Managing Risks in Africa to Maximise Opportunity

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Managing Risks in Africato Maximise Opportunity
NOT AN OFFICIAL UNCTAD RECORD

• Matthew Durdy
• Director, EMEA
• Control Risks Group
• 44 20 7970 2100
• matthew.durdy_at_control-risks.com

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Risk management an enabler of business in Africa

• Risk management was traditionally seen as a cost
  of doing business
• Today it is treated as a source of competitive
  advantage
• In Africa, effective risk management is opening
  up new markets and contributing to post-conflict
  recovery
• Risk management is an enabler of investment,
  economic development and empowerment
• But there is a limit to what risk management can
  achieve without government and community
  engagement

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Risk management for investors in Africa

• Safeguard people, assets and information
• Respond to threat of armed conflict, civil
  unrest, crime and routine safety issues
• Onshore and offshore security
• Security and human rights

Security

• Promote transparency and ethical behaviour
• Revenue management
• Fraud awareness
• Encourage sustainable local content by vetting
  suppliers, contractors and partners

Integrity

• Encourage constructive engagement with host
  governments
• Promote engagement between companies and local
  communities
• Meet concerns of key stakeholders about role of
  business in sensitive countries

Responsibility
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Conditions are favourable for increasing the
level of private investment in Africa

• Favourable commodity prices have boosted economic
  growth
• Renewed international focus on promoting
  development and reform
• G8 Summit
• Debt relief
• Commission for Africa
• US Millennium Challenge
• NEPAD
• African Peer Review Mechanism
• Enhanced risk management, partnerships such as
  EITI are facilitating sustainable investment
• FDI in Africa has traditionally enjoyed extremely
  high rates of return

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but daunting challenges still remain

• Volatile commodity prices, unfavourable terms of
  trade, indebtedness, declining aid flows, poverty
  and poor health
• Weak governance, instability and conflict deter
  companies with low risk appetite
• Overall FDI is low and concentrated in extractive
  industries
• 20 of the worlds poorest countries four-fifths
  in sub-Saharan Africa have the most difficult
  business conditions and are slowest to reform,
  according to the World Bank

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Assuring Security

• People
• Assets
• Information
• Reputation

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Assuring Integrity

• External Integrity
• Host governments
• Joint venture partners
• Suppliers and subcontractors
• Internal Integrity
• Fraud
• Corruption

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Assuring Responsibility

• Host government relations
• Community relations
• Stakeholder relations

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However careful a companys preparation, risk
management has its limits

• Effective risk management cannot substitute for
  effective policy implementation by governments
• To deliver sustainable growth and reap benefits
  of FDI, government policy must focus on improving
  investment conditions and fostering
  business-friendly environment
• Lack of social capacity presents an obstacle to
  building sustainable community relations

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Case study new market entry for a telecoms
company in Africa

• Background
• Civil disorder, community violence
• Violent crime, road traffic accidents
• Law enforcement erratic
• Corruption
• Control Risks provided over 4 years
• Full project life-cycle support
• Country assessment, due diligence, country-wide
  security assessment, some IT forensics and sweeps
• Crisis management / response plans, training on
  security and frauds
• In-country security managers ensure secure local
  travel, remote working and effective management
  of security personnel
• Result Operation is now clients most profitable
  foreign venture

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Case Study revamping community relations for an
oil gas supermajor

• Background
• Civil disorder in operating areas
• Repeated shutdowns to production
• Breakdown of trust with community
• Fears of adverse publicity
• Control Risks provided
• Assessment of companys risk profile
• Analysis of the reasons for the breakdown of
  trust with community
• Provided advice on reforming security management
  function
• Provided advice on reforming community relations
  function
• Provided in-country security manager
• Result Operations restored and disruptions
  significantly reduced

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Conclusions

• Risk management not a cost, but a competitive
  advantage
• Risk management is opening new markets and
  contributing to economic development and
  empowerment
• Foreign and some African companies are embracing
  these principles in order to access new
  opportunities
• Risk management is not a panacea. To maximise the
  benefits of FDI, institutional reform and
  capacity-building are needed
• Assuring security, integrity and responsibility
  will be key to doing business successfully in
  emerging markets of Africa

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Thank You

• Matthew Durdy
• Director, EMEA
• Control Risks Group
• 44 20 7970 2100
• matthew.durdy_at_control-risks.com