Risk Management in Protest Scenarios
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Questions and Answers

What is a primary concern of the bank regarding the protest?

  • The community's opinion
  • The ability to meet financial obligations (correct)
  • The peacefulness of the protest
  • The duration of the protest
  • The planned protest is expected to be violent.

    False (B)

    Name one safeguard that can be implemented to support local community protestors.

    Communication about the planned peaceful nature of the protest.

    To address the bank's concerns, we can offer updated financial projections showing that the protest will not negatively affect our long-term financial _______.

    <p>health</p> Signup and view all the answers

    Which risk mitigation strategy involves hiring professionals to manage order during the protest?

    <p>Crowd management (B)</p> Signup and view all the answers

    Match each concern with its corresponding safeguard:

    <p>Reputational risks = Develop a media strategy Operational disruptions = Hire private security Legal implications = Consult with lawyers Financial health = Provide updated projections</p> Signup and view all the answers

    What is one potential legal concern mentioned regarding the protest?

    <p>Local trespassing laws.</p> Signup and view all the answers

    A contingency plan is unnecessary when organizing a protest.

    <p>False (B)</p> Signup and view all the answers

    What is the total cost for sustainability training for 100 employees?

    <p>P$325,000 (A)</p> Signup and view all the answers

    Cecilia believes that sustainability training is essential for all staff members.

    <p>True (A)</p> Signup and view all the answers

    What is the daily cost of disruption per person during the training?

    <p>P$125</p> Signup and view all the answers

    Rotomyne's total operating profit for 2024 was P$______ million.

    <p>2,741</p> Signup and view all the answers

    Which director believes that focusing on technical operations is more important than sustainability training?

    <p>Andrey (B)</p> Signup and view all the answers

    Match the following objectives with the appropriate statements regarding sustainability:

    <p>Improving company reputation = Helps gain trust with consumers and regulatory bodies Reducing financial losses = Protects against bad currency shifts Creating a sustainability-conscious culture = Engages employees to consider sustainability in daily tasks Educational investment = Supports staff understanding broader environmental goals</p> Signup and view all the answers

    Why does Cecilia believe that employees should be trained in sustainability principles?

    <p>To improve the company's overall reputation and support regulatory compliance.</p> Signup and view all the answers

    Andrey supports the idea of sustainability training as necessary for the company's operations.

    <p>False (B)</p> Signup and view all the answers

    What is one of the primary concerns of the construction firm regarding potential protests?

    <p>Delays in the construction project (C)</p> Signup and view all the answers

    Rotomyne should avoid providing basic needs like water and restrooms for protestors.

    <p>False (B)</p> Signup and view all the answers

    What should onsite security personnel be trained to handle?

    <p>Protests calmly and non-violently</p> Signup and view all the answers

    To avoid damage during protests, planning ______ routes for workers can help.

    <p>access</p> Signup and view all the answers

    Match the following safeguards with their purpose:

    <p>Clear boundaries = Ensure protestor safety and avoid interference Onsite security conduct = De-escalate tense situations Law enforcement conduct = Handle protests peacefully and respectfully First aid and medical support = Provide care for any injuries</p> Signup and view all the answers

    What legal action can be taken if protestors trespass?

    <p>Swift response to remove them (C)</p> Signup and view all the answers

    Establishing clear boundaries for protestors is optional and does not affect their safety.

    <p>False (B)</p> Signup and view all the answers

    What should be provided to protestors to prevent dehydration?

    <p>Water bottles</p> Signup and view all the answers

    A _______ security company can be hired to bolster security during protests.

    <p>private</p> Signup and view all the answers

    Match the type of risk associated with protests to its description:

    <p>Delays = Postponement of construction activities Bad publicity = Negative media coverage affecting reputation Injury to protestors = Legal and ethical concerns for safety Equipment tampering = Possibility of damage to construction tools</p> Signup and view all the answers

    What is an important factor to maintain communication with protestors?

    <p>Empathy and openness (B)</p> Signup and view all the answers

    Construction firms are only concerned about financial impacts due to protests.

    <p>False (B)</p> Signup and view all the answers

    What is a crucial planning step for the safety of construction workers during protests?

    <p>Planning access points and routes</p> Signup and view all the answers

    It's important that law enforcement use ______ language when addressing protestors.

    <p>non-confrontational</p> Signup and view all the answers

    What is the projected Net Present Value (NPV) for the DLE plant investment?

    <p>P$20 million (A)</p> Signup and view all the answers

    Securing an early license is advantageous for the company.

    <p>True (A)</p> Signup and view all the answers

    What should be created to manage DLE development and testing?

    <p>A dedicated team</p> Signup and view all the answers

    The process of assessing the DLE method's feasibility will include laboratory tests, pilot trials, and __________ studies.

    <p>scalability</p> Signup and view all the answers

    Match the following funding sources with their descriptions:

    <p>Cash = Immediate funds available Debt = Borrowed money that must be repaid Equity = Funds raised by selling shares Grants = Non-repayable funds typically for specific projects</p> Signup and view all the answers

    What is one approach to managing relationships with the government?

    <p>Conduct regular discussions with relevant departments (C)</p> Signup and view all the answers

    DLE technology requires more water compared to traditional brine extraction.

    <p>False (B)</p> Signup and view all the answers

    How often should the board evaluation process occur according to the guidelines?

    <p>At least once a year (B)</p> Signup and view all the answers

    A majority of the board should be made up of independent non-executive directors.

    <p>True (A)</p> Signup and view all the answers

    What key factor contributed to protests against the brine mining plan?

    <p>Environmental concerns</p> Signup and view all the answers

    What is the primary responsibility of the Audit Committee?

    <p>Overseeing the integrity of financial reporting and internal controls.</p> Signup and view all the answers

    The potential of the DLE plant is to generate income via licensing, taxation, and __________ activities.

    <p>export</p> Signup and view all the answers

    Match the following activities with their purposes:

    <p>Laboratory tests = Assess material properties Pilot trials = Test scale production Scalability studies = Evaluate expansion capabilities Financial analysis = Determine funding requirements</p> Signup and view all the answers

    The __________ Committee is responsible for deciding on executive pay and performance bonuses.

    <p>Remuneration</p> Signup and view all the answers

    Match the committees with their primary responsibilities:

    <p>Audit Committee = Financial oversight and reporting Remuneration Committee = Setting executive pay Nomination Committee = Selecting directors and succession planning</p> Signup and view all the answers

    What is the CFO's role in the DLE project?

    <p>Calculate and present the revised NPV (C)</p> Signup and view all the answers

    The DLE project team will work independently of technical and operational experts.

    <p>False (B)</p> Signup and view all the answers

    What advantage does a local JV partner provide in terms of political instability?

    <p>Better understanding of local laws and politics (C)</p> Signup and view all the answers

    Independent auditors should have a relationship with the audit committee to ensure robust reporting.

    <p>True (A)</p> Signup and view all the answers

    What should be highlighted to gain local support for the DLE plant?

    <p>Economic benefits</p> Signup and view all the answers

    What should be considered when establishing the governance framework for the JV?

    <p>Board diversity, transparency, and shareholder engagement.</p> Signup and view all the answers

    Building a good __________ with local communities can help mitigate resistance to the DLE project.

    <p>rapport</p> Signup and view all the answers

    To manage risks in an unstable environment, local partners can help __________ the risks.

    <p>share</p> Signup and view all the answers

    Which of the following best describes the role of the Nomination Committee?

    <p>Recommend and select directors (D)</p> Signup and view all the answers

    A local partner typically has limited connections with government officials.

    <p>False (B)</p> Signup and view all the answers

    Why is it important for the Nomination Committee to have balanced representation?

    <p>To reduce potential conflicts of interest between partners.</p> Signup and view all the answers

    A local partner may provide access to __________ options that foreign companies cannot utilize.

    <p>funding</p> Signup and view all the answers

    Match the following roles with their responsibilities:

    <p>Audit Committee = Integrity of financial reporting Remuneration Committee = Determining executive pay Nomination Committee = Board member selection</p> Signup and view all the answers

    What does WACC stand for in financial analysis?

    <p>Weighted Average Cost of Capital (A)</p> Signup and view all the answers

    Equity financing does not dilute the control of existing shareholders.

    <p>False (B)</p> Signup and view all the answers

    How long does it typically take for traditional brine mining to produce lithium?

    <p>12-18 months (C)</p> Signup and view all the answers

    What financial risk is associated with debt financing?

    <p>Default risk</p> Signup and view all the answers

    The opportunity cost of capital reflects the ______ that could have been earned from an alternative investment.

    <p>profit</p> Signup and view all the answers

    DLE technology reduces land use significantly compared to traditional brine mining.

    <p>True (A)</p> Signup and view all the answers

    Match the types of financing with their characteristics.

    <p>Equity = Sharing profits with shareholders Debt = Requires fixed interest payments Preference Shares = Paid first in profit distribution Ordinary Shares = Typically offers voting rights</p> Signup and view all the answers

    What is the estimated NPV of the DLE project?

    <p>P$20 million</p> Signup and view all the answers

    Which statement about gearing ratio is true?

    <p>Equity financing reduces the gearing ratio. (A)</p> Signup and view all the answers

    The investment cost for the DLE plant is _____ than that for traditional brine mining.

    <p>double</p> Signup and view all the answers

    Match the following stakeholders with their interests:

    <p>Local Communities = Concerned about water use and carbon emissions Shareholders = Interested in revenue and profits Customers = Concerned with price and supply reliability Government = Focused on environmental regulations</p> Signup and view all the answers

    What is one of the strategic goals the government aims to achieve?

    <p>Achieving net-zero carbon emissions (B)</p> Signup and view all the answers

    Using debt financing can lead to loss of control due to covenants.

    <p>True (A)</p> Signup and view all the answers

    What is the significance of Mendelow's Stakeholder Matrix regarding the project?

    <p>It suggests local communities have high power and interest (D)</p> Signup and view all the answers

    What is one tax benefit of debt financing?

    <p>Interest payments are tax-deductible</p> Signup and view all the answers

    Long-term benefits of DLE technology include only lithium extraction.

    <p>False (B)</p> Signup and view all the answers

    What is one recommended way to build a skilled local workforce?

    <p>Setting up local training programs.</p> Signup and view all the answers

    Raising funds through ______ financing often takes longer than applying for a loan.

    <p>equity</p> Signup and view all the answers

    The DLE plant project is expected to operate with carbon emissions.

    <p>False (B)</p> Signup and view all the answers

    What could be a limitation of issuing bonds for financing?

    <p>It requires scrutiny from credit agencies. (B)</p> Signup and view all the answers

    NEDs assist in ensuring that the interests of all ______ are represented.

    <p>stakeholders</p> Signup and view all the answers

    What are the main challenges facing the adoption of DLE technology?

    <p>Teething problems and scaling to commercial level</p> Signup and view all the answers

    A secured loan uses company assets as collateral.

    <p>True (A)</p> Signup and view all the answers

    The DLE plant will use _____ liters of water compared to the 500,000 liters needed for brine mining.

    <p>3,000</p> Signup and view all the answers

    Match the following roles with their responsibilities in a joint venture:

    <p>NEDs = Monitor performance Executive Directors = Handle daily operations</p> Signup and view all the answers

    How can companies improve their average cost of capital?

    <p>By obtaining a good interest rate on debt</p> Signup and view all the answers

    Why is the independence of Non-Executive Directors important?

    <p>They ensure impartial oversight and decision-making. (D)</p> Signup and view all the answers

    Match the following benefits of DLE extraction with their descriptions:

    <p>Faster extraction = Takes only 3 months to extract lithium Lower water use = Uses only 3,000 liters of water Reduced land requirement = Only 1 square meter needed Carbon-neutral operation = Uses geothermal electricity generation</p> Signup and view all the answers

    Which of the following stakeholders is considered to have low power but high interest?

    <p>Customers (B)</p> Signup and view all the answers

    A DLE plant is expected to ______ profits and reduce environmental impact.

    <p>increase</p> Signup and view all the answers

    The DLE process must be connected to government goals to appear as a competitor.

    <p>False (B)</p> Signup and view all the answers

    What is a potential outcome of increasing debt financing?

    <p>Increased financial risk (C)</p> Signup and view all the answers

    Before proceeding with the DLE plant project, thorough pilot-scale testing is recommended.

    <p>True (A)</p> Signup and view all the answers

    What should the board set in place to resolve conflicts in a 50:50 JV?

    <p>A clear conflict resolution plan.</p> Signup and view all the answers

    The UK code emphasizes that at least half of the board should be independent ______.

    <p>non-executive directors</p> Signup and view all the answers

    What key factor helps DLE technology to be environmentally friendly?

    <p>Geothermal electricity generation</p> Signup and view all the answers

    The DLE plant aligns with Rotomyne’s strategic goals of being a leader in _____ and green energy solutions.

    <p>sustainable mining</p> Signup and view all the answers

    Which of the following is a key responsibility of Non-Executive Directors in a JV?

    <p>Provide strategic direction (C)</p> Signup and view all the answers

    Rotomyne's DLE proposal should not include geothermal power to align with renewable efforts.

    <p>False (B)</p> Signup and view all the answers

    What can Rotomyne offer to enhance its relationship with the government?

    <p>Working with local universities or research institutions.</p> Signup and view all the answers

    The DLE technology is particularly important due to its ______ nature.

    <p>new</p> Signup and view all the answers

    Match the following components of good governance with their descriptions:

    <p>Accountability = Responsibility to stakeholders Transparency = Open communication Integrity = Moral principles Responsibility = Duties to meet regulations</p> Signup and view all the answers

    Flashcards

    Bank Safeguard: Peaceful Protest

    Ensuring a peaceful and non-violent protest by communicating its purpose and methods with the bank and other stakeholders.

    Bank Safeguard: Risk Mitigation

    Addressing the bank's concerns about potential reputational risks, operational disruptions, and legal implications by providing detailed plans to mitigate them.

    Bank Safeguard: Financial Projections

    Providing updated financial projections to show the bank that the protest will not negatively impact the company's long-term financial health or ability to repay loans.

    Bank Safeguard: Media Strategy

    Developing a contingency plan for potential negative media coverage to proactively address concerns and limit the impact of the protest.

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    Safeguard: Security Measures

    Hiring security guards to ensure order and security during the protests, thereby mitigating potential risks of violence and vandalism.

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    Safeguard: Law Enforcement Coordination

    Coordinating with local law enforcement to prevent violence or vandalism during the protests, thereby minimizing risks and disruptions.

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    Safeguard: Maintaining Operations

    Ensuring that the protest activities do not obstruct key areas, such as business operations, thereby minimizing disruptions and maintaining functionality.

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    Safeguard: Legal Awareness

    Consulting with lawyers to understand local trespassing laws, which can help mitigate potential legal liabilities during protests.

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    Trespassing

    A legal term that refers to the unlawful entry onto another person's property without their permission.

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    Legal paperwork in case of trespassing

    A document drafted by a lawyer that outlines the legal procedures and actions to be taken in case of trespassing or other legal issues.

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    Penalty clauses in a construction contract

    A clause in a contract that specifies the financial penalties for delays caused by unforeseen circumstances, such as protests.

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    Impact assessment for construction delays

    A detailed analysis of how a protest could impact specific phases of construction, identifying potential delays or disruptions.

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    Secure pathway for construction workers

    A safe passage created for construction workers and equipment to bypass a protest zone.

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    Insurance against protest-related damages

    Insurance that protects Rotomyne from financial loss due to damages or injuries caused by protestors.

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    Hiring private security during protests

    The act of hiring private security personnel to ensure the safety of workers and equipment during protests.

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    Managing protests with empathy and openness

    A strategy for managing protests that emphasizes respectful communication, transparency, and de-escalation tactics.

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    Right to peaceful protest

    The right of individuals to express their opinions and beliefs through peaceful demonstrations, as protected by the law in many democratic societies.

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    Clear boundaries for protestors

    Marked areas within a construction site or protest zone that are off-limits to protestors.

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    Training for security personnel during protests

    Training security personnel to manage protests effectively, emphasizing de-escalation and non-violent conflict resolution.

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    Briefing law enforcement on protest management

    Instructions given to law enforcement officers to ensure peaceful and respectful handling of protests.

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    First aid and medical support during protests

    Providing protestors with access to first aid facilities and medical support in case of emergencies during a protest.

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    Access to water and restrooms for protestors

    Providing basic amenities such as water and restrooms to protestors to ensure their comfort and safety.

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    Potential for heat-related emergencies during protests

    A scenario involving potential dehydration and heat exhaustion among protestors due to long exposure to high temperatures.

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    What role do Non-executive Directors play in JV governance?

    Non-executive directors (NEDs) are independent members of the board who provide oversight, guidance, and accountability, ensuring the JV's interests are balanced and protected. They ensure the board's decisions are impartial and unbiased, crucial for the 50:50 JV structure where both partners have equal say.

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    What are the key responsibilities of Non-executive Directors in a JV?

    NEDs bring independent judgment to strategic planning, risk management, performance monitoring, and ensuring stakeholder interest representation. This includes balancing the needs of investors, employees, local communities, and the government, promoting transparency and accountability.

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    What is the importance of independence for Non-executive Directors in a JV?

    The UK code suggests at least half of the board (excluding the chairman) should be independent NEDs. This ensures unbiased decision-making and prevents potential conflicts of interest which can arise in a 50:50 JV where both partners have equal power.

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    What is the process for ensuring Non-executive Director independence in a JV?

    A formal process to ensure NEDs have no material relationship with either JV partner and are free from any conflicts of interest that could compromise their objectivity.

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    What is the role of a Non-executive Director regarding the JV's daily operations?

    NEDs should not be involved in the daily management of the JV, allowing them to act independently and impartially.

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    How can conflict resolution be implemented in a 50:50 JV to prevent decision-making deadlock?

    A conflict resolution plan should be put in place in the JV to prevent decision-making deadlock and ensure a fair outcome for both partners. This plan might include methods like arbitration or mediation by a third party, especially for critical decisions related to resource extraction, technology, and environmental management.

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    Opportunity Cost of Capital

    The potential profit a company could have earned by investing the same funds in a different project with similar risk.

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    Weighted Average Cost of Capital (WACC)

    A calculation that considers the cost of both equity and debt financing, providing a comprehensive view of a company's overall cost of capital.

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    Default Risk

    The risk that a company will be unable to make its debt payments, leading to financial distress or even bankruptcy.

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    Gearing Ratio

    The ratio of a company's debt to its equity, indicating its financial leverage.

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    Equity Finance

    Sharing ownership and control of a company with shareholders, typically through the issuance of new shares.

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    Debt Finance

    Borrowing money from lenders, with the promise of repaying the loan plus interest.

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    Preference Shares

    A type of equity financing where investors receive preferential treatment, typically receiving fixed dividend payments before ordinary shareholders.

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    Covenants

    Financial agreements that impose restrictions or obligations on borrowers, often included in loan contracts.

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    Secured Loan

    Securing a loan with specific assets that can be seized by the lender if the borrower defaults.

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    Unsecured Bonds

    Bonds issued by a company that are not secured by any specific assets.

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    Redeemable Bonds

    Bonds that have a maturity date after which they are redeemed by the issuer.

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    Irredeemable Bonds

    Bonds that do not have a maturity date and are not redeemed by the issuer.

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    Direct Lithium Extraction (DLE)

    A method of extracting lithium from brine using membranes or other technologies, which often has a lower environmental impact than traditional mining.

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    SAF Framework

    The Johnson and Scholes Suitability, Acceptability, Feasibility (SAF) framework is a model used to assess the viability of a project or opportunity.

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    Suitability, Acceptability, Feasibility (SAF)

    A method of evaluating a project based on three criteria: suitability (does it make sense for the company?), acceptability (is it acceptable to stakeholders?) and feasibility (is it doable?).

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    Sustainability

    A company philosophy or set of practices that aims to minimize environmental impact while maximizing social and economic well-being.

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    Business Flexibility

    The ability to change business plans and practices to respond to uncertain or unpredictable events, like currency fluctuations.

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    Sustainability Training

    Training designed to raise awareness and educate employees on sustainability principles and practices.

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    Cost-Benefit Analysis

    The financial impact of a decision (e.g., training) on a company's overall profitability.

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    Operating Profit

    The value of a company's profits after all expenses are deducted.

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    Reputation Risk

    The impact of negative publicity or public perception on a company's reputation and brand.

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    Regulatory Compliance

    Ensuring that company operations comply with environmental regulations and laws.

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    Employee Engagement

    The process of engaging employees in a company's long-term goals and initiatives, promoting a shared sense of purpose.

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    Net Present Value (NPV)

    The value of a project calculated by discounting all future cash flows to their present value, considering the cost of capital.

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    First-mover advantage

    The advantage of being the first company to enter a new market or introduce a new product or technology, giving you a competitive edge.

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    Operational risk (new technology)

    The potential risk that a new technology may face, such as uncertainties in its performance or scalability, or regulatory issues.

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    Risk management plan

    A plan to identify and analyze potential risks associated with a project, and develop strategies to mitigate those risks.

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    Feasibility study

    A study conducted to assess the feasibility of a project, taking into account technical, financial and economic factors.

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    Action plan

    A detailed plan that outlines the specific steps and activities needed to implement a project, including timelines and resources.

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    Pilot trial

    A process of testing and verifying a new technology or process in a controlled environment to assess its effectiveness and potential for scaling up.

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    Scalability

    The ability to expand the production or operation of a technology to a larger scale.

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    License application

    A formal request to a government agency for permission to undertake a specific activity.

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    Local engagement

    Understanding and responding to the needs and concerns of local communities, to build trust and foster cooperation.

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    Lobbying

    The practice of influencing government officials or policymakers to advocate for specific interests.

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    Funding approach

    The process of acquiring funds for a project, often through a combination of cash, debt, and equity.

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    Government relations

    The process of understanding the interests and goals of stakeholders, including local communities and government agencies, to build strong and lasting relationships.

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    Pilot project

    A small-scale version of a project or technology, designed to test its feasibility and gather data before full-scale implementation.

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    Traditional Brine Mining

    A method of mining lithium from brine that involves evaporating water from the brine to concentrate the lithium. This process takes a long time - 12 to 18 months.

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    Time-to-Market

    The speed at which a new product or process can be brought to market. This is often crucial in industries with high demand and fast-changing technologies.

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    Ansoff's Matrix

    A framework for evaluating the risk of different business strategies based on the introduction of new products or markets.

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    Acceptability

    The process of assessing whether a new project or initiative will be accepted by key stakeholders, such as local communities, government, customers, and investors.

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    Mendelow's Stakeholder Matrix

    A tool that helps organizations identify and prioritize key stakeholders based on their power (ability to influence decisions) and interest (concern about the project).

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    Financial Soundness

    The ability of a project to generate a positive net present value (NPV), meaning that the present value of future cash inflows exceeds the initial investment cost.

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    Feasibility

    The process of analyzing whether a project is technically and practically feasible, taking into account factors such as cost, resources, and technology.

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    Teething Problems

    The initial challenges or problems that can occur with a new technology or process, often due to unfamiliarity, design flaws, or operational issues.

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    Cash Balance

    The financial resources a company has available to fund projects or operations. It determines their ability to invest in new initiatives.

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    Geothermal Electricity Generation

    The use of geothermal energy, which is heat from the Earth's core, to generate electricity. It offers a sustainable and carbon-free source of power.

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    Carbon Neutral

    A project or initiative that aims to minimize or eliminate greenhouse gas emissions, contributing to environmental sustainability.

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    Pilot-Scale Testing

    The process of conducting small-scale tests or trials to evaluate a new technology or process before full-scale implementation.

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    Board Evaluation

    Regular assessments of how well the board and its committees are performing to ensure effectiveness and alignment with governance principles.

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    Independent Non-Executive Directors (NEDs)

    Independent directors with expertise in relevant fields like mining, technology, and sustainability, who provide impartial oversight.

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    Board Diversity

    Ensuring at least half of the board members are independent NEDs, bringing diverse expertise and perspectives.

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    Audit Committee

    A committee responsible for overseeing the integrity of financial reporting, internal controls, risk management, and the audit process.

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    Remuneration Committee

    A committee responsible for determining executive pay and performance bonuses, ensuring they align with long-term JV goals.

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    Nomination Committee

    A committee responsible for recommending and selecting directors for the JV board, managing succession planning, and identifying suitable candidates.

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    Political Risks

    Understanding and mitigating risks arising from political instability, changes in government, and policy shifts.

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    Local JV Partner

    A partner with deep local knowledge, connections, and experience navigating the political and legal landscape, mitigating risks associated with political change.

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    Political Connections

    Leveraging a local partner's relationships with government officials, regulators, and local communities to navigate political changes smoothly.

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    Political Adaptation

    A local partner's ability to adapt to changes in political stability, policies, tax laws, and regulations.

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    License Security

    A local partner's ability to maintain access to crucial assets like licenses, even during political instability.

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    Risk Sharing

    Sharing the risks associated with operating in a politically unstable environment, leveraging the local partner's resilience and experience.

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    Funding Access

    A local partner's potential access to funding sources like government aid or loans, which may be inaccessible to foreign companies.

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    Currency Risk Management

    Managing exchange rate fluctuations and currency risks, leveraging the local partner's understanding of the local market.

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    Joint Venture Advantage

    Partnering with a local company to mitigate political risks and navigate the complexities of doing business in a politically unstable environment.

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    Study Notes

    Safeguards for Upcoming Protests

    • Bank Safeguards:
      • Communicate protest details (duration, impact) to the bank.
      • Highlight peaceful intentions, mitigate reputational risks (security guards, crisis management).
      • Present updated financial projections demonstrating no long-term impact or loan default risk.
      • Develop a risk mitigation strategy with contingencies (security, law enforcement).
      • Consult lawyers to address trespassing, draft legal procedures.
    • Construction Firm Safeguards:
      • Ensure emphasis on communication, collaboration, and risk mitigation.
      • Address potential project delays & reputational damage in contracts (penalty clauses).
      • Map out alternate construction zones unaffected by protests.
      • Designate access points, routes, security measures to avoid protest zone.
      • Obtain insurance to indemnify construction firm against potential damage.
      • Employ security guards and coordinate with law enforcement to maintain order.
      • Prevent tampering with equipment (extra security during night). -Outline actions for handling trespassing, disruption (no protestors injury)
    • Protestor Safeguards:
      • Acknowledge peaceful protest rights.
      • Define clear boundaries, restricted areas on site.
      • Train security personnel to handle protests peacefully
      • Brief law enforcement on peaceful protest handling
      • Provide first aid and medical support (access to water, medication).
      • Ensure public safety and minimize potential bad publicity.

    Debt vs. Equity Finance for Brine Mine Project

    • Cost of Capital:
      • Debt finance has predictable interest payments.
      • Equity finance shares profits with shareholders, dilutes control.
      • Opportunity cost of capital: potential return forgone by choosing a different investment.
      • Weighted Average Cost of Capital (WACC) considers both equity and debt cost.
      • Lowering WACC: increase debt (up to optimal level), debt generally cheaper than equity.
    • Project Risk Profile:
      • Equity finance: profits shared with shareholders, control reduced.
      • Debt finance: default risk, fixed payments regardless of performance.
      • Debt finance increases gearing ratio, equity finance decreases gearing ratio.
      • Gearing impact calculated given P$50 million debt/equity increases/decreases.
    • Control and Ownership:
      • Equity: shareholders' shares profits and control.
      • Debt: maintains full ownership and control (potential restrictions/covenants).
      • Diluting control: providing opportunity for existing shareholders to buy more shares.
      • Debt restrictions from covenants (limitations on actions, rules).
    • Debt funding considerations:
      • Using assets as collateral. Current borrowings already potentially secured.
      • Figure out which assets can be used as additional security.
    • Recommendation:
      • Debt financing preferred (bank loan).
      • Gearing ratio increase is small.
      • Secured bank loan using assets (property, plant, equipment).
      • Tax deductions for loan interest.
      • Easier to secure lower interest from bank loan.
      • Avoid bonds for lower value, more scrutiny on bonds.
      • Short-term bank loan preferred, not long-term bonds.

    DLE Plant Opportunity Analysis

    • Suitability:
      • DLE efficiency: faster lithium extraction (3 months vs 12-18 months).
      • Sustainability: reduced water use, carbon emissions (geothermal power).
      • Decreased land use, faster time-to-market.
      • Medium risk category (new technology with associated challenges and investment).
    • Acceptability:
      • Local community: DLE reduces water use, addresses concerns.
      • Shareholders: higher revenue, profits, and market standing.
      • Government: aligns with environmental goals, gain support from local communities.
      • Customers: faster supply, price competitive.
    • Feasibility:
      • Emerging technology: scaling up to commercial level crucial, potential teething problems.
      • Investment cost double traditional brine mining (P$100 million).
      • Sufficient cash (P$857 million) or loan option (increase gearing).
      • Optimize energy consumption of extraction (geothermal energy).
      • Environmental benefits depend on geothermal energy (carbon-neutral if achieved).
    • Recommendation:
      • Proceed with the DLE project cautiously (managing risks).
      • Pilot-scale testing, de-risking technology, regulatory approvals.
      • Minimizing environmental impact, strategic partnerships.
    • Justification:
      • Environmental advantages (water, land use, sustainability).
      • Cost savings potential (geothermal energy).
      • Alignment with strategy (sustainability leadership, EV demand, government relations).
      • High financial viability (NPV of P$20 million).

    Managing the Relationship with the Drylandian Government

    • Government Interests:
      • Economic (licensing fees, taxes, exports).
      • Environmental (reducing water usage, addressing local concerns).
      • Political (election support from local communities).
    • Local Engagement:
      • Public gatherings to educate on DLE advantages and environmental benefits.
      • Involve local leaders and stakeholders, highlighting economic benefits.
      • Present water conservation plans (recycling, partnerships).
    • Strengthening Government Ties:
      • Connect projects with government campaign promises.
      • Small, pilot project proposal, demonstrating commitment and easing concerns.
      • Highlight alignment with national goals (renewable energy, net-zero emissions).
      • Benefit from long-term considerations (technology improvements, global market position).
    • Political Sensitivities:
      • Build relationships with diverse political groups, not just the current government.

    JV Corporate Governance Requirements

    • Non-Executive Directors (NEDs):
      • Independent oversight (strategy, risk, performance).
      • Risk management (new technology, regulations, operations).
      • Strategic direction (long-term sustainability, shareholder value).
      • Stakeholder interest (investors, employees, communities, regulators).
      • Performance monitoring (aligning with goals and objectives).
    • NED Independence:
      • No material relationship with JV partners (no conflicts of interest).
      • Focus on independent oversight, not daily management.
    • Conflict Resolution:
      • Clear plan (mediation, arbitration) to resolve disputes between JV partners.
    • Governance Practices Review:
      • Board evaluation at least annually (assessing NED performance, governance practices).
    • More Considerations:
      • NED expertise (mining, technology, geothermal, environment).
      • International experience.
      • Board diversity, transparency, shareholder engagement.
    • Committees:
      • Audit, Nomination, Remuneration committees.
      • NEDs appointed chairpersons for impartial oversight.

    Local JV Company and Political Risks

    • Political Risks:
      • Local partner insight into country's rules, politics, legal challenges.
      • Understanding political shifts, policies, and regulations.
    • DLE License:
      • Access to networks with government officials, regulators, and communities.
    • Risk Sharing:
      • Local partner mitigates risks associated with political instability.
    • Funding:
      • Access to local funding options, government aid, or loans.
    • Exchange Rate & Currency Risks:
      • Local partner expertise in managing currency fluctuations.

    Sustainability Training

    • Issue:
      • Production director concerns about training cost and disruption (HR director favoring training).
    • Downside:
      • Training costs estimated at P$325,000 (training and disruption).
    • Advantages:
      • Alignment with company mission (clean, healthy, sustainable world).
      • Enhanced reputation, regulatory compliance.
      • Engaging employees in long-term sustainability goals.
    • Recommendation:
      • Sustainability training justifiable (training costs relatively small).
      • Maintaining positive company image crucial for license.

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    Description

    This quiz explores various aspects of risk management related to protests, including concerns of banks, legal implications, and the importance of training. Participants will also examine safeguards that can support community protestors and the financial considerations involved. Test your knowledge on strategies and costs associated with organizing protests effectively.

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