Risk Assessment in African Oil & Gas
A client faced an oil and gas opportunity in a volatile region of Africa. ICG was asked to evaluate the risks associated with remaining in-country and investing further versus an immediate withdrawal and sale of assets. In a continent acknowledged as having a dearth of information, ICG succeeded in an historical examination of numerous issues from 1950 through today including:
We concluded that the political and operational risks were extremely low compared to the potentially high return and advised the client to retain the assets. The client did so and later was able to sell the assets at an extremely satisfactory profit.
- Internal and external conflict
- Attitudes towards foreign investment, legal, and taxes
- Trends for operators
- Onshore versus offshore
- Exploration and production capital expenditures
- Expertise, technology, capital, and operational risks
- Partnership with US and non-US majors
- Independent operators versus the majors
- Foreign operators not bound by FCPA, offsetting practices
- Expropriation, graft, sanctions, signing bonuses, and dispute resolution
- Ownership turnover or changes in percentage ownership
- Renegotiation of tariffs, taxes, and fees
- Access to new concessions
RISK ANALYSIS AND BUSINESS INTELLIGENCE
ICG performs all-source information collection and analysis on a continuous or task basis for our clients. Consistent with our intelligence background of strategic and tactical analysis, we place business issues in a national intelligence framework that takes the widest possible scope, employs rigorous analysis, points out trends and emerging threats, and requires rapid action.
Our research draws on data streams from international and domestic sources; press and news services; technology and market assessments; interviews; press releases; corporate information, patents and filings; international peacekeeping, lending, and aid agencies; analyses from regional and technical experts, and our own experience. We excel in discovering patterns among, and causal effects between, otherwise unrelated news items in order to forecast an inherent risk.
Countering a competitors well thought-out plan requires collection of relevant information, understanding of its meaning, and a properly targeted response. The ability to develop a clear competitive strategy is especially difficult when the amount of information is overwhelming, and where intuitions can be tragically misleading. A principal challenge is the fusion of different pieces of information from all sources.
- Turnkey risk analysis and assessment
- Real time electronic sweep data in electronic or paper form
- Real time data stream access by client staff
Data fusion is the seamless integration of data from disparate sources. The combination of two or more sources of complementary data is greater than the sum of the parts. This is especially true when maps, imagery, and textual data need to be overlaid and annotated. Data must be integrated across data sources, collection sources, and geographic boundaries, and then blended thematically in order to be readily understood.
Data fusion serves four distinct functions:
Successful on-demand data fusion reduces the clients efforts and allows them to become active risk managers rather than paper collectors.
- Communicating internally to ensure that distinct entities may share data quickly and effectively.
- Filtering to distill the most relevant data without losing the context of the original source material.
- Merging the many available data streams into actionable information.
- Identifying the different possible scenarios and their probabilities given all available background information
In a defensive state, success is contingent on the ability to detect a threat in time and to check a competitors plan. In an offensive state, success relies on the ability to mask the intent of an aggressive action, to plan and implement effectively and to defer discovery until its too late for the competitor to deploy countermeasures. (Success in risk management can often mean that nothing happens and that only failures become visible.)
Unfortunately this is often an unattainable goal. Current technology places a heavy workload on intelligence workers, requiring them to sift piles of information explore new sources, to qualify the data, and to understand the contextual nature of the data in time and space before making a decision. Researchers repeatedly round up the usual suspects, and a limited number of data sources, at that, and make a judgment based upon an extension of their environment instead of what is happening at the target environment.
Data and research limitations may be explained as simply a lack of attention, money, time, and people. These limitations place a premium on careful prioritization of the research steps -- collection, filtering, and analysis. Data origin is often separated at birth from excerpted documents and stored in different locations as separate data sets, even when it might have originated from the same source. Data fusion rejoins or fuses these data elements.
In both defense and offense, we help clients to identify and manage existing threats, find the weakest points of their own systems and those of their competitors, and to prioritize the strengthening of their systems while weakening those of their competitors.
Areas that ICG addresses in its Risk Analysis and Business Intelligence practice are:
Corporate: Strategy, reputation, key staff, core competencies, products and services, operations, productivity, pricing and costs, financials, M&A, marketing/sales, suppliers and distribution channels, alliances, joint ventures, R&D, patents, intellectual property, customer service, deregulation, training, and use of information technology
Conflict: Low intensity conflict (LIC), interstate conflict, ethnic strife, terrorism, natural resource contests and conflict diamond effects, insurgency, corruption, transnational crime, migration, illegal immigration, and famine
Socio-cultural: Customs, demographics, languages, religions, health and life expectancies, literacy, social institutions, status symbols, life-style, beliefs, and acceptance of foreigners
Economic: Economic development, Commerce, trade, GNP trends, currency fluctuations and convertibility, commodity prices, per capita income, climate, water rights, monetary and fiscal policies, employment and wage levels, nature of competition, maritime access, and aid commitments
Technological: Technologies and technology transfer, energy availability/cost, natural resource availability, industrial and transportation infrastructure, workforce skills, patent-trademark protection, and information infrastructure
Political-Legal: Form and stability of government, political ideology, foreign policies, defense posture, border disputes, tax laws, legal system, attitude toward foreign enterprises, regulations on foreign ownership of assets, trade regulations, protectionist sentiment, strength of opposition groups, terrorist activities, and treaty obligations