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A practical approach to 3TG risk assessment and mitigation in conflict affected and high risk areas

Harrison MitchellDirectorharrison@rcsglobal.comwww.rcsglobal.com

May 2014

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REASONS FOR ACTING AND CHALLENGES

Multiple pressures compelled our client to act• Commercial – demands from the market• Regulatory - direct local (ICGLR) and indirect internationally

reaching laws (DF1502)• Reputational – risk of association with conflict/human rights

abuse/child labour• Responsibility /moral– no responsible company wants to make

money from conflict

Upfront challenges• Identifying an approach that was rigorous, based on good

practice and appropriate to their position in the supply chain (as a trader)

• Needed to be sensitive to commercial realities but also be able to legitimately respond to risks = assign significant responsibility to the producer/local trader but also provide support and maintain oversight

• How to identify what is a high risk area?

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APPROACH

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Opted for a combination of: • IDENTIFICATION: Using Heidelberg Conflict Barometer as an impartial way to

identify high risk areas worldwide + CSFI country lists. • Commercial pressures meant that effectively DRC + 9 countries had to be

considered high risk due to DF1502 and CFSI program requirements.

• REFINEMENT: Company policy consistent with the OECD DDG that targeted conflict/HR/child labour risks + communicating expectations to suppliers

• USING EXISTING COMPANY APPROACHES: Enhanced KYC process to check background of ALL new 3TG suppliers• ONLINE SEARCH FOR SANCTIONED INDIVIDUALS/COMPANIES incl. UN• ENHANCED QUESTIONNAIRE ABOUT OFFICERS AND SHAREHOLDERS• INFO ON SUBSIDIARIES AND PARTNERS

• CERTIFICATION: Only sourcing certified material from CFSI approved programs

• INDEPENDENT ASSESSMENTS: Supplemented with own risk based annual independent assessments on a % basis, ongoing monitoring and better communication with suppliers and certification scheme

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RESULTS AND REVIEW

Initial Results - RESPONSE• Independent assessments identified a number of risks that

are being addressed and tweaking approach• Program is providing assurance to the company executive

concerned about liability now able to use DD to their commercial advantage

Summary Thoughts • Can take some time to set up, but worth being rigorous at

the beginning of the process to get full support across multiple company departments. You need people to take on new responsibilities to make this work!

• Identification of high risk areas still requires targeting of risks within those areas. Conflict Barometers is broad – best way to identify local risks is by being on the ground using local sources = independent risk assessments, information from suppliers and certification scheme

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