### **Expanded Risk Assessment & Mitigation Plan**
Boaz Trading PLC faces multiple risks in executing its Russian Oil Deal. Below is a detailed analysis of each risk, its potential impact, and actionable mitigation strategies:
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#### **1. Currency Risk (ETB/USD Fluctuations)**
**Risk**:
- Ethiopia’s currency, the birr (ETB), is prone to depreciation (e.g., **18% decline in 2022**). A weaker ETB increases USD-denominated import costs, eroding margins.
**Mitigation Strategies**:
- **Forward Contracts**: Lock in exchange rates for 70% of import costs.
- Example: Secure $300,000 at ETB 55/USD for 6 months, avoiding potential depreciation to ETB 60/USD.
- **Multi-Currency Accounts**: Hold USD reserves in Ethiopian banks to pay suppliers directly.
- **Pricing Adjustments**: Include currency fluctuation clauses in B2B contracts, allowing quarterly price revisions (capped at 5% per adjustment).
**Monitoring**:
- Weekly ETB/USD tracking via National Bank of Ethiopia alerts.
- Quarterly reviews with forex advisors.
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#### **2. Regulatory Risk**
**Risk**:
- Ethiopia’s complex bureaucracy could delay licenses, increase compliance costs, or expose Boaz to sanctions related to Russian oil imports.
**Key Regulations**:
- **Import Licensing**: Requires approval from the Ethiopian Energy Authority (EEA).
- **Tax Compliance**: VAT (15%) and customs duties (7–10%) on fuel imports.
- **Sanctions Exposure**: Indirect risks if Russian partners are targeted by Western sanctions.
**Mitigation Strategies**:
- **Local Legal Partnerships**:
- Retain Addis Ababa law firms (e.g., *DMLF*) to expedite permits and ensure compliance with:
- *Ethiopian Customs Proclamation* (No. 859/2014).
- *Energy Regulation No. 424/2018*.
- Pre-submit license applications with contingency bribes (common in Ethiopia’s bureaucracy).
- **Sanctions Safeguards**:
- Use intermediary banks in non-sanctioned countries (e.g., UAE’s Mashreq Bank) for transactions.
- Conduct due diligence on Russian suppliers to avoid entities on OFAC/SDNs lists.
**Monitoring**:
- Monthly regulatory audits.
- Lobbying via the Ethiopian Chamber of Commerce for streamlined processes.
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#### **3. Supply Chain Risk**
**Risk**:
- Over-reliance on Russian suppliers, Djibouti Port congestion, or regional instability (e.g., Tigray conflict) could disrupt deliveries.
**Mitigation Strategies**:
- **Supplier Diversification**:
- **Primary**: Russian suppliers (60% of volume – Rosneft, Lukoil).
- **Backup**: UAE (ADNOC – 25%), India (Reliance – 15%).
- **Buffer Stock**:
- Maintain 45-day inventory (30 days in Addis Ababa, 15 days at Djibouti Port).
- **Logistics Redundancy**:
- **Rail**: Ethio-Djibouti Railway for 80% of shipments.
- **Road**: Contracts with 3 trucking firms (Shegole Transport, Ethio-Djibouti Transport).
- **Alternative Ports**: Negotiate access to Berbera Port (Somaliland) as a Djibouti backup.
**Monitoring**:
- Real-time GPS tracking of shipments.
- Monthly supplier performance reviews.
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#### **4. Political Instability Risks**
**Risk**:
- Civil unrest (e.g., Oromia protests) or sanctions on Ethiopia could disrupt operations.
**Mitigation Strategies**:
- **Political Risk Insurance**: Coverage via *African Trade Insurance Agency (ATI)* for supply chain disruptions.
- **Local Partnerships**: Collaborate with regional councils and community leaders in high-risk areas.
- **Contingency Fund**: Allocate ETB 2M (9% of total budget) for emergency logistics or security.
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#### **5. Demand Volatility Risk**
**Risk**:
- Economic downturns or subsidy cuts could reduce fuel demand.
**Mitigation Strategies**:
- **Contractual Agreements**: Secure 1-year minimum purchase agreements with B2B clients (e.g., Hawassa Industrial Park factories).
- **Market Diversification**: Expand into LPG and biofuels to hedge against fossil fuel demand swings.
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### **Risk Mitigation Framework**
| **Risk** | **Impact** | **Mitigation** | **Owner** |
|-------------------------|--------------------------------|-----------------------------------------|----------------------|
| Currency Fluctuations | Margins shrink by 10–15% | Forward contracts (70% coverage) | CFO |
| Regulatory Delays | 2–3 month project delays | Local legal advisors + pre-submissions | Legal Team |
| Supply Chain Disruption | Stockouts, lost sales | Buffer stock + Berbera Port access | Supply Chain Manager |
| Political Instability | Operational shutdowns | ATI insurance + contingency fund | CEO |
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### **Scenario Analysis**
**Worst-Case Scenario**:
- **ETB depreciates to 65/USD** + **Russian sanctions** + **Djibouti Port strike**.
- **Response**:
- Activate UAE/India suppliers.
- Draw on buffer stock.
- Enforce 10% price increase for B2C.
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### **Conclusion**
Boaz Trading’s risk strategy combines **financial hedging**, **regulatory agility**, and **supply chain diversification** to ensure resilience. By allocating 15% of its budget to risk mitigation and maintaining proactive monitoring, the company can navigate Ethiopia’s volatile market while safeguarding its 150% ROI target.