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May 26, 2016

Just about any international business is going to face risks associated with regions experiencing conflict, political strife or war. As we will explain below, nation-state conflicts are, unfortunately, a reality that has no foreseeable end. And while trying to avoid those regions may seem like the prudent tact to take, for many companies it is not possible nor is it a good business decision. Companies have to mitigate the risks associated with conflict regions, and the key to that is information that becomes intelligence.


Why Not Avoid Conflict?

Yes, a company could simply choose not to operate in areas of conflict. But with today's global economy, that becomes harder to do. India and many regions in Asia have become international business centers that represent huge market potential. Creating value for shareholders makes it nearly mandatory that these markets be considered by companies facing strong competitors that have chosen to do business in these regions. Even if a company decides the risks are too great to merit opening an operation in a conflict region, the company's supply chain may include companies in these regions, thereby creating different kinds of risks to business continuity. If a company you rely on for critical materials/products for your business is affected by a conflict, then your company is affected by that conflict too. Travelling executives and staff also face potential risks if their work requires visiting a high-risk region. Kidnapping, which our associate Scott Spencer wrote about for Oil & Gas Monitor, is an all-too-real risk that can have an impact on a company's short and long-term business. What if your company CEO were taken while on a trip to Mexico or Bangladesh? How would your company operate until the CEO is found and safe? And how would that distraction impact your company’s business continuity and brand identity? So, while a seemingly simple solution is to just avoid conflict altogether, that’s not the reality of the modern world.  As we explain below, while some conflicts rise and fall in intensity, the world is likely to have conflict in it for the foreseeable future.


Conflicts Arise Because of Security Threats

All nations, states, cities and towns want to provide safety for their people (however they define who their people are, which we are not getting into here). The methods they use to do that vary but, the goal is to create a perimeter that defines their region separate from those surrounding it. Perhaps the world would be safer if everyone accepted the boundaries as permanent but in many regions, that is not the case. And it is the expansion/contraction of these boundaries that creates conflict. Nation states strive to have a “buffer” between their population centers and those of neighboring countries. The further the boundary is from these centers, people feel less threatened. The closer the boundary, something akin to claustrophobia can be felt by citizens. This leads to stress, which leads to friction and ultimately can result in conflict. Border wars are fought all the time for this reason. A current example is what some are calling China’s “land grab” in the South China Sea. As China, in essence, expands its border by taking over small islands, the closer the country comes to neighboring nation’s like Vietnam and the Philippines.  Those countries, sensing imminent danger, have reacted by bolstering their military including a new agreement between Vietnam and the United States through which the latter has lifted a decades-old military equipment sale embargo. This is all, or mostly, in response to China expanding its territory, thereby reducing the “buffer” of other countries. While the China situation makes headlines, these type of territorial conflicts exist throughout the world…and they come about quickly. A company may feel reasonably safe opening an operation in South America, for example, only find that a few years later, it is surrounded by strife and conflict. Companies have to gather information nearly constantly in order to stay ahead of developments, but that is only effective if that information is transformed into intelligence.


Intelligence, Not Just Information, Required

Avoiding conflict regions may seem somewhat straight forward….gather information about the region and make a decision. If there seems to be a high level of unrest, violence, corruption or other negative elements, it would seem easy to decide to avoid that region. However, other factors are in play. How long has the conflict been going on? Is it on the rise or waning? What is the root issue or issues? How is the government handling it? What is the strength of the government? What relationships does it have with stronger nations that may be likely to help? What outside factors could end, or prolong, the conflict? We recommend companies seek out locals when gathering information so that it can be vetted through sources who know the region far better than an outsider. Security experts in the region can take information and use it effectively to anticipate circumstances that could cause problems. For example, Bangladesh’s garment manufacturing industry is booming. Cheap labor is one reason and can have a major impact on the bottom line. However, with that labor comes a great deal of unrest due to low pay, harsh work conditions and the political climate. Companies relying on information analysis done by people out of the regions may fail to consider many regional factors like these while making their recommendations. That can have a long-lasting impact. Much of the time, security issues that arise in these conflict regions cannot be handled from a distance at the corporate office. It requires “boots on the ground, ” personnel who can be trusted to work with regional governments and organization to help provide safe conditions. A robust employee screening process can help a company establish strong leadership while weeding out those who could have alternative motives for employment. This leadership can then create a company culture that is consistent with that of the region’s, a synergy that will help avoid stress and strife within the operation. And lastly, it is critical that the information be current and comes from trusted sources. Again, local security experts in the region can help ensure that. Basing decisions on old information, even if just a few weeks, can have negative impacts. In volatile regions, elements…even  governments…change so quickly that it’s imperative that you have the latest intelligence upon which to make decisions. Local, trained experts can be a huge advantage.


Be a Good Neighbor

Another element we strongly recommend, especially for new companies entering a market for the first time, is a solid Corporate Responsibility program. Being a good neighbor and giving back to the community creates goodwill no matter what country you are in. Several Pinkerton clients are involved in businesses that use a considerable amount of natural resources. We have seen some of these companies build schools, assist with hospital constructions, donate resources for housing and other basic needs locals require. In turn, they are accepted into the community and have a low level of internal or external strife directed at them. While this won’t avoid all risks, it will put the company is a better position to work with locals when conflicts arise than those companies who have not focused on being a good neighbor. Whether opening a new operation, choosing a supply vendor or sending employees, conflict regions represent several unique risks. Having data-driven intelligence that leads to situational awareness can mitigate those risks and avoid large-impact issues. Finding people you have vetted and trust in the region is the key to turning information into actionable intelligence. And finally, being a good neighbor can help avoid unwanted attention to your business from those who would look to disrupt your operation.

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