Knowing Clean Technology Customers

In the next 10 years, the clean technology market is expected to increase by more than 60 percent to nearly $400 billion worldwide, according to Clean Edge’s Clean Energy Trends 2014 Report – creating an enormous selling opportunity for agents and brokers who understand the risks faced by this industry.

Although clean technology companies are diverse and operate across many industries including manufacturing, hardware, software, life sciences and power, all are focused on creating energy efficiency, optimizing natural resources or deriving power from renewable sources.

According to a recent Chubb Clean Tech Industry Survey, three out of four of these companies operate internationally. Many seek funding globally, rely on international supply chains, utilize contract manufacturing and offer their products and services worldwide. As a result, global risk exposure and management — from securing complex supply chains to executive and employee travel risk – should be a priority business issue that agents and brokers proactively discuss with their clean technology customers.

Executives in the clean technology industry are often innovators. They are accustomed to the risks and constant changes inherent in their business. However, in their pursuit to develop technology, secure funding and increase sales, they may miss the global risks that could threaten the viability of their business.

Fifty-nine percent of clean technology companies in the Chubb survey do not have a business recovery plan, which could be key to their long-term survival.

For U.S. clean technology companies with global operations, catastrophic incidents can have profound, immediate and sometimes long-term consequences on business operations. From tornadoes and hurricanes to port strikes and civil unrest, global risks can shut down suppliers for months, destroy the company’s facilities, endanger employees who are traveling abroad on business and threaten the financial stability of a company.

Talking Supply Chain

In June 2013, devastating floods hit parts of India and Nepal. The flood resulted in thousands of deaths and left buildings and infrastructure in ruins. Earlier this summer, a 6.5-magnitude earthquake off the coast of northern Japan conjured memories of the 2011 Tohoku earthquake and tsunami. Crises of this scale remind us of our increasing vulnerability to natural catastrophes and the myriad risks posed to global businesses.

Forty percent of clean technology companies depend on foreign businesses for their supply chain, yet according to the Chubb survey, only one-in-four companies is very concerned about supply chain stability.

When speaking to clean tech customers, think about what is putting stress on their supply chains and how those stress factors can have different implications for these companies depending on the life stage they are in. Clean technology customers may be start-ups or commercialized companies, but regardless all may have some international presence.

Clean technology businesses with a large global footprint may have a more sophisticated supply chain and have an established business continuity plan, but many such companies remain vulnerable due to a lack of continued management of that plan.

Business continuity plans that are relegated to a binder on a shelf quickly become out-of-date. Plans need to be regularly tested and updated to properly respond to supply chain failure. Alternatively, a start-up may lack basic supply chain best practices, such as securing back-up suppliers in different regions and conducting end-to-end supply chain assessments.

Emerging Markets

Additionally, there is a strong chance that many of these companies — regardless of the company’s life stage — may have suppliers in emerging markets like China and India, where facility standards and infrastructure may be deficient. This can increase a company’s vulnerability to delays caused by fire, theft or more complex issues such as terrorism and natural catastrophes.

Clean tech companies may be unaware of how vulnerable their supply chain is, let alone how exposed their supplier’s supply chain might be. But a clean tech firm with a strong, well-tested business recovery plan and responsive insurance protection may successfully survive a disaster. For example, a clean tech company may obtain a key component from a single location–a red flag that indicates potential trouble if a fire occurs at that manufacturing facility.

Earlier this year a Canadian solar panel company experienced a non-fatal fire at its manufacturing plant in Suzhou, China. Such an incident could cause lengthy delays in the shipment of critical components from China to Canada. But a well- thought-out business recovery plan will have identified a second source for the component.

A global property and business income insurance policy can further strengthen supply chain management by providing a financial cushion for loss of income and extra expenses if operations are halted due to property damage from natural catastrophes or other causes.

Talking Employee Well-Being

Despite the fact that the majority of clean tech companies have a global presence, Chubb’s survey noted that 57 percent of respondents were not concerned about global protection for employees while they are traveling on business.

Sending employees abroad for business is inevitable for clean technology companies that are expanding globally and for those with a well-established international presence.

According to the Global Business Travel Association, U.S. business travel spending is expected to hit nearly $290 billion in 2014 and increase 7.6 percent in 2015. Many clean technology employees may find themselves traveling to emerging markets such as Brazil, India and China — all of which fall into the top 20 high-risk areas for health and security concerns.

The reality is that wherever they may go, employees are more vulnerable while traveling. Everyday activities when traveling are more susceptible to danger, and, in the event of a medical emergency, an employee may be rendered unconscious or debilitated and unable to seek quality medical assistance.

Further exacerbating employee travel risks are events such as political unrest or natural catastrophes, which often can be chaotic and result in the grounding of airplanes and the closing of borders.

Traveling employees also may be exposed to local endemic diseases. With many manufacturing facilities and businesses located outside of urban areas, an employee may become sick or injured in a remote, rural area that lacks proper medical resources.

When talking to clean technology customers, consider asking four key questions to determine if they are proactively managing their travel risk:

• Do they have an incident response plan?
• Do they educate their employees on the country-specific hazards prior to travel?
• Are they limiting the number of key employees who are traveling together on a plane?
• Are they aware of where their employees are at all times and the potential threats they may encounter in their travels?

From an insurance perspective, U.S. workers’ compensation policies do not usually respond to work-related injuries or even illness when employees are outside of the country. Therefore, customers in the clean technology sector may want to consider the purchase of foreign voluntary workers’ compensation and repatriation insurance. This can help protect employees by paying for travel expenses for emergency medical treatment and evacuation and for bodily injury from accidents and diseases.

As an agent and broker, you can help your clean technology customers build a global insurance program that will better ensure they meet local insurance requirements and have a strong business continuity plan in place to help protect their employees, facilities and supply chains.

Educating your customers on evolving global risks – whether a catastrophic tsunami or unpredictable foreign travel mishaps – will help prepare them to manage their global risk exposure and help put them on a path to continued success.

Topics Catastrophe USA Agencies InsurTech Tech China Manufacturing Chubb