Just as different firms and funds have varying appetites for risk in Africa, so not all firms are equally exposed to various types of risk. This is particularly true of reputational risk.
This short post reflects on how most sources of reputational risk in Africa will probably continue to come not from mere presence in a country -- even one that itself has a poor reputation -- but from the traditional sources of reputational risk such as supply chain (labour relations, community or environmental impact, or quality control) incidents.
When it comes to the significance of reputation (and so the importance of its degree of vulnerability), so much depends on the sector, the nationality of the firm (Western firms are more vulnerable, generally speaking) and the extent to which a firm has a transnational footprint where things like consistency and contagion-perception can matter.
Thus foreign banks interested in Angola face different reputational risks to foreign beermakers; while often arbitrary distinctions arise (especially where the business and political elite are small and entwined), they can be relevant: investing in palm oil in Equatorial Guinea does not, on the face of it, raise the same lay person's response as investing in oil there.
Why write about this now? Last week saw Uhuru Kenyatta sworn-in as Kenya's new president following the March elections. Given that for now he still faces trial before the International Criminal Court (and given that Sudan's president, another ICC indictee, was initially to attend his inauguration), much of last week's media coverage turned on what the ICC dimension in Kenya means for Western governments' dilemma -- torn between (on one hand) not undermining the ICC and all it stands for, and (on the other hand) their interest in engaging with a duly-elected, not-convicted-of-anything leader of a major and strategic African partner state.
It is also a state with good investment and economic growth potential. I've not seen any accompanying questions about the appropriateness of investment dealings, by private firms, with a government led by an ICC indictee -- corporate diplomacy or foreign policy, if you will.
In my view there is not really any issue in the Kenya case: it is very hard indeed to see that any firm will (or in principle should) suffer reputational damage simply from maintaining or initiating such links now; the risks, if any, lie far more in particular relationships and actions that firms might take, than any broad-brush 'complicity-by-general-association-or-presence' risk. By contrast the latter risk -- whether fairly or not, and partly because Washington maintains some sanctions -- probably obtains in relation to a country like Sudan.
Yet the private sector inhabits a public world where its decisions and actions will impact the public interest -- and vice-versa. Thinking in terms of distinct public and private spheres is limiting even just in a narrow corporate operational sense: this is not to say that the state (on behalf of the public) has a legitimate interest in all private dealings. Instead for companies at least it means being conscious that a particular firm's actions can (often quite randomly or arbitrarily) become seen as illustrative of big political debates -- suddenly, hashtags appear linking one's business in the public mind with narratives of crimes against humanity; likewise, seemingly small issues and events can become seen as linked to much wider stories.
Hence -- for those firms with reputational exposure -- the links between attempts to respect and protect the public interest, and what the public will likely take an interest in.
Jo
ps - see the first April post on public trust in firms -- a key element of reputation; see also, for instance, this post on corporate engagement in 'pariah' states -- here.
pps - in the last post related to this topic (here) I referred to a talk on 'corporate foreign policy' that my colleague Dr Stephanie Hare gave for our firm at the Chicago Council on Global Affairs. Here is a link to a podcast of her talk.
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