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Country Risk for Business Leaders


Your organization has just started a new business operation in Country A. Being a high potential business leader, you have been identified by the management to head that international office as the first Country Head, the position perceived as equivalent to chief executive officer (CEO ) at the headquarters. One of your main immediate concerns is how to deal effectively and manage the various risk potentials in a foreign country.

Country risk is the kind of risk originating as a result of doing business in a foreign land. For purpose of discussion, the country risk is categorized into six (6) groups –

A to F. As the Country Head, you need to identify; separate; and thus manage & mitigate the various risk events resulting or transpiring from each of the group.

Group A. Personal
Group B. Security
Group C. Natural disaster
Group D. Political
Group E. Operational
Group F. Health, safety and environment

In this article, the writer tries to provide a practical approach or guide on how to go about managing the risk events and subsequently managing your business on a day-to-day basis.

Identification and separation of risk events: Probable risk events for each group include but are not limited to the following, taking note that one country is different from the other.

For purpose of demonstrating and easy understanding, each risk event is hypothetically classified into Low (L), Moderate (M), or High (H) rating.

Group A. Personal
A (i) residence (L)
A (ii) transport (L)
A (iii) death threat (L)
A (iv) traffic accident (M)

Group B. Security
B (i) kidnapping for ransom / hostage (M)
B (ii) terrorist attack / sabotage / bomb threat (M)
B (iii) theft / burglary / crime (L)
B (iv) industrial espionage (M)
B (v) war (L)
B (vi) civil unrest / strife (M)
B (vii) sectarian violence (L)

Group C. Natural disaster
C (i) flood (L)
C (ii) major earthquake (H)
C (iii) sandstorm (L)

Group D. Political
D (i) change of power / political crisis (L)
D (ii) tension in neighboring countries (H)
D (iii) sanction (L)
D (iv) nationalization (L)
D (v) deportation / capital punishment (L)

Group E. Operational
E (i) communication disruption (L)
E (ii) unavailability of essential services (L)
E (iii) information leakage (L)
E (iv) breakdown of office equipment / utilities (L)
E (v) fraud (L)
E (vi) forced closure of office (L)
E (vii) strike (L)
E (viii) sabotage (L)
E (ix) corruption (L)
E (x) currency restriction (L)
E (xi) legal compliance (L)

Group F. Health, Safety & Environment
F (i) fire (L)
F (ii) disease / epidemic outbreak (L)
F (iii) death of staff (L)

The total number of risk events in the above examples is 33; of which 25 is classified as Low (L); 6 as Moderate (M); and 2 as High (H).

Managing and mitigating the risk events: For practical purpose, we should be focusing on managing the risk events that are rated as Moderate (M) and High (H) only – in this case, the total number is eight (8). We do not concentrate on those risk events that are rated as Low (L) because by normal standard, we can manage them. To avoid these potential risk events from turning into a crisis and then affecting the business scenario of your organization, you as the Country Head needs to work out some forms of mitigation.

Below are some of the possible measures of mitigation for each risk event classified in the Moderate (M) and High (H) ratings (eight in total).

– Major earthquake – avoid renting high-rise building for the office as well as for staff accommodation, work together with host country's relevant department to develop earthquake emergency procedure and provide regular awareness training to the staff.

– Tension in neighboring countries – compl with local acceptable standard, stay neutral, establish good networking with locals and liaise regularly with your country's High Commission / Embassy and office headquarters. Partial or full evacuation may be possible if local situation worsens.

– Traffic accident – establish a policy that staff are not allowed to drive while they are stationed overseas. If they must travel, rent a car with a local driver.

– Kidnapping for ransom / hostage – develop practical journey management for staff, learn to break from routine, move in groups, be good corporate citizen, maintain good networking with community / local authorities and maintain a low profile.

– Terrorist attack / sabotage / bomb threat – be an apolitical organization, maintain low profile and practice transparent and arms length transaction.

– Industrial espionage – do not let local records to prepare / handle reports and key documents, classify all documents, hand-carry sensitive documents and hold strategic meetings outside the office.

– Civil unrest / strife – work closely with headquarters's security, include force majeure case in major contracts and register and communicate with your High Commission / Embassy on regular basis. During actual disturbance, limit movements or stay indoors and monitor local news.

– Fire – install smoke detectors and fire extinguishers in the office and develop an "emergency response plan".

In summary, country risk is one of the components of the larger scope called risk management. To manage and mitigate the country's risk events effectively, the Country Head needs to work very closely with his or her counterpart in headquarter's security outfit.

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Source by Kamaruddin B Hassan

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