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The issue: Our client was considering investing in a new mine project in Macedonia and wanted a better understanding of the political and business environment in the country before making its final decision. The client was particularly concerned about political risks in Macedonia, including the threats posed by nationalization, corruption, and political violence.
Our solution: We provided a presentation on the political and business environment in the country, including the main drivers of political and security risks in the coming years. The presentation included an outline of the key political risks in the country as they relate to mining companies, with a focus on how such risks could affect the client’s mining investment. We followed up with an in-depth report on key threats that could affect their mining project, including risks of nationalization and corruption, as well as potential ethnic conflict and interethnic violence.
The issue: The client wanted to produce better sales forecasts for nine product lines across five regions around the world. Because its sales had been affected by volatile market conditions in the past, the planning team wanted to get more clarity on how potential macro events could affect its top line.
Our solution: We created an Excel-based model that uses our macro and industry forecasts to generate sales projections for each of the nine product lines. We developed the model by correlating past product sales with key economic drivers. The model allows the planning team to input alternative macro assumptions and comparisons with the central forecasts. We also provide a detailed forecast report that analyzes macro and sectorial conditions, and shows the impact of potential macro events and emerging risks.
The issue: Our client won a bid for two oil blocs in Myanmar, a high-risk market. Before beginning exploration, it wished to understand corruption at both the state and provincial level, and the potential impact on its business operations. This ranged from the impact of corruption on day-to-day activities, such as setting up offices and bank accounts, and renewing business licenses in the nation’s capital, through the effect on exploration and production in a remote and undeveloped region.
Our solution: We provided the client with a detailed corruption risk assessment. The report analyzed the regulatory and commercial environment, assessed the client’s exposure to corruption risk in relation to its anti-bribery and corruption policies, and identified gaps and potential incompatibilities between a zero tolerance approach and the reality of operating in Myanmar. We then provided the client with recommendations for possible risk mitigation strategies, and offered practical solutions derived from our experience in helping other oil and gas players there. We advised correctly that the strength of its brand and size of investment would give the company considerable opportunities for shaping governance standards and influencing behaviors.
The issue: Following the financial crisis, governments around the world enacted financial regulations that require banks to test the robustness of their balance sheets against severe economic stresses. Regulators typically provide varying degrees of detail for their scenarios, and banks need to fill the gaps to ensure they have the required economic drivers to stress test their balance sheets. To comply with these new regulations, a major international bank asked us to perform stress-testing for them for the Eurozone Banking Union (EBA), Prudential Regulation Authority (PRA) in the UK, the Hong Kong Monetary Authority (HKMA), and the Prudential Regulation Authority in Australia (APRA). These scenarios form the core of the enterprise examination in the bank’s enhanced stress testing framework.
Our solution: To conduct these stress tests we used the Oxford Economic Model, which covers 46 countries, including the US, EU, China, and the other main Asian economies. The Model provided a rigorous and consistent structure for analysis and forecasting, allowing the implications of alternative global scenarios and policy developments to be readily analyzed at both the macro and sectoral level. In particular, it proved to be a consistent tool for determining the implications of international economic events in individual countries. These included, for example, changes in financial market conditions globally and regionally; changes in the oil price; and changes in the pace of economic growth in the rest of the world. In addition to providing the impact of regulatory stress tests on a wide range of variables that are critical for stress testing the bank’s balance sheets, we provided commentary on the key drivers and transmission mechanisms.