While legal guidelines regarding corporate responsibility for overseas employees remain unclear, most firms have accepted responsibility for their employees' physical safety and have instituted costly security measures. While large firms can balance these costs against the higher costs of a terrorist incident, the expense may be prohibitive for small companies. Terrorism has indirect effects on daily operations when an American manager is removed, U.S. technical experts cannot enter the country, and the foreign branch becomes isolated from overall corporate production goals. Terrorist threats may exacerbate relations between the company and the local government when they pursue diverse goals in a crisis situation. Coping with a high risk environment strains morale and employee relations. Companies may suggest that executives vary their routines and keep a low profile even though this lifestyle is often contrary to the employee's personality and makes job performance difficult. Moreover, spouses and children worry about the executive's safety, and security concerns disrupt family life. Business executives must prepare themselves to deal with a kidnapping situation, and conflicts may arise between the firm and the family in the negotiation process. In addition, the hostage experience often leads to changes in lifestyles and priorities. Because terrorists have tried to contest the loyalty of a foreign company's workforce, management should screen employees and establish channels of communication for grievances. The paper includes 17 references.