Managing Political Risk in the Power Sector

2013 Workforce Management Centre. All rights reserved.

THE NATURE OF PUBL IC SECTOR LEADERSHIP

Due to the stage of development in the Power Sector the influence of government on market forces, competitive advantage and business sustainability is still significant.

The very nature and structure of government and its decision making process is political. Hence, political risk management is an imperative to sustainability of any business model in the sector.


KEY POLIT ICAL R ISK AREAS

Policy Risk Regulatory Risk

Stakeholder Risk

Legislative Risk


POL ICY R ISK

One of the formidable forms of political risk is the Policy Risk. Policy Risks are comes in several forms: Policy Somersaults (For example the power reform programme of the

Obasanjo Administration was halted and overturned by the Yaradua Administration);

Policy Design Failure (When the very premise, assumptions and

principles of the government policy is faulty, It increases the risk of failure in execution);

Poor Policy Implementation (When sound government policy lacks strong and sustainable political will for its execution).


REGULATORY R ISK

Regulators implement weak enforcement and compliance management framework. Leading to

A state of total breakdown of Industry law and order

Incompetence and lack of capacity in the regulators may lead to misapplica=on and abuse of industry rules, regula=ons and guidelines

Consistent regula=on of market forces, overlapping regulatory requirements and constraining of business drivers

Over-regula=on

Mis-Regula=on

Under-Regula=on

No Regula=on

2013 Workforce Management Centre. All rights reserved. | 6

STAKEHOLDER R ISK

Where the interest of the poli=cal leaders are not aligned to the industry interests

Lack of public support and buy-in because the ci=zens cannot see tangible government value

Poli=cal and Personal Interest in the legisla=ve oversight process

Union Ac=ons and Unrest

Labour Stakeholder Interests

Parliamentary Interest

Poli=cal Leaders Interest

Mass Public Interests


LEGISLAT IVE R ISK

Laws that are in conflict with government policy

Parliamentary Oversight that reduce the effec=veness of

regulators

Laws that are outdated and behind government

policy


CORRUPT ION R ISK

CORRUPTION RISK

SUSTAINABILITY RISK

TRANSACTION RISK

Corruption Risk is a reality and

it directly impacts business

sustainability and transaction

failures


HOW TO MANAGE THE POL IT ICAL R ISK

The Risk Assessment Model for Government Influenced Sectors must include: Determination of the Critical Success Factors for the Business Model

Success; The Determination of which of these Critical Success Factors are directly

impacted by political risk; The assessment of the structure and nature of the political risks; An engagement model that includes political and policy management

(practically all key business leaders in every sector support policy formulation and implementation as a key factor for sustainability);


ENGAGEMENT MODEL FOR REDUCING POLT ICAL R ISK IN BUS INESS

DRIVE THE POLICY STREAM

Policy Development Support

Policy Implementa=on Support

DRIVE THE STAKEHOLDER

STREAM

Ac=vely Develop and Par=cipate in Sector Stakeholder Interven=ons that Drive Industry Ac=on

Serve as Pool for Deep Domain Exper=se for Poli=cal Leaders

DRIVE THE SECTOR

MINDSHARE

Lead Sector Innova=on and invite policy and poli=cal leaders to learn

Leverage Global Best Prac=ces Knowledge and drive poli=cal leadership capacity building

Documents

Managing Political Risk in the Power Sector