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For ENI, business risk, geography, and political risk all come together

Tom Fox | July 10, 2016

What is business risk? How do you measure and how can you manage it? The Man from FCPA thought about those and other questions when reading a recent piece in the Financial Time’s Big Read about the Italian energy company ENI and its refocus on doing business in Africa. Libya has always been an ENI stronghold, given the historic ties between the two countries and now it is no different. Indeed, Libya constitutes up to 20 percent of the company’s production, so any stability in that country would be welcome news for ENI and its shareholders.

Yet more than simply upbeat news from Libya, its renewed African focus has put some investors ill at ease. Obviously the political risk in the continent remains high. Yet the company is committing to large projects in Egpyt, Nigeria, Congo and Mozambique. What are some of the risks that occur with such a strategy? First is the political instability risk, as many of these countries have been recently convulsed in turmoil.

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