**Expanded Risk Assessment & Mitigation Plan**
Boaz Trading PLC’s Russian Oil Deal faces three critical risks: currency volatility, regulatory complexity, and supply chain disruptions. Below is a detailed analysis of each risk, its potential impact, and actionable mitigation strategies.
---
### **1. Currency Risk: ETB/USD Fluctuations**
**Risk**:
- Ethiopia’s ETB has depreciated **23% against the USD** since 2022. A further 15% drop could inflate import costs by **ETB 3.3M/year**.
- Example: If ETB/USD falls from 55 to 63, Boaz’s monthly oil import cost rises from ETB 1.1M to ETB 1.26M.
**Mitigation Strategies**:
| **Action** | **Detail** | **Responsibility** |
|-----------------------------------|-----------------------------------------------------------------------------|----------------------------|
| **Forward Contracts** | Hedge 70% of USD liabilities via Commercial Bank of Ethiopia (CBE) at 5% premium. Lock in ETB 58/USD for 12 months. | CFO |
| **Multi-Currency Accounts** | Hold 20% of revenue in USD to offset import payments. | Treasury Team |
| **Dynamic Pricing** | Adjust retail prices quarterly based on ETB/USD trends (e.g., +5% if ETB drops 10%). | Sales Director |
---
### **2. Regulatory Risk**
**Risk**:
- **Complex Compliance**: Ethiopia’s fuel quality standards (Euro IV) require costly third-party certifications.
- **Policy Shifts**: Sudden tariff hikes (e.g., 2022’s 10% import duty increase) or sanctions on Russian oil.
**Mitigation Strategies**:
| **Action** | **Detail** | **Responsibility** |
|-----------------------------------|-----------------------------------------------------------------------------|----------------------------|
| **Legal Partnerships** | Retain *DLA Piper Ethiopia* for license acquisition and compliance audits. | Legal Advisor |
| **Lobbying** | Join Ethiopian Chamber of Commerce to influence fuel import policies. | CEO |
| **Contingency Fund** | Allocate ETB 1.1M (5% of budget) for unexpected tariffs or fines. | CFO |
| **Pre-Compliance** | Use blockchain (WaveBL) for transparent customs documentation. | Logistics Manager |
---
### **3. Supply Chain Risk**
**Risk**:
- **Russian Supply Halt**: Sanctions or geopolitical tensions could disrupt shipments.
- **Logistics Bottlenecks**: Djibouti Port congestion or Ethio-Djibouti Railway strikes delay deliveries.
**Mitigation Strategies**:
| **Action** | **Detail** | **Responsibility** |
|-----------------------------------|-----------------------------------------------------------------------------|----------------------------|
| **Supplier Diversification** | Secure backup contracts with Kazakh suppliers (KazMunayGas) at $75/barrel. | Procurement Manager |
| **Pre-Positioned Inventory** | Store 3M liters (20% buffer) in Djibouti warehouses. | Logistics Manager |
| **Alternative Routes** | Partner with *Selam Trucking* for road transport if rail is disrupted. | COO |
| **IoT Monitoring** | Track shipments via Siemens MindSphere to reroute in real-time. | Tech Team |
---
### **Implementation Timeline**
| **Risk** | **Q1** | **Q2** | **Q3–Q4** |
|-------------------------|----------------------------------|----------------------------------|--------------------------------|
| **Currency** | Sign forward contracts with CBE | Open multi-currency accounts | Adjust pricing models |
| **Regulatory** | Hire legal advisors | Apply for import licenses | Lobby for tariff reductions |
| **Supply Chain** | Negotiate Kazakh contracts | Pre-position Djibouti inventory | Test alternative transport routes |
---
### **Alignment with Financial Projections**
- **Cost of Mitigation**: ETB 3.3M (15% of total budget) allocated to hedging, legal fees, and buffer inventory.
- **ROI Protection**: Mitigation measures safeguard the 150% ROI target by capping cost overruns at 10% (vs. 30% unmitigated).
---
**Conclusion**
Boaz’s risk strategy transforms vulnerabilities into managed variables. By locking in forex rates, diversifying suppliers, and embedding regulatory compliance, the company ensures stable margins and uninterrupted supply. This proactive approach is critical to achieving the 150% ROI while navigating Ethiopia’s volatile market.