Risk Assessment is an interesting part of risk management, a field of practice, that is exciting and challenging for the mere reason that, it is a determination in probabilities. Like the proverbial needle in the haystack, it is analyzing likelihoods of events and costs or impacts of those events, when the events do occur.
If one is fortunate to be a quant, models come in handy, ‘opinions’ as they may be, become only subject to the rigour of the method. If the risk assessment is however qualitative, then bless your soul, because you are challenged from the beginning with all the difficulties of personal bias and heuristics.
Agyapa Royalties Corruption Risk Assessment, like all qualitative assessment, the Office of the Special Prosecutor had the task of overcoming subjectivity and helping Ghanaians appreciate the real likelihood and impacts of corruption to the Gold Royalties Monetization Transaction under the Minerals Income Investment Fund Act, 2018 (Act 978).
We shall analyse whether or not the risk assessment was dispensed with in a way that overcomes the general challenge of subjectivity thus producing a credible ‘opinion’ worth societal trust and seek to find whether the risk to corruption is high or low.
The starting point in any risk assessment is understanding the risk sources, call them the variables. This has the goal of identifying the likely markers that are characteristic of the least corrupt transaction. It is looking out for the feel as much as the evidence or scenarios that have defined corrupt transaction so one can by inference say, Agyapa is ‘likely’ to be corrupt or otherwise on a subjective scale of how the assessor has defined corrupt transactions and based on the identifiable variables on that scale.
The problem however is that corruption is difficult to define. The question of what may constitute a gift, favour from above, protocol from high places or forthright corruption is a difficult cultural discussion. The cultural climate makes the conceptual and philosophical appreciation difficult so although we may have the legalities laid down, the risk assessment may not be as simple. The implication is that a nuanced risk aggregation of different variables may give either a false positive or false negative.
False positive as we say is when the ‘good’ gets a bad name so you may hang it whiles a false negative is when we accept the bad for want of identification of the appropriate makers or definition. Theoretically it is agreeable that, indicating a risk as good when it is indeed bad is worse than saying, it is bad when it may actually be good, so to err, a false positive is a lesser evil.
It appears it is the same thinking that guides the criminal jurisprudence. In Benjamin Franklin’s words, “It is better 100 guilty persons should escape than that one innocent person should suffer”; the seminal Blackstone ratio in legal cycles “Better that ten guilty persons escape than that one innocent suffer. Except to the extent of tolerance of what measure that ‘reasonable doubt’ lays, the two brilliant minds agree on the principle.
Let us now be guided by this reasonable doubt principle as we reflect yet again on Agyapa Royalties and the Special Prosecutor. To proceed, let us agree erring on the side of caution for the OSP means indicating the transaction is more likely to be corrupt than indicating it is not. For that reason, let us brand the Special Prosecutor like any other risk manager, a pessimist, naysayer or bean counter whichever you may prefer.
Once we accept the Special Prosecutor only did his job we shall transcend name calling and look to substance. So in that spirit of the Special Prosecutor only doing what was his duty by highlighting the potential incidence of corruption as he saw it in the selection of the transaction advisors. Without reproducing the entire report, pages 20 and 21 are instructive:
“It is imperative to note that the correspondence between the Ministry of Finance and the Transaction Advisor are addressed to the Managing Director, Imara Corporate Finance (Pty) Limited in South Africa. It is also pertinent that all the offers for engagement as services providers were addressed to Imara Corporate Finance, South Africa alone.
But transfers of foreign currency for payments from the Ministry of Finance are made to the account name of Imara Botswana Limited through… This supports the analysis of the risk of corruption and anti-corruption that the addition of the Databank Financial Services Limited as a decoy joint bidder contrary to the PPA approval was a manipulation of the bidding process and constituted bid rigging in favour of Imara Corporate Finance Limited (Pty) of South Africa to foster individual interest of the Ministry of Finance.” (Emphasis Added)
At this stage, the risk assessor must be fully convinced with full facts before making such categorical conclusions or the person is completely out to be crucified. In that regard, the pertinent questions are legal, both determinations in fact and law:
- Whether or not Databank is in fact determined to be a decoy joint bidder?
- Whether or not the determination in question one above have legal implications for the validity of the PPA approval process?
- Whether or not the approval process can be said to have in fact been rigged in favour of Imara Corporate Finance?
- Whether or not such determination above was for individual interest at the Ministry of Finance?
These are the essential questions we must agree on, the issues as we may call them. Although we are incapable of answering any of the questions at this point, the Office of the Special prosecutor proceeds to determine the transaction as an international business or economic transaction under Article 181(5) of the 1992 Constitution wanting of parliamentary approval before execution. The office then makes these remarks:
“This failure or refusal by the Ministry of Finance, subsequent to the Deputy Minister (F) unlawfully signing the Mandate Agreement had already seriously lowered the risk of corruption and made corruption a low risk incentive for public holders. The consequence are that all transactions undertaken by the unlawfully appointed Transaction Advisors in the name of the Republic of Ghana were not backed by any law or the 1992 Constitution.” (Emphasis Added)
The conclusions above are of two parts. The Special Prosecutor seems to conclusively asserts the illegality of the Mandate Agreement. The second conclusion for which reason this article is necessary is the question of whether or not the risk of corruption is high or low. The determination of high risk or low risk of corruption is the central question the document ought to answer.
The Special Prosecutors conclusions appears obvious, “This further cemented the perception that the procedure and process adopted in mortgaging Ghana’s mineral royalty right to Agyapa Royalties Limited of the United Kingdom, in perpetuity may have been tainted with corruption and corruption-related offences.” But the real question of risk assessment is to what extent or degree because indeed there is risk to anything including doing the ‘safest’ of things.