Good community relations lessen security risks

In the aftermath of the Sept. 11, 2001, terrorist attacks on the US, press attention has focused on the international terrorist threat. That is understandable, but local grievances and security concerns are often as important, if not more so, for international oil and gas operations.

Typically problems arise when local people feel that they do not benefit from petroleum operations, even though the oil and gas is found in their area, and they bear the brunt of any environmental damage. Complaints of this nature are commonplace in countries such as Nigeria, Sudan, and Pakistan, where resentment is leading to severe problems.

Before beginning operations, it is essential to understand the local power structure and to identify who benefits from petroleum development, who loses out-and who is likely to react violently against it. Risk assessment is not a one-time effort; companies need to monitor developments-and anticipate grievances-as long as they continue to operate in a country.

Good works

Ultimately, host governments are responsible for the equitable distribution of resources such as petroleum income. However, companies may win friends-and defuse potential opposition-if they are seen as making their own direct contributions to local development. Such contributions may include the construction of roads and medical facilities or offering scholarships to local students.

Contributions to local projects work well, provided that they answer a genuine need and are properly managed. But corporate charity is not a panacea. In one example from Colombia, the company found itself facing worse problems than when it started such an approach. Managers tried to preempt extortion demands from rural guerrillas by building a school for local villagers. The idea was that the villagers would be pleased with the school and would use their influence with the guerrillas to dissuade them from attacking the company. The plan backfired because the company found itself dealing with a construction firm that was, in effect, a front for the guerrillas. The construction firm's representatives took the money, and the school still has not been built. No one dares complain. Whatever its intentions, the company's donation has turned into another extortion payment and may well lead to further demands.

Tragedy

Another company had a team of geologists working in a remote area of a developing country. The region had a history of low-level conflict, but the national government had told the company that it would take care of relations with tribal leaders. So company management left that to the national government.

It was a mistake.

The team was ambushed, and several people were killed.

This story is based on a particular incident, but it has many parallels, and the lessons it teaches are universal. Company security is not just a matter of physical protection. It also involves diplomacy, both with the national government and with local communities. Failure to address social issues can lead to physical casualties, damage to reputation-and ultimately to project failure.

In the last example, when the company conducted an inquiry to find out what had happened, it found out that the local tribal leader had been angered by what he saw as an insulting breach of protocol. Other companies operating in the region had always consulted him; this one hadn't. The country manager was concentrating on geological problems, not social ones.

That company has learned a valuable, albeit costly, lesson. It is now scrupulously careful to keep local communities informed and to consider the impact that future production operations may have on them. The fact that it is still operating in a difficult environment counts as a success, but one that comes too late for the victims of the ambush. The challenge for other companies is to apply the same lessons without going through the same painful experience.

Security forces

It is essential to work closely with government security forces, and to set down clear rules. In countries such as Myanmar, Colombia, Indonesia, and Nigeria, companies have been accused of complicity with security forces committing human rights abuses in their area of operations. In some cases, the companies' association with government security forces may actually increase the threat from opposition groups because they are seen as part of the "enemy."

The problem is that companies may have limited influence on military commanders reporting to a sovereign government. They are nonetheless expected to use what influence they possess to promote high standards.

The Voluntary Principles on Security and Human Rights issued in December 2000 serve as a guide to best practice. (See: www.state.gov/www/ global/human_rights/001220_fsdrl_principles.html). The principles followed a year-long dialogue process involving the US and UK governments together with seven companies in the extractive sectors and nine nongovernmental organizations.

In addition to emphasizing the importance of risk assessment, the principles lay down guidelines for dealing with government and private security forces. For example, companies' security arrangements with government forces should be transparent, and they should promote observance of law enforcement principles such as those reflected in the United Nations Code of Conduct for Law Enforcement Officials and the UN Basic Principles on the Use of Force and Firearms.

Think 'inside the box'

Along with all these issues, it is essential to consider your company's culture and management practices. Most Western companies now have codes proclaiming their commitment to high environmental standards, stakeholder dialogue, and human rights. But principles count for little if they are not implemented effectively.

Many security problems are ultimately failures of management. For example, middle managers often receive mixed messages: "Your promotion depends on your ability to meet production targets. And, by the way, you ought to keep an eye on community relations." Managers are unlikely to give real commitment to corporate responsibility if it is seen as a minor add-on to their main job, or worse still, as a mere public relations exercise.

Experience shows that sound community relationships are not simply an add-on to security or any other management function; they are critical to the success of the entire operation.

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