Hello! My name is Quinn Cottrell and I am proud to present the USU Aggie team. Like I said, my name is Quinn Cottrell, I am a United States Citizen and I have an undergraduate degree in economics and am currently an MBA candidate.
Daniel Godoy is from Brazil, he has spent his entire working career in finance. He was CFO of a large multinational corporation that managed billions of dollars, and is also currently an MBA candidate.
Clint Kunz is from the United States. He has an undergraduate degree in international relations and is currently an MBA candidate.
Based upon the information given in the risk room, we determined the lowest risk countries to be Australia, Chile and Botswana. This was determined based upon a combined score of both the economic and political scores in 2015.
We then took these scores and weighted to highlight the nuances of the mining industry. As seen in this table, we weighted the political and social stability factors on a scale from 1-2. This means that the areas we felt were of greater importance to the mining industry, were weighted 100% greater than the factors that didn’t affect the mining industry as much.
We weighted the economic and business environment on a scale from 1.2-2.2. This also means that the factors that more directly affect the mining industry are affected 100% greater than the non-factors. Furthermore, after research, we decided to weight all economic and business factors by 20 percent.
If you now take those same rankings that were given us and adjust them based upon the weighted riskiness levels the countries ranking changes. Australia risk becomes lower than the United States, and Rwanda beats out Botswana for the 4th best nation.
Another factor that we wanted to take into account was a nations variance from year to year. We noticed that over the 20 year video, some nations moved around significantly, and others remained relatively constant in their levels of political stability and business environment. All other things being equal, we felt that countries that were more stable would be less risky. As seen in these above diagrams, Rwanda from 2010-2015 had significant levels of movement.
We decided to take these levels of variance into account to help determine which nations would be the least risky.
As seen from the diagram, when a nations level of variance is added to the weighted rankings, the rankings change. The US becomes less risky than Australia, and Botswana beats out Rwanda.
Based upon the weighted factors for the mining industry and variance of each risk level the top nations that should be considered are Australia, Chile and Botswana. Some of the main risks that face Australia and Chile is a shared dependence upon China. As seen in the graph, both Chile and Australia score in the 4th quartile for China dependence.
Australia also faces challenges relating to government enforced burdens.
Botswana faces the risk of state failure and rule of law issues relative to other nations.
In order to mitigate these main risks that face these nations we have developed a few different recommendations.
First, Hematite Capital can search out distressed firms that export and import to a variety of countries. Rather than remaining dependent on China.
Government regulation: When it comes to the burden of government, Hematite could seek out firms in areas where the burden of government regulation is lower on the local level
State failure and rule of laws risks: In the case of Botswana, Hematite could consider looking for mining companies in geographically safe areas and firms that have private security forces
If state failure and rule of law risks are mitigated enough, Rwanda could be considered in the top three countries again
Future Due Diligence should consider the risk of natural disasters, disease outbreaks and control, and cultural issues that might occur in each country.
- Natural Disasters – Chile is ranked 154th (Earthquakes)
- Disease Outbreaks – Botswana is ranked 169th by WHO in terms of health system performance
- Cultural Issues – Rwanda has a history of major ethnic issues, some countries may be against US imperialism
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