1. Control Risks Group w w w. c r g. c o m CR G Managing Risks in Africa to Maximise Opportunity Matthew Durdy Director, EMEA Control Risks Group +44 20 7970 2100 matthew.durdy@control-risks.com NOT AN OFFICIAL UNCTAD RECORD

2. Control Risks Group w w w. c r g. c o m CR G 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

3. Control Risks Group w w w. c r g. c o m CR G 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 Integrity Responsibility Promote transparency and ethical behaviour Revenue management Fraud awareness Encourage sustainable local content by vetting suppliers, contractors and partners 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

4. Control Risks Group w w w. c r g. c o m CR G 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

5. Control Risks Group w w w. c r g. c o m CR G …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 world’s poorest countries – four-fifths in sub-Saharan Africa – have the most difficult business conditions and are slowest to reform, according to the World Bank

6. Control Risks Group w w w. c r g. c o m CR G Assuring Security People Assets Information Reputation

7. Control Risks Group w w w. c r g. c o m CR G Assuring Integrity External Integrity Host governments Joint venture partners Suppliers and subcontractors Internal Integrity Fraud Corruption

8. Control Risks Group w w w. c r g. c o m CR G Assuring Responsibility Host government relations Community relations Stakeholder relations

9. Control Risks Group w w w. c r g. c o m CR G However careful a company’s 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

10. Control Risks Group w w w. c r g. c o m CR G Case study – new market entry for a telecoms company in Africa NIGERIA 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 client’s most profitable foreign venture

11. Control Risks Group w w w. c r g. c o m CR G Background Civil disorder in operating areas Repeated shutdowns to production Breakdown of trust with community Fears of adverse publicity Control Risks provided: Assessment of company’s 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 Case Study – revamping community relations for an oil & gas supermajor

12. Control Risks Group w w w. c r g. c o m CR G 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

13. Control Risks Group w w w. c r g. c o m CR G Thank You Matthew Durdy Director, EMEA Control Risks Group +44 20 7970 2100 matthew.durdy@control-risks.com