What is risk?

Reports indicate the world’s largest cement manufacturer, LafargeHolcim is under investigation relating to its former operations in Syria. An internal investigation found “managers of Lafarge’s Syrian plant had paid armed groups to allow employees to move to and from the factory so that it could continue operating.” This led to the resignation of the Chief Executive Officer (CEO), Eric Olsen. French authorities now have him under investigation, examining if he and other senior executives knew about the payments and, more ominously, “whether the company may have bought oil linked to the Islamic State.”

When the Syrian Civil War broke out every other western company eventually left their facilities in the country. However, the company kept its plant open. Alderman reported, “In 2012, Lafarge’s local managers started using intermediaries to pay the armed groups to ease the passage of employees and suppliers, the company’s internal inquiry found. Lafarge has said it saw little choice if it wanted to keep its operations running, and sought to avoid direct contact with the groups to minimize potential risks that could arise with the Syrian government or other militants.”

The company said in a statement in April 2017, “Very simply, chaos reigned and it was the task of local management to ensure that the intermediaries did whatever was necessary to secure its supply chain and the free movement of its employees.” That seems like an admission of payments to either criminal gangs or terrorist organizations in violation of at least US sanctions laws.

While this situation may seem like an extreme one, with the company possibly making payments to ISIS; the same situation may be faced by US companies on a much smaller scale, much closer to home. In Mexico, many swaths of the country are under the sway of large criminal enterprises. The Zetas, Colima Cartel, Guadalajara Cartel, Juárez Cartel, Sinaloa Cartel, Sonora Cartel and Tijuana Cartel are to name only a few. What if a US company makes a payment so that its trucks can transport through their territory? Does such payment violate any US laws on making payments to those entities on sanctioned lists? What does the geographic area you conduct business in mean for your company’s risk?