After identifying the risks and beneficiaries of Pre Frontier Markets last week, Tim Curtis in Part 4 discusses the challenges and opportunities when operating in such sensitive environments.
The changing sociopolitical dynamics in fragile environments present significant challenges for businesses and international organisations. As developing countries demand more natural resources, mining companies often increase the risks they are willing to take to match supply with this demand. Examples are now regularly presenting themselves in post-conflict environments such as Iraq, South Sudan, the Democratic Republic of the Congo (DRC) and Afghanistan, as well as more remote, austere and fragile areas in Africa and across the Southeast Asian and South Pacific archipelago.
Countries such as Iraq, Afghanistan, Ghana, Sudan, Ivory Coast, Sierra Leone, South Sudan, Somalia and Mozambique are increasingly seeking to develop deals and concessions with Western companies. Pre-Frontier countries are looking to encourage those international companies that have a proven track record of investment and project delivery, high standards of safety and also competency in managing stakeholders, coupled with appropriate corporate social responsibility (CSR) programmes. The latter is incredibly important for the local communities that experience the most profound changes. Countries have learned, through experience and research, that non-Western companies do not necessarily conduct their projects with the same sensitivity; nor do they commonly offer opportunities for local industry participation and involvement in their projects. There continues to be, therefore, an increasing demand for the services and support of western-based and western principled companies.
For those companies planning to operate in this environment, there are many challenges that should be mapped, resourced and proactively managed prior to entering a territory. Commercial commitment will develop a thriving private sector that can also allow the influence and even the leading of public policy. Improved commercial environments will draw supporting sectors and industries into the districts and provinces. The key is ensuring that these economic benefits can trickle down to improve the standards of living for the general population- and hence ensure acceptance and support. Well planned and executed operational solutions can value add into a wider health, safety and environment strategy and can also greatly contribute to improved ‘industrial relations’. Organisations must take a holistic and integrated view of all risks related to health and safety, the environment, security, human resources, liaison, community outreach, civil affairs, and logistics and supply chain management.
In fragile environments, where sectarian and tribal issues are often prevalent, civil liaison and community outreach and development are key enablers to success. This includes the design and delivery of community-based security strategies.
Owing to underdeveloped infrastructure and utilities, frontier markets can also be logistically complex. The supply chain for importing and exporting resources is often convoluted and high risk as it regularly traverses ungoverned spaces that commonly harbor issue-motivated groups, criminals and anti-government elements. Cross-border movements require a detailed understanding of stakeholders and liaison networks, in order to mitigate the risk of convoys and staff being impounded and hence significant time delays. Furthermore, quality and quantity inside the supply chain are often misaligned with demand. And speed and reliability are often below expectations. That said, it is possible for supply chains to be established successfully. But they should be mapped and designed as part of one cohesive and coherent market entry strategy, and constantly adapted to remain ahead of the changing environmental factors including social, political, economic, security, health, legal and environmental issues.
In a security context, international companies are often highly visible in terms of their physical footprint, labour complexion and their high profile lines of supply and communications. There is also a significant perception of wealth. This can make them particularly susceptible to being targeted through crime, kidnapping and politically motivated attacks. Indeed, governments in these countries often advertise the foreign investment being made by international firms in an attempt to secure political gravitas, unintentionally making the project a ‘trophy target’ for terrorist activity.
Next week, Tim will advise on planning for Pre Frontier Markets. If you are a business looking at entering a pre frontier market or are already operating in one, make sure you follow our page to get the expert’s tips.
Please contact ERS if you require further advice or if you would like us to assist with travel security +61 8 6109 0115 .