Tuesday, October 16, 2012

Global Leadership: Security in an unstable world

With so many companies operating on a global scale, increasingly leaders are confronted with security challenges that were previously unimaginable.  Steve Coll's book outlines some of the challenges for a company like ExxonMobil.

One problem is the theft of products.  In at least one country of which I'm aware, the scale of the problem is enormous.  In the not too distant past, the theft from just one company in one country was somewhere between 26 and 30 million barrels of oil per year with a loss of over a billion dollars in revenue.  This is clearly not the work of villagers driving spikes in pipelines and siphoning oil into 55 gallon drums.  It involves a fairly sophisticated technical capability to get the oil and supply an distribution network to move it and sell it.  Often the revenue this generates is used to fund insurgents with interests against the host nation.

Another security challenge is harm to ones employees.  Kidnapping for ransom is the most common experience.  Actual harm to expatriate workers is relatively rare.  More often they are held until a ransom is paid.  Coll claims the going rate for an expat in oil rich countries is a ransom of $250,000 which is routinely paid.  That said, the "they won't harm an expat" belief hasn't always been correct and companies must treat all these cases seriously.  Coll lays out in some detail different security challenges ExxonMobil faces in Indonesia, Chad, Equatorial Guinea and Nigeria.

This often leads to security arrangements with the police and military forces of the host nation.  Companies necessarily must respect the sovereign rights of states within which they operate and that includes security.  A complicating factor is that the same security forces that provide protection to commercial activities are the same forces accused,  or in some cases known, human rights abusers.  It's difficult to reconcile the dilemma of being protected by security forces who are also being used to oppress ordinary citizens.  In Exxon's case they chose to join the Voluntary Principles on Security and Human Rights Regime.  This regime commits corporate signatories to communicate their human rights standards to local security forces; authorize the use of force around their properties only in proportion to the threats and to vet local militias serving them for known rights abusers.

So what does all this mean to a leader?  First of all it means that you need to be choiceful about where you choose to operate.  Although many leaders are skilled and experienced in making business-case driven choices, security concerns and ability to implement the Voluntary Principles have to be part of that decision process.  Second, leaders must be aware that a lucrative business proposition can cloud their judgment and cause them to dismiss or minimize security concerns.  Third, leaders must be aware that circumstances can change quickly.  Coups and revolutions as well as peaceful political transitions can change the basis of key decisions and trusted relationships.

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