July 23, 2021
Defining, Identifying and Dealing with Global Mobility Risks
To successfully handle risk in talent mobility, you must first understand and prioritize approaches to mitigate the most critical threats to your business.
For most global organizations, risks look very different today than they did pre-2020. When it comes to the global movement of talent, even some of the more traditional risks – such as immigration and tax compliance – have taken on new levels of complexity. But how do you identify and prioritize actions around the most significant and unique risks to your business and personnel?
The RES Forum, an independent community of international HR and mobility professionals, hosted a virtual event on June 24, 2021, to help companies understand and act on key risks. Here we provide a summary of insights shared, as well as a SWOT model to help start the process of understanding areas of vulnerability or strength.
Entitled “Define-Identify-Decide…Dealing with Risk in Global Mobility,” the session featured three panelists from RES Forum technical partner organizations, including Francie Starnes from WBN Global, a network of insurance brokers supplying multinational corporations with property and casualty insurance and employee benefits consulting; Matthew Judge from The Anvil Group, a risk management organization; and, to offer the relocation management company perspective, Sterling Lexicon’s Elizabeth Bilek Portalla, CRP GMS-T.
The SWOT Analysis: Understand your organization’s unique strengths, weaknesses, opportunities and threats
To get things started, David Enser of The RES Forum and Dr. Benjamin Bader, Professor from Newcastle University Business School, presented a SWOT Analysis quadrant model, with some sample questions an organization can ask to understand the types of global talent mobility risks they face and how to manage them:
The Panelists’ Perspectives
Following the SWOT review, Francie Starnes shared that an understanding of all risks associated with a particular international assignment should include an assessment of the insurance coverages offered to employees to protect personal property, as well as health and well-being, disability and even worker’s compensation, in addition to providing Emergency and Evacuation services to expatriate employees and their families. The “Work from Anywhere” concept has increased the risk of non-compliance with respect to tax and immigration, but also affects the efficacy of insurance products in locations other than where they originated. Starnes believes now is a great time to review risk for the entire organization, and recommends inviting HR, Global Mobility, Risk Management, and other corporate departments to take part in that review, as duty of care has become a crucial aspect of employer responsibility.
Matthew Judge reminded attendees that compliance regulations around the world have grown around tax and immigration, as well as the continuing response to the Brexit split, in addition to new travel restrictions in response to COVID-19, adding to existing permanent establishment rules. The risk of triggering permanent establishment occurs when an enterprise has a facility in a foreign territory that is used to conduct all business activities and there is a person (other than an independent agent) conducting business on the enterprise’s behalf in the foreign territory, as defined by Airswift, an international workforce solutions provider. Previously, most internal risk departments were concerned with financial risk and legal liabilities, and while this has not changed, the focus on employee safety has expanded. Judge sees a greater need for Global Mobility to help complete comprehensive due diligence before an assignment starts by looking carefully at the location, the individual and accompanying family members being asked to relocate to make sure the “fit” is right. He pointed out that the international standardization organization’s ISO/TC 262 will release ISO 31030 - Travel Risk Management in September 2021, which will set best practice standards for duty of care, including physical and mental health assessments.
The third panelist, Sterling Lexicon’s Elizabeth Bilek Portalla, CRP GMS-T, Vice President, Client Services and Innovation, discussed the framework in which relocation management companies define, identify, and decide how to deal with risk. She shared that it can really be distilled down into a few core areas that Sterling Lexicon refers to as the “5 Cs: Cost, Complex Compliance, Duty of Care, and Crisis Management:”
- Risks associated with an increase in costs. In the U.S., this has largely been caused by the low inventory of available housing, leading to more lengthy stays in temporary accommodations and often resulting in transferees waiving inspections and paying well above the asking price – scenarios that could potentially lead to loss-on-sale/negative equity situations in the future. Globally, we have seen escalating costs of materials, port congestion, and container and labor shortages result in higher shipping costs. Quarantine requirements have also increased temporary living costs.
- Risks associated with complex compliance. With respect to the pandemic and rapidly changing cross-border entry requirements, the post-Brexit movement of people and goods is becoming more complicated than before and still emerging. The question of whether companies will require vaccines before employees return to the office remains to be answered and there is a risk that extended business travelers could overstay in a location if conditions prohibit their timely return.
- Risks associated with duty of care. As companies become more attuned to the importance of employee health and well-being for successful assignments, in addition to balancing privacy with “the need to know,” selecting the right candidates is now even more vital – and complex. The pandemic put a spotlight on the importance of accurate location and work status tracking and helped catapult global mobility teams into greater conversations around talent management overall, including better aligning mobility programs with the organization’s CSR and DEI initiatives. The pace at which conditions are changing makes planning much more difficult.
- Risk associated with crisis management. Global mobility professionals must be agile enough to meet new challenges, of which COVID-19 is just one kind of test for governments and businesses to manage. Mobility teams need plans and technologies in place to handle the next global crisis, whether it be health-related, financial-related, or the result of different types of unforeseen circumstances that requires strong leadership. These situations can influence employee attitudes about work, which in turn, may affect the war for talent, creating a greater need for global mobility and HR to work together to demonstrate the ROI of cross-border assignments in the face of more remote work and stronger desires for greater location flexibility.
We are seeing some organizations consider hiring local talent as opposed to relocating an employee from headquarters. According to Asia Hundley, a SheildGeo Customer Success Manager, although the discussion of virtual assignments has heated up, ECA’s 2021 Managing Mobility Survey found only 27% of companies are currently using this option. Some were initiated because employees were caught overseas by borders closing or had to start an assignment before they could travel to the host location. The complexity that arises from a virtual assignment is somewhat surprising and must be addressed to maintain compliance on a number of fronts.
How to Offset Risk
The pandemic served to raise awareness of different kinds of risk, and today we are seeing more companies strive to manage it, some using a tool such as the SWOT analysis to start the discussion by providing a visual to help understand where the organization fits in the continuum. Remember to think about risk holistically, and according to Mercer, you should look at physical, psychological, operational, data-related, financial and reputational risks, when making an assessment of readiness. Once a baseline has been established, the next steps are to offset risk in as many areas as possible. Presented below are some ideas on how to mitigate corporate and employee risk:
- Make sure a diverse group from different departments within the company are included in the discussion of how to manage risk, such as HR, tax, legal, internal audit, travel, etc. For example, the travel department may already use data from the travel agent as a preview of potential cross-border entry issues or changes.
- Use technology solutions and professional immigration partners, such as Sterling Lexicon’s team of immigration specialists, to identify and track the location of all employees for potential immigration and/or tax risk.
- Build a diverse workforce to diminish the effects of early retirements or increased attrition rates, while looking closely at local talent to ease any restrictions on the ability of foreign nationals to work in a particular country.
- Align global mobility with talent management strategies to strength company performance goals while providing a level of flexibility when examining unique situations.
- Prepare employees and accompanying family members for the assignment by participating in cultural training and language instruction (if necessary), as well as encouraging pre-move health screenings; offer Destination Services upon arrival in the host country to orient the assignee and family to the location and cultural norms.
- Consider rethinking what constitutes a “hardship location,” and whether the calculation for the allowance should be adjusted; revisit assignment cost estimate templates to ensure they reflect costs today, and think about the impact to tax equalization policies
- Remain agile and anticipate things will change – build partnerships with key suppliers in immigration, tax, household goods transportation, and relocation, who can help alleviate risks via proactive information-sharing and other ways of offering support.
- Adopt contingency plans in case employees experience an emergency, whether the issue is health-related, due to natural disaster, or other causes.
How can we help you assess, prioritize and manage your unique risks? Our technical partnerships with RES Forum and internal subject matter experts can bring you access to robust peer data, assessment tools and flexible, personalized solutions. Schedule a call with us today.
Leah Johnson is Sterling Lexicon’s Director, Client Solutions, and has worked in the global mobility industry for more than 20 years. She has held management positions in business development, operations, account management, and consulting, and had the opportunity to live and work in Tokyo and Hong Kong for six years. She initiated destination services in Hong Kong for a relocation management company and directed global mobility for Goldman Sachs in the APAC region. She graduated from Colgate University, earned an MBA from the University of Alabama in Huntsville, and maintains a Senior Certified Professional (SCP) certification from SHRM.