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Tuesday, November 07, 2006
India most secure biz destination
Both political and security risks in India remain low, while concerns over political stability and terrorism in neighbouring countries are much higher, global business risk consultancy Control Risks said in a report published on Tuesday.
Control Risks' India representative Jake Stratton said RiskMap 2007 indicates geographically difficult operating environment for business around the world, but companies can successfully tackle formidable country risk issues by developing country-sensitive risk management strategies.
"Indian multinationals are directing a great deal of attention to these issues as they expand their operations into volatile markets like Latin America and Africa," he added.
According to Control Risks' RiskMap 2007 report, 96 out of 198 countries surveyed (49 per cent) have been ranked as being medium, high or extreme for political risk -- indicating, at best, businesses in these countries may face disruption and, at worst, the state is actively hostile to foreign business.
In terms of security risks for businesses worldwide, 78 out of the 198 countries surveyed (40 per cent) have been ranked as being medium, high or extreme for security risk -- which means that, at best, there is a reasonable possibility of security problems affecting companies and, at worst, business of any sort may be completely untenable.
The general direction of India's economic policy would remain positive, although coalition politics could compromise the government's ability to deliver some of the liberalisation measures demanded by investors, it said.
Notwithstanding the risks posed by terrorist attacks by Kashmir-based groups and spread of this threat to the IT hubs in the southern part of India, the 'low' security risk in most part of the country affirms a generally secure platform for business, Control Risks said.
However, the study sees serious risks to business in other parts of the region. Political and sectarian tensions in Pakistan in the run-up to national and presidential elections in late 2007 see the country ranked as medium political risk, while many areas of the country have been assigned a high security risk rating. It also foresees a gradual slide back to civil war in Sri Lanka with a consequent risk of LTTE bomb attacks in Colombo, and no end to Bangladesh's violent struggle between the two main political parties may result in a large cost to the companies operating there. A major concern for many investors is infrastructure issues in key business hubs like Mumbai and Bangalore.
The BPO industry is becoming a victim of its own rapid growth with some of the fundamental country-specific gains being eroded by lack lustre growth in urban infrastructure.
Control Risks said the key issues that could de-stabilise business in 2007 across the world are more likely to come from actual risks rather than headline threats.
"Terrorism will continue to dominate the headlines but should be treated as a risk like any other, requiring detailed contingency planning. Energy concerns, always an important issue for business, will prove to be critical," it added.
The exponential growth of transnational crime in areas like intellectual property and counterfeiting are now widely recognised as crucial security issues. And the possibility of a worldwide pandemic continues to be a real concern for business across the world, it noted.
Rural Dose to MBAs
Catch an MBA undergrad in his best suit, spouting Wharton’s wisdom with a Gandhi cap. The powers-that be have just decreed that our management gurus of tomorrow could do with a strong dose of agrarian realities. So this year onwards, management undergrads will have to pack their bags and head for a rural project, a must-do if their business school is to get a state ranking.
Till recently, management students in the state could pass off gardening as farming and blood donation as community activity. The neglect and disinterest was apparent, given that the state doesn’t have an Amul milk revolution or an IT driven rural marketing initiative like e-chaupal to boast of. But Maharashtra’s directorate of technical education has now decided that the “educated manpower and natural resources’ at its disposal need to be used in remote, undeveloped areas. “We need excellent managerial skills to exploit our strengths,’’ says Dr N B Pasalkar, director of technical education of Maharashtra.
He even sees it as a two-way learning process. “For students,” Pasalkar says, “it’s important to know the ground realities of our villages, which may be different than what the books teach”. So his department has started rating B schools and a good rural project forms an important criterion in the ratings. The move has been appreciated even in corporate circles , given the existing gaps in knowledge about the needs and desires of various segments of the rural population.
It makes pre-eminent sense to get first-hand experience in the village,’’ says Kishore Chaukar, managing director of Tata Industries. A post-graduate from IIM (Ahmedabad), Chaukar has a fair bit of experience working in a rural set-up . He worked with Bharatiya Agro Industries Foundation for 10 years with late Gandhian Manibhai Desai, who strove tirelessly for the betterment of rural India. Chaukar handled cattle upgrading programmes and water management schemes among many other projects.
Stressing that management knowledge can be put to effective use in villages Chaukar says, “Students can learn how to make use of rural manpower , their skills and capabilities and learn ways to improve quality of living in villages.’’ “Take the example of Fabindia,’’ avers IIT-IIM graduate Gaurav Deepak of investment banking firm Avendus Advisors. “An American importer identifies the diverse crafts and traditions of India and opens a successful retail chain in India.’’ Deepak says working in a village would increase our understanding of the diversity of this country. “Lot of undergrads will be decision-makers at some point. And that’s when their knowledge will count. If not anything it will make one humble and a better person,’’ he adds.
Pasalkar is acutely aware that though Maharashtra is home to the commercial capital of the country, the state hasn’t been able to set too many examples in taking ventures or entrepreneurship to villages. In comparison, Madhya Pradesh is seeing humble farmers confidently marketing their soya produce (one lakh tonnes) without the presence of pesky middlemen due to a digital revolution called echaupal which started in 2000. This initiative by Indian Tobacco Corporation with the collaboration of ICICI is already benefiting over 3.5 million farmers.
Gujarat’s Amul or White Revolution does not require a lengthy introduction. The village milk producers’ co-operative is part of national folklore-a voluntary association of milk producers in Anand who wish to market their milk collectively. While Pasalkar hopes that in the long run his decision could throw up a Kurien or John Bissell (Fabindia), there are some obvious difficulties. Managing partner of EMA Partners, a global executive research firm, warns that students would take it as a compulsory project that has to be got over with.
Like in the case of doctors’ rural internship. “These days we have dual working couples. Taking a career in village may not suit the other half who has a prime job in the city. Lack of job opportunities in town is the main reason for reluctance in moving out of the city.’’ A start, however, has been made. A shirt-tie-dhoti combination will still make for an unusual B-school uniform.
L N Mittal - Steel King
Lakshmi Mittal on Monday took over as chief executive of the Arcelor Mittal, replacing Roland Junck in a surprise move. Mr Junck, the former Arcelor chief, was appointed CEO at the time the deal was finalised, in what is widely considered to be a part of the bargain to limit political opposition to the long-drawn out takeover battle.
The move is being seen in the UK as backtracking on a ‘pledge made at the time of the merger’, as Mittal Steel had then said it would keep an Arcelor executive in the top job.
However, Joseph Kinsch, chairman of Arcelor Mittal, announced that Mr Mittal was now taking on the role of CEO in addition to “clarify the leadership of the company. It had become clear over the past months that the interests of the company were not best served by the previous structure.” Mr Junck will remain a member of the group management board and will act as an special adviser to Mr Mittal.
A London-based analyst who declined to be named said it was no great surprise. “Pretty much everyone knew who the leader of the group was. The chief has not really changed. But why let investors, especially French investors wait until now? It was always going to be the case,” he said. Mittal shares dipped 0.7% to e32.78 after the news.
So far, it has been generally understood that Aditya Mittal, the company’s chief financial officer, was being groomed to take over in about two years. It is also expected that when Mr Kinsch retires next year, LN Mittal will move into the chairman’s job and relinquish the post of CEO. “I believe these revised arrangements are in the best interest of all stakeholders,” Mr Kinsch said. He added that the integration of the two groups was progressing well. In a statement, the company announced that the board of Arcelor Mittal had unanimously approved Mr Mittal as the new CEO with immediate effect, and that Mr Mittal will continue his role as the president of the board of directors. To enable this, the board has also approved an amendment to the memorandum of understanding, allowing Mr Mittal to take up an executive position while remaining on the board of directors. Mr Mittal has requested that this amendment be presented to shareholder vote at the company’s next AGM, in which vote the Mittal family will not participate. Mr Mittal said that the “key focus for the Group Management Board and me is to successfully integrate the two companies and deliver the merger synergies and benefits. I am very pleased that Roland will continue to be a part of this effort as a member of the GMB and as a special adviser to me.”
The GMB will now comprise Lakshmi N Mittal, Aditya Mittal, Roland Junck, Michel Wurth, Gonzalo Urquijo and Malay Mukherjee. Mr Davinder Chugh will retain his operational functions, reporting directly to the chief executive officer.
Roland Junck, a long-term Arcelor executive, said, “I believe this clarification of the leadership arrangements of Arcelor Mittal is in the best interests of all parties. I remain convinced of the great potential of Arcelor Mittal and as a continuing member of the GMB, I will be lending my full support to both Mr Mittal and the company.”
The world’s largest steelmaker, which is three times larger than its nearest rival, also reported third-quarter figures, showing pro-forma core profit slightly ahead of expectations, and confirmed its guidance for the full year.
The group’s sales for the three months to September were of $22.1bn. It announced a pro forma EBITDA of $4.4bn, up 24% over Q2 ’06. “I am pleased to report a strong performance in Q3 2006 for Arcelor Mittal, with EBITDA above guidance. The anticipated low seasonal volume was offset by a strong rise in steel prices,” said the company’s CFO, Mr Aditya Mittal.
