POLITICAL RISK - and associated terms    o    BUSINESS CONTINUITY    o    DISASTER RECOVERY    o    CRISIS MANAGEMENT    o    COUNTRY RISK ANALYSIS - Security Service companies (Globe Risk Ltd.) - International Terrorism - re: Int'l Business - Government Resources

see also    www.witiger.com/internationalbusiness/politicalrisk.htm
see also    www.witiger.com/internationalbusiness/politicalriskcontingencyplanning.htm
see also   www.witiger.com/internationalbusiness/geographicenvironment.htm
see also    www.witiger.com/internationalbusiness/personalrisk.htm
and also  www.witiger.com/internationalbusiness/alanbell.htm

COVID Cathy Pacific planes temporarily moved to Australia

Cathy Pacific planes AOG (Aircraft On Ground) A contingency plan that involved  protecting the "property" from a climate threat diversifying to provide other services selling "merch" to build the brand

When you talked about the contingency plan, I just want to share my personal experience with you. I was working with Cathay Pacific before. When COVID started, the airline was significantly damaged as all cross-border travel was restricted, and almost no one flies. The flight schedule was cut to less than 10% of the pre-covid time. The company needs to react to it very quickly. There were a lot of idle aircraft all of a sudden. Hong Kong’s weather is very humid which is not suitable for storing idle aircraft. To minimize corrosion, Cathay Pacific moved its idle aircraft to Alice Springs, an Australian desert, which has low humidity and no extreme weather events e.g. tropical cyclones. Besides, to save the company, Cathay Pacific introduced different other services, such as providing catering delivery services to offices or schools. It also introduces its online store to sell its products online, at least gaining some revenue. from student Hazel N. in MRK460 2023 Feb 16th who previously worked at Cathy Pacific did Wed Feb 22nd did The Feb 23rd

 

INTRODUCTION

,

As said in the intro to Alan Bell's bio, successful International Business Management is based on solving problems. If there were not a lot of  problems, you wouldn't need managers - but because there are lots of problems, you need managers to analyze the problem, craft a solution, and monitor how the solution is carried out.  Part of being a successful Int' Business Manager (especially after 911) is recognizing that risk and threat situations effect int'l business in many ways, and, these situations  have to be dealt with, and "managed", or your company will be compromised and subsequently uncompetitive. WTGR

.

Why This UNIT is Important

"In the emerging economies of Central and South America, Eastern Europe, the former Soviet Union, Asia and Africa, new business opportunities are continuing to present themselves on a daily basis as privatization takes hold, infrastructure needs grow and restrictions on foreign trade are lowered. While the potential rewards from doing business in these countries are tremendous, so are the risks. The companies that expand into these new markets with the greatest degree of success are those that do so cautiously and prudently, with the understanding that they may face political and economic risks that can cause unexpected and catastrophic losses. The possibility of loss resulting from political events such as changes in government policy, economic instability or acts of terrorism can be great." James F. Quirk, a vice president of Marsh & McLennan

.

Why This UNIT is Important Mining  Sector

One of the biggest sectors of the Canadian economy, that requires political risk assessment and contingency planning is the mining sector. Mining is big business in Canada.  Many mining operations worldwide are operated or controlled by Canadian mining companies which got their origins in northern Ontario and B.S. decades ago. "Miners go where the minerals are - and this often leads them to remote, undeveloped and frequently hostile environments around the world."  www.mineafrica.com

.ff

During the 2nd week of May 2008, Richardson was interviewed by John Downs of AM 640 news for a segment about the consequences of a company involved in a foreign investment where terrorists benefit from the investment.  MP3 here. http://people.senecac.on.ca/tim.richardson/audio/ audio2008May12interview640news.mp3 Several American victims of terrorist attacks in Israel are demanding millions in compensation from a Swiss bank. The Americans claim the Swiss bank should have known that sending money to Iran would result in terrorism being financed.

.

This interview relates to political risk in the context that Canadian companies are at risk when they do business in a country in which the political situation involves activities that may compromise the ethics or integrity of the Canadian firm and its customers and suppliers. (Discussed also in the ethics.htm unit) Richardson explained there are a number of examples of situations where a business directly or indirectly does things which benefit terrorists or  rogue states - a Canadian example cited by Richardson was the Quebec based helicopter parts manufacturer who sold technology and parts to a Chinese company that made the Z-10 "attack helicopters" for the Chinese army. Richardson noted that various human rights organizations such as  www.oxfam.ca have researched how Chinese attack helicopters have been used in the Sudan by the Muslim backed government to attack and kill Christian refugees in western Sudan's Darfur region. "Canada has not authorized the export of combat aircraft to Colombia, where there are reports of aerial bombings of civilians as recent as 2004. Yet the Colombian Air Force is now acquiring Super Tucano aircraft from the Brazilian company Embraer, which are armed with two machine guns and are powered by engines from Pratt & Whitney Canada."  oxfam

...

	click to view larger
v
	click to view larger, and read the points about the mining sector and security, and Alan Bell, regular guest speaker in C44

two basic types of risk

Richardson discussing the difference between  Pure Risk and Speculative Risk Pure Risk - a negative thing could happen, if it does not happen, the company gains no advantage Speculative Risk - a negative thing could happen, or a positive thing could happen did The Feb 23rd

..

main categories of risk

The main categories of risk which effect international business managers CONFLICT / VIOLENCE - unstable ethnic, religious and military conflicts - including the types of threats within Political Risk Political Risk - the risk that politics in the host country will develop in a way which makes it difficult for you to profitably carry on your    Interference with operations Confiscation(they take a piece of equipment) Expropriation (they take the whole company) Nationalization(they take all the companies in a business sector)business. Risks to Personnel violence K&R, kidnap & ransom,  extortion and theft medical risks and threats Pandemic Covid19 virus GEOGRAPHIC ENVIRONMENT climatic and weather extremes that threaten the health and safety of nonresident travelers and effect the operational ability of equipment and machinery topographical extremes that endanger personal safety, communications and transportation. One of the best ways to deal with these security risks is by developing a comprehensive contingency plan.

..

Political Risk can be divided into several types of threats.

CONFLICT / VIOLENCE  Interference with operations Confiscation(they take a piece of equipment) Expropriation (they take the whole company) Nationalization(they take all the companies in a business sector) did Wed Feb 22nd did The Feb 23rd Economic instability, which effects production Currency Repatriation, not being able to get your money out Currency  Inconvertibility, not being able to exchange your money for another currency of international value (yen, dollars, pounds) Contract Repudiation  "... persistent and deliberate refusal ...to honour obligations as set forth in a Contract.."

.

Political Risk Political violence

Political violence – loss of assets or income due to  war and revolution,  insurrection or politically motivated civil strife,  terrorism and sabotage K&R, kidnap & ransom,  extortion and theft forced support of a political party (give us money for the XYZ Party or we will cut off the electrical power to your factory)

.

Political Risk Political violence

Political violence – loss of assets or income due to  forced support of a political party Laurent Ghagbo lost the national election in the Ivory Coast in Nov 2010 but still clings to power - threatening to cut off cocoa exports - which would effect the world supply of chocolate since the Ivory Coast produces a significant percentage of the world supply View the video to see how almost anything can be a "teachable point" about international business. Filmed Feb 14th, Valentine's Day, Prof. Richardson uses chocolate doughnuts to make a point about political risk in the Ivory Coast

.

Political Risk Nationalization

Nationalization is typically when an extreme government takes action against foreigners by using the military, or other power, to take ownership and control over a business sector, or a collection of resources or real estate. Typically this situation happens when foreign investors use their money to create some thing, such a develop a gold mine, or build an energy station, and the government decides to take over the facility by force or by some other action which leaves the foreigners without compensation.

.

Political Risk Nationalization

In October 2011 Hugo Chavez, strongman running Venezuela, threatened to nationalize the luxury homes on the islands of Los Roques, just off the coast of Venezuela These island are located 80 miles north of Venezuela and have become a major attraction for high-end expensive tourism. The area is known for white sand beaches unspoiled by typical tourist circumstances.

.

Political Risk Nationalization

In 2010  Venezuela took over 11 drilling rigs belonging to an American oil company (Helmerich  hpinc.com ) based in Oklahoma. Wall Street Journal reported "President Hugo Chavez nationalized the Helmerich rigs in June 2010 after the equipment had sat idle for months because of a payment dispute. The U.S. company claimed it was owed $43 million for completed work. "

.
.

what are the  specific risks MEDICAL

List of specific medical risks and threats that can effect international businesses medical trauma in remote areas and the subsequent evacuation and treatment Disease and plague in late Sept 2005 the WHO World Health Organization broadcast alarming predictions that a pandemic stemming from the bird flu virus (presently killing people in Asia) could kill as many as 150 million worldwide SARS 2003 could be considered an emergency that required carrying out Contingency Plans  Covid19......

...

..
 

what are the  specific risks VIOLENCE

List of specific violent risks and threats  theft of expensive equipment and recovery of important corporate data;  kidnapping situations kidnapping for money kidnapping for political purposes violent robbery and assault of executives;  Mexico City, Moscow, South Africa, New York City, Detroit, L.A., Malvern ! extortion and threats against company operations, offices and facilities;  security of communications and electronic countermeasures

.

what are the  specific risks

List of specific risks from government problems or problems caused by gov't action  municipal and regional government problems power blackout, accident or sabotage sewer flooding caused by heavy rains road closures, earthquakes, flooding, tornadoes

.

VIOLENCE / PIRATES

List of specific violent risks and threats - PIRATES  In early Feb 2009, student Lulu W. in MGTC44 at UTSC emailed some interesting comments about Pirates. Lulu said  "I read an article about the Somali pirates yesterday. I found it interesting since this is related to the risks we may encounter when we are operating international business. The author mentioned that piracy has taken an increasing toll on international shipping in the water link between the Mediterranean Sea & the Indian Ocean.""    Lulu concludes "I think contingency plans regarding pirate attacks are extremely important for those companies who transport cargos on international waters. Vessels with oil and chemical products should pay special attention to this because they have greater vulnerability and thus a higher possibility to be forcefully boarded"

.

VIOLENCE / PIRATES

PIRATES - 2009 !!! WTGR responds adding Pirates are active in several areas of the world In 2008 and into 2009 Pirates are active in the Singapore Straits, around the Indonesian islands, near the coast of Bangladesh, and off the coast of Somalia, and in the east part of the Pacific off Peru + irregular activity in the Caribbean (mostly targeting yachts which can then be used for drug smuggling).  click to see a larger view,  and you can spot the RPG in the bow Some of the reasons this activity is taking place is based on capability and opportunity. With hand held GPS navigation it is easier for small fast boats to travel far offshore the coast, + access to weapons such as RPGs allow a small boat the ability to create a "big threat" which most ships would surrender to.  Additionally, most ocean vessels have not been "arming" themselves since the traditional pirate years of the 1600's and 1700's - which means you have a "target rich environment" - however that is rapidly changing as 2009 progresses. Somalians who have been captured and prosecuted for piracy, have told the foreign media that they committed these crimes out of desparation when they say their fishing livelihod was being stolen by large international commercial trawlers. see YouTube  youtube.com/watch?v=DSp9OGK69oA

.

VIOLENCE PIRATES

Defending against pirates has become more aggressive, and the pirates in turn are using more powerful weapons to attack. Piracy off the coast of Somalia is getting worse update? just "Google"  'defending against Somali pirates' The Economist..."since Somalia has no functioning state government there is no one in Somalia to whom foreign governments can exert pressure to halt this situation."

.
.
.
.
The screen capture below is from the web site of  CanadExport of the Dept. of Foreign Affairs.
It features an article written by Prof Richardson, for Dept. of Foreign Affairs publication, in 1998

In this article, Prof. Richardson says

"One consequence of government–private sector alliances’ stimulating exporting is that many Canadian  companies are doing business in farther reaches of the globe. However, some of the newer areas that are  being opened to international business are not as safe and free from risk as are more familiar markets and regions. Canadian companies should therefore plan for overseas security."

"...these newer areas can be rewarding for exporters, but Canadian companies need to exercise caution. ...a Contingency plan is one way to address risks"
WTGR

the article used to be at http://www.dfait-maeci.gc.ca/english/news/newsletr/canex/980612fe.htm
- this link is no longer working in 2005
.

As more and more companies develop business in riskier areas around the world - providing risk insurance coverage of these companies is a growing business

Security Services Companies contingency  planning  &  business  continuity  solutions Security Services Companies

.  Globe Risk, "There are many questions when it comes to contingency planning and crisis  management. Similar to an insurance policy, it prepares your company for any disasters it may encounter. Even more like an insurance policy, it can either be money wasted or well spent. When a crisis strikes your firm, it will be too late to find out. Then it will be up to legal teams representing damaged parties, injured employees and government  regulators to determine your liabilities. "

A Summary of World-Wide Terrorism Events, Groups, and Terrorist Strategies and Tactics  www.emergency.com/cntrterr.htm Presently, many medium and large sized companies involved in B2C and also B2B situations, recognize that many of the "safe" areas in the world are being saturated with business, and the only new opportunities lie in regions of risk - therefore in the field of international business there is (in some sectors) an increased interest in knowing more details about the regions of risk and what possibilities there are to do business there - this is particularly true for resource extraction companies and companies selling branded consumer items and services. WTGR

This article, which appeared in the Toronto Star Oct 30th, makes some good points about the effects of Sept 11th on shipping and business between Canada and the U.S. Canadians in international business should be particularly concerned because of the large amount of exports Canada has to the United States.

Canadian government info                       Canadian government info

KEY POINTS This is an example of how federal governments can produce information and reports which allow business people to make decisions regarding risk and threat situations in different business sectors, and geographic regions. WTGR Canadian government information on terrorism commentary piece by Dr. G. Davidson Smith   As explained by the author, Dr. Davidson Smith "The term "Single Issue Terrorism" is broadly accepted as extremist militancy on the part of groups or individuals protesting a perceived grievance or wrong  usually attributed to governmental action or inaction" Here was the entire list of commentaries in the series  www.csis-scrs.gc.ca/eng/comment/comsum_e.html (link broken in by 2012) Dr. Smith gave TR permission to quote from, and link to the CSIS site in an email 2005 June 22, Copies of emails kept on file in the permissions binder