the phone calls and e-mails requesting assistance in such situations. And, strategically, it is the IHRP that may be better placed to develop the emergency plan that will be used when an assignee suffers physical harm — or dies — while on assignment.

Part of developing the emergency plan requires putting together a cross-functional, crisis-management team with identified roles and responsibilities. Often, some members of this team are external vendors that provide local knowledge regarding transportation, medical care, etc. Other external providers may provide local risk-assessment notifications to the employees, as well as employee check-in services so that the they are notified of risk-related developments in their locations and have central check-in's or meeting places that allow the employers to know where all their employees are and to verify that they are all accounted for.

The IHRP can also take the lead in developing processes and procedures to support the assignee and his or her family:

  • In the foreign country when the crisis occurs, and
  • Immediately upon return to the home country.

In cases where an assignee has died, the most immediate practical concern of the family has to do with dealing with officials in the host country. They will need to cope with legal and logistical arrangements with regard to the deceased and repatriation of the body, among other related matters. Foreign consulates in the host country are often trained and efficient in these matters, but an assigned local company representative who can provide support and — particularly where the employee has no family with him or her on assignment — can liaise with foreign officials is recommended. (It should be noted that some foreign countries do not have funeral homes, which can add a requirement of greater familiarity with local customs and protocol.) Where a family is in the assignment location, they may also need further legal and logistical assistance with re-entry into the home country and transportation to the final destination.

Developing Effective International Assignment Policy Provisions

The international assignment policy should address several items that can enable the employer and the employee (and the employee's family) to better comprehend the potential risks and the steps to be taken should a crisis occur — this can help prepare the groundwork and sets expectations.

Wills

Many people have heard the advice that everyone should have a will. But many people do not have one. Perhaps they do not like to think about dying or they think it is morbid to plan for death when they are still young and vital. Or perhaps they are not adverse to the idea, but cannot find time to meet with an attorney and draft a will. Besides, for many, death seems to be so far off and more immediate pressing concerns get our attention. Whatever the reason, the assignee should consider establishing a will prior to his or her departure on assignment. While the company cannot force the employee to establish a will, it can encourage the employee to do so and emphasize that this should be a completed item on the assignee's personal pre-departure checklist. Surprisingly, only 9 percent of KPMG's 2007 GAPP Survey participants actively encourage assignees to complete wills and document arrangements for child custody in case of their death on assignment. Further, just over 50 percent of respondents do not address will preparation or the review of existing wills with their employees prior to their leaving on international assignment. At the very least, employees (and spouses) should execute valid Powers of Attorney prior to departing on assignment. A valid Power of Attorney will enable the person designated by the employee/spouse to execute legal and tax decisions and documents in the event of death, incapacity, or kidnapping.

If a will has been established prior to departure, the employee should be informed, since the laws vary from country to country, some parts of the will may not be enforceable in the assignment location, and additional legal fees may be incurred in attempting to enforce all provisions of the will. However, it should also be communicated, that in the absence of a will, the foreign country's laws may take full effect, with potentially dire consequences with regard to assets and the custody of minor children. The existence of a will may not mitigate these issues entirely, but it is likely to be better than nothing.

Given the importance of having a will while on international assignment, the employer may want to consider providing an allowance for legal fees incurred in connection with the preparation of a will prior to the employee's departure.

Life Insurance

A separate, but related, item to be addressed is life insurance. Life insurance can provide needed cash at a time when expenses seem to be overwhelming for the family of a deceased assignee: legal fees, repatriation costs, burial costs, estate or death taxes, not to mention everyday living costs. Although an employee may have employer-provided life insurance coverage, or other forms of individually paid-for life insurance, the policies may not cover a death that occurs overseas. The employer-provided life insurance policy should be examined for exclusions regarding overseas death and potentially amended in the case of the international assignee. Alternatively, and in the case of non-employer-provided policies, supplemental insurance or riders may be obtained. Additionally, many, if not all, of the death-related expenses can be incurred if the spouse of the employee should die during the international assignment; so, it may be prudent for the employee to have spousal life insurance as well.

Taxes

Should an assignee need to return home early from his or her assignment due to a crisis, or finds that he or she is being assigned to another foreign location, the assignee's tax situation could evolve in unforeseen ways as compared to what was expected at the outset of the assignment. What was anticipated as being a fairly straightforward tax situation — with projections done, hypothetical tax determined, payroll set up, etc. — all of a sudden becomes more complicated.

If the assignee should die, the tax situation can get similarly complicated. The United States and many other countries impose estate taxes or death taxes either on the estate of the decedent (based on the assets in the estate) or on the heirs of the estate (based on the assets distributed). In some cases, these taxes can be substantial. International estate and gift tax treaties can provide some relief. However, once two or more countries are involved in any tax issue, it may become much more complicated and may take a long time to sort out — even with the existence of a tax treaty. Additionally, there may not be an estate and gift tax treaty between the home and host countries. When this happens, the family of the deceased may be faced with a long, drawn-out process for determining and satisfying the tax liabilities.

To the extent feasible, the international assignment policy and tax equalization or tax protection policy should address this issue. Which taxes are covered? Which are not? What about home and host country legal fees and tax return preparation fees? These are just some of the many questions that should be anticipated and addressed in the policy.

Financial Support

Expenses can mount for an assignee (and his or her family) if the assignee suffers assault, grave injury, kidnapping, or an untimely death. A comprehensive international assignment policy will can include provisions for such situations. Also, various employer-provided benefits (medical, disability, etc.) should help, in part, cover medical costs and illness- or accident-induced absences from work. As mentioned above, life insurance can provide a financial life-line at a time when expenses are mounting for the family of the deceased. However, it may take some time for the check to arrive from the insurance company.

Moreover, some crisis situations may make "normal" banking and access to personal funds difficult, if not impossible.

In the meantime, the family has to continue to meet everyday needs such as housing, food, and transportation. These costs may be significantly higher than in the home country and the family may not be able to return to the home country immediately due to legal and procedural issues, or the family may not want to return to the home country immediately due to personal considerations. There may be some expectation on the part of the spouse/ family that the employer will continue to provide housing and cost-of-living allowances for some period of time.

The international assignment policy should be very clear as to what base compensation and allowances will continue to be paid following the grave injury, kidnapping, or death of an assignee, as well as the amount and for how long payment will continue. In the event of a deceased assignee, if the base compensation and assignment premiums and allowances will terminate with the employee's death, the policy should address the issue of emergency financial support, providing specific information regarding the amount and duration.

Logistical and Other Support

If the family of the employee, due to a crisis situation in the assignment location, needs to move/relocate, the policy should address the provision of transportation, and (where applicable) housing and repatriation. Similarly, if the assignee dies, the policy should address such matters. International transportation of a body is complicated and the cost involved can be significant. The policy should address this issue, keeping in mind that the cost may vary depending on the location and circumstances.

Since typically the assignee's and family's transportation back to the home country were to be provided at the end of the assignment, it may reasonably be assumed — but should be clarified in a written policy — that such transportation will still be provided due to:

  • Crisis in the assignment location or grave injury to the assignee, or
  • The death of the assignee while on assignment.

In some situations, if an immediate move/relocation is not necessary, the assignee's spouse and family may choose to remain in the foreign location for several months, for example, to allow the children to complete the academic year. The policy should specify how long the spouse and children can remain in the assignment location before their transportation to the home country will no longer be reimbursed.

Death of Assignee — Practical Considerations

In addition to the financial aspects of an assignee's death, there are the practical aspects to consider. For instance, every country has its own laws regarding the registration of a death and the transport, export, and/or disposal of a body. Depending on the circumstances of the death, an autopsy may be required. Oftentimes, all of the requirements and details will likely have to be addressed in a foreign language. Even if the spouse speaks the host country language, it is likely that his or her ability is limited to everyday conversation, and does not extend to "legalese"; coping with written and oral communication in such circumstances may be troublesome.

Nonetheless, once all the hurdles have been cleared to remove the deceased from the host country, there may be additional legal or bureaucratic hurdles to bringing a body into the home country. While the spouse may call on friends in the host and home locations for some help and support, he or she may also look to the employer for assistance.

The assignment policy should address the issue of whom, if anyone, from the company will liaise with foreign officials, consulates, and home country officials, as well as whether the company will provide or reimburse expenses incurred for host and home country legal advice.

Grief Counseling

Finally, the emotional aspects of the crisis that befalls an international assignee and his or her family should be considered. In the event of assault, grave injury, or kidnapping, it should be clear in the policy to whom in the company, or in the vendor agency that the company has engaged — preferably at the host location — the assignee and his or her family may turn for assistance should counseling or therapy be requested.

If a loved one suffers a grave injury, becomes comatose, or dies, the emotional impact can be severe. Dealing with such a situation in a foreign location, and possibly under dangerous conditions, or as a result of violence, can add to the emotional toll. The assignment policy should specify:

  • What and how much therapy and/or grief counseling will be provided or reimbursed, and
  • By whom (company provided counselor, home or host country provider, etc.) and for whom (spouse, immediate family in host country, immediate family in home country) it will be provided.

Concluding Thoughts

The current global climate of violence and unrest has forced employers to seriously consider the worst case scenario: real and potential threats and risks to not only their physical capital, but also their human capital. Sending employees overseas to perform services on behalf of the company carries potential risks for the company and its employees. The threat of harm is no longer isolated to a few locations, and could touch an employee anywhere he or she is assigned. While the vast majority of assignees complete their assignments safely and soundly, increasingly certain assignees could experience some form of assault, grave injury, kidnapping, and/or death, while on assignment.

The consequences of not making provision in the international assignment policy for worst case scenarios are several: stress, confusion, embarrassment, frustration, damaged reputation, bad press, heightened danger, and increased costs, to name a few. To better manage the assignee's — and his or her family's — expectations, it may behoove the employer to re-examine current policies and, if necessary, modify them to address the following:

  • Estate planning and wills
  • Life insurance (with proper provisions/coverage for overseas death)
  • Estate and death taxes (what is and what is not covered)
  • Compensation and benefits (what continues and what ceases)
  • Documenting emergency preparedness ("checklists") covering processes and procedures for assignee and family members to support a medical emergency, terror or political crisis, and/or country evacuation
  • Emergency financial support
  • Travel and housing arrangements
  • Who will liaise with foreign and home country officials
  • Legal advice
  • Grief counseling.

Finally, proper preparation, careful planning, adequate documentation, and open discussions prior to the international assignment — and preferably upon arrival in the host location (particularly those that may be deemed "high risk") — can help mitigate the troublesome consequences of the worst case scenario, for the IHRP, the employer, and, most importantly, the assignee and his or her family.

Footnotes:

1 "Take a Proactive, Rather than Reactive, Approach to Emergency Planning for Expatriates in Crisis Locations," The Expatriate Administrator 2001-04, Winter 2004; "The International Assignment Taboo: Expatriate Death," The Expatriate Administrator 2002-01, Spring 2002; and "The Danger Factor: How to Compensate Employees for Risking their Lives," The Expatriate Administrator 2004-02, Summer 2004.

2 KPMG LLP's IES practice hosts and publishes the Global Assignment Policies and Practices (GAPP) Survey. (This Web-based survey, the first of its kind in the field of international assignment management, is based on data provided by more than 300 companies. The survey continues to serve as a valuable barometer for the world's leading multinational companies and allows participants to benchmark their program and policies. For your copy of the survey, please contact your local KPMG IES professional. Also, please feel free to register and then participate in the survey at http://www.kpmglink.com. After completing at least 70 percent of the questions, you can receive instant results. You can log on and view the data whenever you want, as the survey is live and continuous.)


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