Lucía López
Senior Consultant
Control Risks
View from the Top

Keeping Risk Factors In Check Vital for Reform's Success

Wed, 02/21/2018 - 19:33

Q: What are the prevalent risk factors for auction projects?

A: The main risk factor for renewable energy projects is security. Other types of risk we have identified include transparency or corruption, as well as social, political and regulatory risks. We assess these risks for our clients prior to the design of their project, based on its location. Control Risks is also working with several companies that have been awarded projects, designing their risk-mitigation strategies depending on the number, size and location of these projects.

Q: What is the best social-impact risk mitigation strategy?

A: Our transparency and investigation department conducts what we call stakeholder mapping. We always begin our involvement one step before the actual social impact assessment begins. We have on-site professionals who assess and report this information to us. We then transmit the important details to our clients. We have a wide-ranging network of contacts throughout the country, from journalists and lawyers, to industry professionals and opinion leaders. The idea behind this mapping is to have a clear picture of community power structures and their connections to municipal leaders, the local police force and the potential for corruption, among other variables.

This knowledge gives companies an advantage in knowing beforehand the context of prior incidents faced by other companies or projects, the existing vested interests and the key players companies need to consider for the success of their projects. More often than not, we conduct this analysis jointly with the third parties undertaking the social impact assessment.

Social impact assessments are facing difficulties because there are not enough people at the Ministry of Energy to manage duly processed and expedited evaluations, which causes delays in projects and, in turn, generates financial losses.

Q: How do risks differ between renewable technologies?

A: Risk factors vary greatly depending primarily on the project’s location. Technology is also an important element as both projects use different materials, with different costs. It is easier to steal a solar park’s copper cables than a wind turbine, for instance. Moreover, project phases also imply different risk levels. Planning, construction and operation have their own risk profiles. We analyze each, taking into account all the different elements, such as material and personnel logistics on and off-site. We then draft strategies to mitigate those elements. We have 36 offices around the world and always use the best practices learned outside Mexico.

Q: What role can Mexican authorities play in mitigating security risks?

A: In the end, we are looking at a social issue. You cannot solve security risks without first addressing your country’s social issues from the bottom up. The spectrum goes as far as involving agencies as diverse and separate in their tasks as the Ministry of Public Security, the Ministry of Education and the Ministry of Rural Development, as well as PEMEX, the Ministry of Energy, CNH and CRE. The National Anticorruption System also has an important part to play and we should be closely monitoring its evolution and making sure it has all the available and necessary tools at its disposal to achieve its mid to long-term goals.

Q: What Control Risks services are most in demand?

A: Prior to a project being developed, we are getting several due diligence requests from companies willing to enter a consortium with another or several other companies. When a project is underway, our Journey Management Plan (JMP) is in high demand. This plan has to do with the logistics of moving personnel from their homes to the project site and vice versa. Another popular service is our risk maps, which complement JMP because they map out the risk factors related to the zones in which project personnel live, as well as the risk factors associated with the project’s location.