Risk managers at U.S. companies that expand overseas face a broad range of concerns that they do not encounter at home, consultants and risk managers say.

Differences in regulations, legal environments, insurance customs and language all serve to make risk management significantly more complex overseas, they say.

To address those complexities and effectively implement a global risk management strategy, risk managers often turn to consultants. And these consultants must be sufficiently large in size, have broad expertise and possess adequate knowledge of local practices, the risk managers and consultants say.

Risk managers with overseas exposures need consultants to provide a whole array of advisory services, said David L. Mair, risk manager for the U.S. Olympic Committee in Colorado Springs, Colo.

“With the world changing as quickly as it is today, risk managers are always looking for advice and counsel. . .and consultants can play a role in that,” Mr. Mair said.

In particular, a consultant can cast an issue in a wider context when a risk manager is accustomed to seeing only “snapshots” of the company’s risks and exposures, Mr. Mair said.

Consultants are most useful to risk managers who use regional or national brokers that lack overseas offices, he said. The U.S. Olympic Committee, on the other hand, uses global brokerages that provide both placement and other services, including loss control and other risk management advice, Mr. Mair said.

Risk managers often need to call upon a range of consultants when their organizations expand overseas, said Andrea Dudek, risk manager at Lexmark International Inc. in Lexington, Ky.

For example, Lexmark uses security consultants to conduct due diligence studies in areas such as Central and Eastern Europe, where there is often a significant amount of organized crime and corruption, Ms. Dudek said.

“You have to check out the areas and your own people. . .you don’t want to be seen to be paying people off,” she said.

And consultants can play a useful role in providing loss control services by ensuring that a common global approach is used throughout an organization, she said.

To provide those services, a consultant must have an extensive network of overseas offices and staff members who are familiar with local laws and regulations and who speak the local language, Ms. Dudek said.

One of the first concepts that consultants must communicate to U.S. risk managers facing overseas exposures is that insurance and risk management practices are frequently different outside the United States, said Russell McGuire, a consultant at Tillinghast-Towers Perrin in Dallas.

“The U.S. does not rule, OK?” he quipped.

Regulations and customs overseas often differ considerably from those in the United States, Mr. McGuire said.

“And the risk managers that really struggle are the ones that presume `That’s the way we do it in America, and that is the way we’ll do it here,’ ” he said.

U.S. risk managers venturing overseas for the first time often encounter an entirely different environment, agreed David Heslington, executive vp at International Risk Management Americas, a unit of International Risk Management Group in Iselin, N.J.

Liability awards, environmental rules and insurance purchasing conventions are often significantly different in other countries, he said.

In most countries, liability awards are significantly smaller than they are in the United States, so property coverage usually is the main insurance concern. Environmental laws are often stringent and are different from U.S. laws, Mr. Heslington said. As a rule, insurance is used extensively, with few policyholders making use of large deductibles or large self-insured retentions, he said.

One of the principal problems that consultants must help risk managers tackle is how to cover international exposures under a master policy in the United States and create a global insurance program, Mr. Heslington said.

Local laws and tariffs often stipulate a minimum amount of coverage that must be bought locally; consultants can provide the expertise needed to ensure that the programs comply with the local laws, Mr. Heslington said. “You have to know the rules and regulations,” he noted.

And the minimum primary coverage required in other countries may be extensive, creating some redundancies of coverage. In such a case, a risk manager should seek a premium reduction from the insurer on its global program, said Mr. McGuire of Tillinghast-Towers Perrin.

In other cases, a risk manager may have a misunderstanding about the regulations in an overseas market and, as a result, may put unnecessary restrictions on a program, Mr. McGuire said.

For example, there is a perception that recent regulatory changes bar the use of captives for risks in Mexico. But the regulations bar only the use of captives based in certain “fiscal paradises,” he said.

“If you read the legislation carefully, it lists the specific locations, and so Vermont is not a problem,” Mr. McGuire said.

One major difference between foreign and U.S. coverage is the wide variety of wordings available outside the United States, he said.

“If you look at the forms in the U.S., they are all the same. But in other areas, the insurance contract is a personal contract between the insurer and policyholder, and it may be very different from the contract issued to a similar factory next door,” Mr. McGuire said. “So read it, and go back and read it again, and don’t assume anything.”

By providing the local information and services, consultants can help risk managers bring exposures under a global program, often in spite of resistance from local managers who have established relationships with insurers and want to maintain control of the coverages, Mr. Heslington said.

“From a corporate point of view, it makes sense to reduce costs, but people are often reluctant to leave programs that they are familiar with,” he said.

A risk manager may also need to introduce a different approach to loss control at a foreign subsidiary, Mr. Heslington said.

“Often, the overseas operations have very low deductibles, and they buy insurance for everything,” he said.

By improving loss control at the overseas units and covering the risks under a global program, a risk manager can reduce overall costs, Mr. Heslington said.

Consultants can help a risk manager build a system in which the risk management department treats the local companies as clients, said Mark Charron, a principal at Deloitte & Touche L.L.P. in Hartford, Conn.

By making the risk management department a central resource center, a corporation can help instill a common risk management approach throughout its operations, while still complying with the various local regulations and customs, he said.

One of the best ways to develop such a system is to build Internet-based risk management tools, Mr. Charron said.

“You create a database that really provides information to locals,” he said.

And the risk manager can use the database to develop varying approaches to coverage for the different countries, depending on the exposures, Mr. Charron said.

Consultants can also help by providing data for risks that are not normally covered overseas, Mr. Heslington said.

For example, in the United States, it is now possible to obtain coverage for hydroelectric plants against a drop in the level of water flows, but that coverage usually is not available in Latin America, he said.

“If you can come up with the data to underwrite the risk, underwriters will look at it. People often think that the data is not available in Latin America, but, in some cases, it is,” Mr. Heslington said.

Other services Tillinghast-Towers Perrin provides include surveys to establish benchmarks for risk management practices in a specific region, Mr. McGuire said. Examples of surveyed information include the levels of insurance coverage bought by particular industries and the types and levels of coverage bought for specific risks, he said.

The consultancy published surveys on Japan and Latin America last year. It is scheduled to publish a survey on the Asia-Pacific region in May, and it plans to conduct a survey of Europe later this year, Mr. McGuire said.