Looking Ahead - Mining and the Environment: From Ore to Metal - page 854

regional terrorism; and assessing the implications of potential shifts in political strategic alli-
ances within and between governments; are all more difi cult than previously. International
development agencies (e.g. Multilateral Investment Guarantee Agency (MIGA), part of the
World Bank Group) and international business, including the mining industry, are all chal-
lenged to develop new strategies and techniques to deal with these realities.
For example, recent practice seems to have gone beyond conventional political risk
insurance to the adoption of proactive, l exible and adaptive business management regimes
that attempt to mitigate potential risk factors, or allow rapid response to risk issues before
they have an effect. This concern seems to be steering large mining investments towards
the following response mechanisms:
●

Good corporate governance (e.g. in line with macro-level agency principles and guide-
lines, such as the World Bank, OECD, IFC and EPFI) conceived to minimize risks
arising from lax operational management and insufi cient attention to multifarious
risk factors.

●

Increasingly sophisticated approaches to political risk management in response to the
above, with a shift away from traditional solutions (e.g. diversii ed portfolios, balanc-
ing risk and return, and weathering the worst with political risk insurance) to more
l exible, holistic and proactive strategies.

●

The application of more systematic and whole-of-operation approaches, i.e. Com-
prehensive Enterprise Risk strategies, which by dei nition incorporate an integrated
approach to all risk issues, responses and overall risk management programmes.

●

Support for Technical Assistance Programs (i.e. MIGA principles) and 'Turn Around
Strategies' conducted by appropriate international agencies, governments and NGOs,
to strengthen institutions, legal systems and community cohesion in regional econo-
mies facing trauma and instability, seeking thereby to contribute to a more stable operat-
ing environment.

Given the nature of its business, mining is at the forefront of these broader development
risk issues. Each mining operation needs to address its viability not only in strict com-
mercial proi tability terms, but also increasingly in terms of the potential impacts of these
external risk factors.

Transparency and Corruption

A particular challenge for international mining companies, as with other industry sectors
operating globally, is dealing with corruption in their operating environments. Corruption
is a huge drawback in doing business. While most governments have strict anti-corruption
policies in place, the difference between will and action is often profound. 'It's like you
look at a mirror and want to lose weight. But then you sit at the table and eat.' comments
Mussemeli, US Ambassador to Laos, a country that increasingly attracts mining (Forbes
Asia February 11, 2008).
The trend for more geographically dispersed mining ventures increases the likelihood
of operating in a 'corruption challenged' setting. In a rising effort to restrict or eradicate
corrupt practices associated with corrupt governments and their ofi cials, NGOs, such as
Transparency International, and international watch-dog agencies increasingly monitor
and report on company performance. This trend will lead to more stringent operational
requirements on legitimate mining companies. For example, the OECD has agreed to
international laws addressing transparency and corruption, and the United States Federal
Corruption Prevention Agency (FCPA) has developed a surprising global reach in pursuing

'It's like you look at a mirror and
want to lose weight. But then
you sit at the table and eat.'