Iain Donald is the Senior Vice President and Americas Director, Global Analysis, at Control Risks, an independent, global risk consultancy specializing in helping organizations manage political, integrity and security risks in complex and hostile environments. Control Risks supports clients by providing strategic consultancy, expert analysis and in-depth investigations, handling sensitive political issues and providing practical on-the-ground protection and support.
Q: How much of what you do involves helping clients to avoid problems of political and security risks, versus coping with problems as they start to crop up? Will you take on a client who comes to you for help only when they are in serious trouble?
Iain Donald (ID): Control Risks advocates a pro-active stance towards risk management; i.e. that clients adopt an enterprise-wide risk management program, with robust country risk assessment and due diligence performed before they advance into a new market or make changes to their business in existing markets. This obviously puts an organization on the strongest possible footing and can help to address many prevalent risks, however the world is a dynamic place, particularly in the complex emerging and frontier markets where many of our clients are investing and operating. Control Risks is frequently engaged by clients who for a variety of reasons find themselves in acute risk or crisis situations. With our large global clients we may simultaneously help them plan entry to a complex new market, while assisting the closedown of a business in another (with all of the varied risks this attracts), and addressing the crisis caused by hostile government intervention in yet another. While we seek to build close, trusted and pro-active relationships with all clients, we will certainly examine all ways of helping a new client that finds themselves in serious trouble. In fact Control Risks finds its roots in in exactly that kind of situation; we were founded in 1975 as a kidnap for ransom response consultancy.
Q: How much of your political risk analysis work is associated with investment in the planning stage?
ID: We estimate we do about half our work with clients who have already been invested or operating in a country for some time. Clients in this latter group have normally found that something significant in their risk profile has changed and feel the need for a complete evaluation of their business environment. It may be that something has changed in the political realm (for example, the arrival of a new government hostile to their interests) or that there are legislative or regulatory modifications in the wind that threaten profitability (for the extractive sectors the review of royalty regimes is often cause for concern). In other situations there may have been little material change in the political situation, but the client is altering the way they do business—perhaps through expansion, contraction, or a change in the business model—and this creates new risk exposures. Because Control Risks’s specialist consulting practices operate in an integrated manner, globally, we are able to leverage investigative expertise alongside our political risk analysis, which affords us an ability to map our client’s risk exposures to a high degree of detail at the local level, which is critical given some of the fluid frontier markets in which we operate.
Q: How can you make sure your advice gets to the right people in client firms?
ID: We are constantly working on improved ways to deliver our analysis to clients; the days of dropping an 80 page report on a client’s desk and expecting it to be digested are long gone. In my experience not clarifying the preferred mode of receiving the analysis, as well as nature of the audience are the key means of “dissemination failure.” Nowadays, even for long pieces of research and analysis, we offer clients at the very least a debrief (either web-based or in-person), and preferably a “risk workshop” to work through a structured process which maps the results of our analysis onto the client’s business and translates into practical risk mitigation strategies. Many of our clients choose to retain us through our “PRIME” service, which enables them to engage directly with our analysts through the year on political risk matters of interest to them.
Q: What sources of political risk or instability that are not in the daily press do you think investors should be thinking about? For example, are water rights or food scarcity things you think we should be tracking closely?
ID: Yes these are items of concern when taking a “futures” risk view out to say 2013, but I would not say they necessarily require weekly tracking; perhaps trends on an annual basis are useful to track. Specific geographies in which there are acute issues may warrant more frequent attention. We are also tracking the macro trends of global urbanization, the youth population bulge that will appear between now and 2030, and the potential for these to coincide with clusters of highly religious populations to create civil unrest in partly-governed city spaces out of the immediate governance view of national authorities. There is a correlation between incidences of civil unrest and areas of densely packed, youthful populations and indicators suggest this will increase.
Q: Do you play a role in helping a company deal with a threatened expropriation? Is there often a “back-channel” way to deal with such threats? Can you give us some examples?
ID: Yes, we do. Supported by detailed micro-analysis of the manner in which an expropriation may take place in a given country and industry, we create specific corporate crisis management plans to govern responses to such a developing situation, as well as project or site-specific contingency plans aimed at safeguarding staff, assets, finances and corporate reputation. While expropriation events themselves are typically extremely hard to manage or influence, most successful strategies involve effective engagement with influential stakeholders. We help profile those through the use of intelligence, and design effective strategies by applying “power maps” that track patterns of influence.
Q: Can you give me some examples of how “hands-on” you are in dealing with physical and personnel security matters?
ID: We provide executive protection and security advisory/management services, to the highest standards and according to a consistent framework, globally. We are probably the “go-to” organization for practical risk management support in some of the world’s most hostile and complex environments.
Q: What is your relationship with the Kidnap and Ransom insurance market? How does that work?
ID: This is the origin of Control Risks. We were founded as a K&R response consultancy in 1975 and continue to provide these services globally through our partnership with the Hiscox syndicate at Lloyd’s, for whom we are the exclusive responder on special risk policies.
Q: Political violence insurance policies exclude coverage when an insured or the foreign enterprise fails to take all reasonable measures to protect or preserve property. Do you think that the standard should be satisfied if a client and local managers take all measures pursuant to your advice about security?
ID: There are certain policies where our advice is written into the warranties, though this is obviously very much to the discretion of the underwriter. Irrespective of whether we have provided advice or not, I think the key word there is “reasonable”: all companies should enshrine a culture of risk assessment and due diligence into their market entry and general operational processes; however, the required standard will vary greatly based on geography and the activity being pursued.
More about Control Risks:
Control Risks delivers a range of solutions to support clients in gaining insight into their risk profile, including:
Risk Consulting and Analysis. Analysts work with clients in a highly tailored manner to define and quantify the specific macro and micro country risks they face.
PRIME. This retained advisory service provides insightful analysis of political developments in emerging markets, as well as flexible access to Control Risks’ expert analysis team to help clients assess their political and business environment, often in emerging markets.
Country Risk Forecast. This is an online subscription product, which provides daily updates of political and security risk developments in some 200 countries worldwide.
RiskMap. This is a critical assessment, published annually, of the political and security issues that will challenge global organizations in the forthcoming year.