Expansions, mergers, construction projects: any sizable investment or move for a company involves, by definition, sizable risks. Could the investment be lost? Could something go wrong, and how? What areas must one mitigate in order to protect the venture, the workers involved and the wider world while creating and preserving value? In days gone by, people consulted soothsayers and fortune tellers before taking on risk: these days, risk management has been turned into a science, and Oboni Riskope Associates Inc. (Riskope) has built upon that science to create a leading system that, it feels, outstrips the common – approaches and methods used by many of its rivals.
We’ve come a long way from turning to the stars for answers on future events. Now, teams of researchers risk engineers and data scientists, aided by the right software, can perform predictive evaluations of the risks of any venture, major or small, thus allowing companies to focus in on the right areas and perform tactical and strategic planning accordingly. It’s a process that not only helps a company to protect its reputation and assets, but also its people and the public who may be affected by their operations. Riskope is one such company – its customers range from its origins in mining right through to insurance and even the armed forces. Amongst these companies and groups are impressive clients such as Fortune 500 names, government agencies and international institutions.
We spoke with Dr Franco Oboni, company founder and president, to learn more about what Riskope does: “At Riskope, we identify, quantify and prioritize enterprise risks (ERM) related to life, property, income or reputation. This includes a comprehensive review of natural and human hazards and threats, both internal and external to the organization. This helps executives and boards to make informed decisions that preserve enterprise value.”
Whilst the company serves customers worldwide, it does so from its HQ in Vancouver, Canada and another hub in Turin, Italy. From these two locations, much of the work is done remotely, using resources such as publicly available satellite observation, digitised archival data and other publicly available resources, major or minor, to learn as much as they can before their first need to travel. This examination of every piece of information they can access allows Riskope to know its case study in depth and do much of its work long before setting foot on site, which has led to a dramatic rise in business for the company over the pandemic period in particular.
So, how does Riskope do what it does? We asked Franco to talk us through it: “Our services are based on a ‘universal evaluation platform’ called ORE (Optimum Risk Estimates). The pun is intended, because ORE was originally developed specifically for the mining industry. It is our flagship methodology that, now, we apply to every single industry we touch, from forestry to mining to transportation. We have even done risk assessments for the armed forces in a country in Europe using ORE. The principles of risk are the same, whatever you do: if you make a jam in your kitchen, you can do a risk assessment of your jam production using ORE, and if you have a nuclear power plant that you’re refurbishing – such as a $15 billion project we worked on a few years ago – you can apply ORE to that too.”
ORE is a methodology that Riskope developed itself. “We are at the forefront of the development, because people are still using ‘good old methodologies’ that we know don’t work. They’re insufficient in today’s social environment.” As the company thought out and created its methodology, it was continually expanded and pushed as it encountered new challenges and requirements from clients: “Once in a while, a client comes out and says ‘Hey guys, can you do this?’, and that’s how we evolve. It’s because most of the work we’re doing has never been done before, and that suits us. It’s fascinating.” The method has been some 20 years in the making, though it largely solidified into what it is today after the first ten.
But what exactly does Riskope do, and how does it do it? The concept of probability and prediction feels like a dark art, but Franco says it’s all down the data. “We apply strict grey matter to what is proposed to us, and we are not ‘one number’ people – we always express our results in ranges. The more uncertainties there are, the wider the range will be. The accuracy of the predictions has been tested a number of times, but this isn’t to say that we’re infallible – the very fact that we get to express our results in probabilities means that there is a probability it will go a different way. The point is to define the relative risks within a portfolio, and to be able to advice your clients accordingly.”
“For example, we may be asked to size up strategic stocks in such a way that if there is a catastrophe anywhere, the company will be able to react in a reasonable way without being stuck or mobilising too much capital. We have done that for suppliers, mining companies and other natural resources. In another area, we have had a few Fortune 500 companies asking us to perform risk assessments on mergers and acquisitions – sometimes even unbeknownst of the future acquired!”
“So, how do we do that? We tap into whatever publicly available information there is. In the case of natural resources and construction, we also use publicly available satellite observation. It’s a very broad approach that we have, because contrary to what many people do, we have 360 degrees view on risk. We really bring everything together convergently on the same platform, so the client knows what their reputational risks may be, what their crisis potential may be, what the potential for public upheaval is ahead of what the client may do and so forth. We believe that if you use grey matter and good methodology, you can do a lot, and we do a lot. Before the Lehman Brother crash occurred, we were asked, “How long will the financial crisis last, how deep will it go?” We ended up publishing our predictions, and it was kind of mesmerising how correct they were.”
Gathering the data is the real legwork of what Riskope does. In the case of yet-to-be-announced mergers and other hush-hush topics, this challenge becomes especially hard, as it must be done without the investigation drawing any attention to itself. Similarly, Riskope is sometimes called in to assess risk after an incident has happened, which can make information difficult to access for a wide range of reasons. “Risk assessment after major accidents is something I don’t like to do, because I think we should do our work before the accidents occur. Additionally, doing so within the framework of litigation is a very difficult and challenging situation, because they limit what we can talk about to anybody.” Another complex and hush-hush job was, of course, the one Riskope took on for one of the European Armed Forces – a several-year-long study into the risks of cyber impact.
Whatever area the company is hired to look into, the biggest challenge, Franco told us, is in gathering all the data, because what Riskope needs for its ‘360 view’ always goes further than the client predicts and gathers. “Generally, there are huge gaps in the data. It doesn’t matter the industry – the gaps in the information are incredibly deep and wide.” Where the gaps are, the overlooked risks are most likely to be, which makes plugging these gaps all the more essential.
“When you look at what some companies do around the world, they seem to pursue projects wearing blindfolds. They become numb to what is around them. In many cases, our action comes long before the risk needs to be evaluated. We say simply, ‘Look, the situation is such that if this event or that event would happen, the court of the people would kill you.’ It’s a court where there’s no appeal.” Then again, this attitude has changed significantly in recent years, and Franco has witnessed it. Where once there was willing ignorance, companies are increasingly conscious of their responsibilities to their workers and the people and environment around them, as well as conscious about their public reputation. This change has been notable in the mining industry, which has started taking an active interest in the impact of its operations and its responsibilities to those under its care. “Our business has been doubling year over year from the mining industry for the past few years – it’s booming.” Say what you like about social media, but in some regards, it sounds as though it is literally saving lives:
“I’m confident that things are changing. With the internet and social media, the mining industry has realised that the environment, social and governance (ESG) are becoming absolutely necessary, and they cannot afford to have big accidents any more. To have an accident, now, is truly a corporate catastrophe. So, there are several reasons compelling mining companies to better their practices and get a grip on what they’re doing.”
One area that’s particularly close to Franco’s heart is the quality of dams built by mining companies and other such heavy industries: “Due to a number of vividly discussed cases of dam failures around the world in the last five years, there has been a new standard that has come up. It’s called the Global Industry Standard on Tailings Management, mainly promoted by the International Council of Mining and Metal, aiming at raising the quality of new and existing tailings storage facilities and transparency. The Standard is extremely important, and although I have criticised it in writing numerous times, because it has some significant gaps that should be filled, the effort has been extremely valid and I’m glad it happened.”
As a result of these changes, the dam projects that Riskope are called to assess are looking better and better; the only issue is, the old dams still exist, even if they are out of commission, and realistically, a company cannot afford to repair and update every one it its portfolio. “That’s when making comparative risk assessments is absolutely vital. You want to allot mitigative investments where you might optimize the benefit, not only for the mining company but for the public and in general.”
It is reducing risk, not simply calculating and profiting from it, that is at the core of what motivates Franco. This has been the case since before he founded Riskope: his career began as a structural and geotechnical engineer in the Alps, Switzerland – an area with common and dangerous landslides. In those times, no real work had been done into evaluating the probability of such landslides in a risk management capacity, and so, when he had the chance to do a PhD, this is what he looked into. Today, many steps in his career later, it is still safe practices and protection from danger that motivates him. As well as using Riskope’s knowledge to run his business, Franco has co-authored a series of books on risk management in different industries, and contributes teaching to MBAs so that those studying business can learn not only how to run businesses, but how to do so safely.
“It’s very important for us. We put a great value in the fact that what we are doing, in the end, should help not only our clients but society in general. It’s very important for us to do some good around us.” If all companies could say the same, we’d operate in a safer world.