CEEC Meeting, Brussels
CURRENT AND EMERGING THREATS TO INTERNATIONAL CONSTRUCTION PROJECTS
Mr Maxim Worcester
Managing Director, Control Risks Deutschland GmbH 21 September 2006
Fail to plan and plan to fail
There is an understandable reluctance to confront an issue which may never happen.
However, there is evidence that the worst time to learn how to manage a crisis is during a crisis itself.
“”-Financial Times
Control Risks’ Background
The international business risk consultancyFounded in 1975130 countries
Diverse backgroundsGlobal network and local contactsComplete client support
5,300 clients86 of the Fortune 100600 full-time staff
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Control Risks’ offices
Control Risks enables its clients to succeed in hostile and complex environments
Pre-entry due diligence
Country, regional and industry analysis
Contingency planning and business continuity
Security Design and Solutions
Imbedded security consultancy
Robust travel planning
Incident response
Litigation support, fraud and forensic capability
Control Risks services: a live example
PlanRisk analysesSecurity analysesDue diligenceInformation security
ActRisk monitoringAsset protectionBackground checksC&SM
ImproveRisk auditsTraining & coachingMedia trainingLessons learnt
ReactCrisis responseCrisis communicationEmergencyCR24
Types of Crises
High level of publicity
Manifest/eruptive
Low level of publicity
Latent/structural
Management scandal
Office shutdown
Rumours
Unfriendlytake-over
NIMBY
Loss of product lines
Environmental accident
Strike / lay-offs
Bad media coverage
Explosion
Productrecall
Assassination
Productextortion
Legal restraintsProvisional injunction, e.g. product contamination, sabotage
Lethal accident MD/CEO/Board
Boycott
War and Instability
Other conflicts and civil wars will continueLess prospect of international interventionProgress and investment in certain countries
War will remain a major political risk in 2006The war in Iraq will continueCoalition partners cannot withdraw troops
Only the hardiest companies operate in IraqCoalition troops cannot be committed elsewhereOther ‘Axis of Evil’ states will be unthreatened
Terrorism
Opened borders and liberalised communitiesDirect costs to global businesses manageableIndirect costs a major unknown
Global extremism a priority for governmentsNo easy solutions in 2006The threat is manageable for businesses
Loose al-Qa’ida networkLess sophisticated imitators Post-9/11 counterterrorism actions successful?
Terrorism will remain a threat across the world
North & South AmericaUS homeland a priority target, but post-9/11 vigilance makes it harder to operate. South America a possible venue for anti-US attacks?
Middle EastPersistent threat of large and small scale attacks across region – not just in Saudi Arabia. Government crackdowns having an impact
AfricaEast Africa and North Africa remain at high risk of further attacks, but are receiving increased CT assistance
South AsiaOngoing crackdown in Pakistan and Afghanistan will fuel continued attacks on foreign interests. Further attacks likely in Uzbekistan Far East
Persistent threat in Philippines and Indonesia, emerging troubles in Thailand
EuropeMadrid & London attacks and thwarted operations across continent underscore growing problem of radicalisation in migrant communities
Corruption
Corruption is the abuse of entrusted power for private gain. It hurts everyone whose life, livelihood or happiness depends on the integrity of people in a position of authority.
“”-Transparency International
theft . fictitious credit notes . counterfeit money . corruption. underestimation . fictitious advertisements
credit card fraud . commission fraud . unjustified price deductions . rerouting of customer payments
unofficial subcontractor agreements . money laundering . balance falsification . IT manipulation . kickbacks
bribery . fraud . competition limiting agreements . tender fraud . money laundering . insider trading
Corruption
The effects of corruption Damages reputationEndangers jobs and human livesThe long term damage always outweighsAny short term benefits of sharp practices
Measuring CorruptionExtremely difficultPolice Statistics (often unreliable)Studies of victims (often subjective)
Project-based ‘integrity pact’ approachExperience from governments, companies,and civil societyClear commitment through project lifecycle
Who has lost business to a competitor due to corruption?
0
10
20
30
40
50
60
Constr. Pharma Telecom O&G,Mining
Banking Retail Defence Power
Last 12 months
Last 5 years
White collar crime
W.C.CrimeTotal
W.C.Crime
Total
The proportion of total crimes
1.5-2% (80-100,000 cases)
The proportion of total economic
damage 50% (5 billion Euros)
Crime committed by a person of respectability and high social status
in the course of his occupation.
-Edwin Sutherland
“”
White collar crime
Asset Recovery in 44% of the cases
In over half of the detected cases, the criminal keeps the money:
Many cases never discovered
Many cases buried by companies
Discovery only after years of abuse
White collar crime is seen to be worth the risk
theft . fictitious credit notes . counterfeit money . corruption. underestimation . fictitious advertisements
credit card fraud . commission fraud . unjustified price deductions . rerouting of customer payments
unofficial subcontractor agreements . money laundering . balance falsification . IT manipulation . kickbacks
bribery . fraud . competition limiting agreements . tender fraud . money laundering . insider trading
Corporate Obligations: tiers of expectation
We must… We really should… It would be nice if we…
Obey all relevantLegislation
Conform to allRelevant norms andExpectations
Minimise adverseImpacts on communityWhere investing
Maximise profit andShareholder value
Act as positiveInfluence in communityWhere investing
Benefit the investmentLocation throughOur presence
Include social elementsIn business plan
Operate in a totallyEthical & transparentManner
Safeguard all assetsAnd personnel
Bare minimum Realistic Best practice
Corporate Obligations: competing expectations
Provide regular taxation revenueImprove local
infrastructure
Operate in physically secure environment
Maintain high share price while operating
ethically
International campaigningNGOs
International campaigningNGOs
Trans-national organisations
Trans-national organisations
Company HQ government
Company HQ government
Local activists / host community
Local activists / host community
Investment country security forces
Investment country security forces
Investment country government
Investment country government
Ethical investment funds
Ethical investment funds
ShareholdersShareholders
Protect local human rights
Prioritise local social development
Protect local environment
Produce high profits
Comply with international norms
and standards
Corporate Obligations: no hiding place
Baby Milk Protest Staged at Nestlé UK HeadquartersTenth university joins boycott over Coke
India practices
•Global corporations face attention in every country where they operate.
•Activists, investment funds and litigators respond to scrutiny overnight.
SHELL NIGERIA DECLARES FORCE MAJEURE ON PIPE BLASTLawsuit Alleges Slavery and Child Labor on Liberian
Firestone Plantation
Risks in detail: Angola
Organised crimeLow to mediumThreat of banditry in rural areas
Legal systemUnderdeveloped and weakContracts with foreign companies usually honoured
CorruptionLack of transparency among the world’s worstSolicitation of bribes
Risks in detail: Saudi Arabia
Organised crimeInsignificant
Legal systemHighly discriminative of foreigners Underdeveloped commercial legal systemInadequate copyright protection
CorruptionWidespread general corruptionCorruption in awarding contracts
Risks in detail: Russia
Organised crime Rampant
Legal systemPoor legal, regulatory environment and court systemLegislation poorly wordedJudges, lawyers and court officials poorly trained
CorruptionCentral to business lifeRussia 90th/146 on TI’s Corruption Perception IndexWorse today than during the Soviet period
Contact Control Risks
Control Risks Deutschland GmbH
An den Treptowers 1
12435 Berlin
Tel.: +49 (30) / 53 32 88 0
Fax: +49 (30) / 53 32 88 99
http://www.control-risks.com/
mailto:[email protected]
Maxim Worcester
Managing Director