Issue link: https://industrialmanagement.epubxp.com/i/285723
march/april 2014 25 make the mistake of simply buying products and services, in some cases at uncompetitive prices, from what are often the business elite of the community. Rather, the corporations should go the extra distance to expand economic opportunities available to the larger part of the population. It comes down to the difference between "local buying," which means sourcing products and services from local vendors without regard to their place of origin, and "local content," which means buying choices made on the basis of origin of the physical products and where the value was added. There is a big difference between the two approaches, both in mitigating risks by engaging locals and in how much economic opportunity is made available locally. These two approaches also differ hugely regarding their abilities to build good relations with local communities, obtain the social license to operate and manage social and operational risk. Experience has taught a number of success factors that companies can seek to emulate when they venture into devel- oping countries. For instance, it is vital to start the mitigation part of an audit and local engagement by open dialogue with members of the local community, rather than by proposing measures that may have worked elsewhere or for your organi- zation at home. It is important to start with a blank tablet, no preconceptions of what challenges or opportunities there might be for the community to engage with the manufacturing company. The usual method of many companies has been to find out what is available in the community and then buy locally where practical. A better approach is to assess risks and engage nearby communities to find out what skills and capacities might be available there, and then find ways to build those abilities to a point where they meet the requirements of the manufacturing company. The audit might address the issue of capacity-building, gaps in infrastructure that could be met by working with local governments, or an increased military presence that would benefit not just the security of the project but of the local population. Once a good understanding of the community's capabilities and opportunities is developed, the next step is to develop plans for improving those capabilities. The goal is to build a strong network that not only benefits from the operation, but contributes to the well- being of the communities. Sometimes, companies are afraid of engaging in dialogue with locals because they don't want to raise expectations. However, this may result in the company investing millions of dollars into a blind spot where it didn't audit the soft risks and didn't develop alternatives and ways to ameliorate risk. Experience has revealed that open dialogue, managed professionally, is the short cut to mitigate risk, keep costs low and open opportu- nities to collaborate. A comprehensive risk audit that probes beneath the surface, combined with analysis of steps that can reduce that risk and engage with the local people, goes a long way toward making an international expansion a successful and profitable venture. v Open dialogue, managed professionally, is the short cut to mitigate risk. Companies looking to expand into developing countries should make sure that audits, assessments and engagement processes involve research and analysis at the site, not back in the home offce. Photo courtesy OTrade IM MarApr 2014.indd 25 3/24/14 11:02 AM