Chavez deadline highlights the importance of considering political risks within the context of business continuity

Earlier this week Venezuelan president, Hugo Chavez, was granted the authority to rule by decree for 18 months by the country’s Congress. Mr. Chavez wasted no time in using his new powers, almost immediately setting a deadline of May 1st for multinational oil companies operating in Venezuela’s Orinoco Belt to surrender their assets. Companies which fail to meet the deadline face having their oil fields seized.

Other industries may also be threatened with similar actions in future as Mr. Chavez’s follows through on his commitment to state nationalization of critical infrastructure and industries.

It is possible that international pressure, especially from international banks, may result in the oil companies operating in Venezuela managing to hold on to their oil fields; but should the nationalization take place it will be a concern that other countries may follow the Venezuelan lead.

For the majority of the oil companies; the loss of their Venezuelan output will result in a substantial dent in profits; but not to a business continuity threatening level. However if the nationalization activities extend to other areas, as predicted, smaller companies with investments in the country may find that the losses incurred are enough to threaten the survival of their business.

Political risk has tended to be seen as beyond the scope of business continuity planning, however events in Venezuela may cause some to wonder whether a rethink is necessary.

•Date: 2nd Feb 2007 • Region: S.America/World •Type: Article •Topic: BC general
Rate this article or make a comment - click here