An international trading company implemented a 3TG due diligence program to address risks in its supply chain and meet regulatory requirements. The program included identifying high-risk areas using conflict risk maps and country lists, enhancing know-your-customer procedures for new suppliers, requiring local certification for sourced materials, and conducting independent risk assessments of a percentage of suppliers. Initial results found risks being addressed and assurance provided to company leadership, while independent assessments helped improve the program's design and implementation. The company found that due diligence takes time but is worthwhile, and more guidance is still needed for practical upstream risk assessments and audits.

1. 1 www.rcsglobal.com
A practical approach to
3TG risk assessment and
mitigation in conflict
affected and high risk
areas
Harrison Mitchell
Director
harrison@rcsglobal.com
www.rcsglobal.com
May 2014

2. 2
OVERVIEW
• This presentation summary describes upstream due diligence from the
point of view of an International Trader. It was first presented at the 7th
Annual OECD-ICGLR-UN GoE Conference on Responsible Supply
Chains in Paris May 26th 2014 by Harrison Mitchell
• Discusses
• The company’s reasons for Acting
• Upfront Challenges
• Approach and design of practical due diligence
• Initial results and Reponses from suppliers
• General thoughts on key issues
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3. 3
SUPPLY CHAIN AT A GLANCE
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Miners
Exporters
Int. Traders
Smelters
Refiners
Manufacturers
Component
Manufacturers
Brands
Supply
Chain
Due
Diligence
Upstream
Midstream
Downstream
Due
Diligence
Certification
& Assurance
schemes
CFS
program
SEC Audit
OECD
States:
Due
diligence
should
be
appropriate
to
your
company’s
posi;on
in
the
supply
chain
=
intelligent
response
based
on
understanding
supply
chain
and
risk
analysis

4. 4
REASONS FOR ACTING
Multiple pressures compelled our client to act
• Commercial – demands from the market to comply with the CFSI
conflict free smelter program
• Regulatory - direct local (ICGLR) and indirect internationally reaching
laws (DF1502) mean pressures from above and below given their
position in the supply chain
• Reputational – risk of association with conflict/human rights abuse/
child labour
• Responsibility/moral – no responsible company wants to make money
from conflict/HR abuse and child labour
• International Norms on Human Rights and Transparency – the
company was starting to respond to the emerging international norms
on Human Rights and Transparency which influence DD response
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5. 5
UPFRONT CHALLENGES
Upfront challenges
• Significant challenges in identifying what was effectively a new
approach towards due diligence that was rigorous, based on good
practice and appropriate to their position in the supply chain (as a
trader)
• Needed to be sensitive to commercial realities but also be able to
legitimately respond to risks = assign significant responsibility to the
producer/local trader but also provide support to supplier and
maintain oversight
• Key questions:
• How to identify what is a high risk area?
• Balancing practical with normative (and usually vague) guidance
• Which guidance to use? = based around OECD
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6. 6
APPROACH
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Opted for a combination of:
• IDENTIFICATION: Using Heidelberg Conflict Barometer as an impartial way to identify high risk
areas worldwide + CSFI country lists.
• Commercial pressures meant that effectively DRC + 9 countries had to be considered high risk due
to DF1502 and CFSI program requirements.
• CONSISTENT INTERNAL STRATEGY: Company policy consistent with the OECD DDG that
targeted conflict/HR/child labour risks + communicating expectations to suppliers
• PIGGYBACK ON EXISTING COMPANY APPROACHES: Enhanced KYC process to check
background of ALL new 3TG suppliers
• Online search for sanctioned individuals/companies including UN
• Enhanced Supplier questionnaire about officers and shareholders
• Request for information on subsidiaries and partners
• LOCAL CERTIFICATION: Only sourcing
certified material from CFSI approved programs
• INDEPENDENT ASSESSMENTS:
Supplemented all of the above with own risk
based annual independent assessments on a %
basis, ongoing monitoring and better
communication with suppliers and certification
scheme

7. 7
RESULTS AND RESPONSES
Initial Results and Responses
• Understanding that this is now a permanent issue within the company
– training and roll out to other departments are needed
• Independent assessments identified a number of risks that are being
addressed and leading to changes in program design and deployment
• Program is providing assurance to the company executive concerned
about liability now able to use DD to their commercial advantage
• The program provides confidence to talk commercial steps in high risk
areas
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8. 8
SUMMARY THOUGHTS
• Can take some time to set up, but worth being rigorous at the
beginning of the process to get full support across multiple company
departments. You need people to take on new responsibilities to
make this work!
• Identification of high risk areas still requires targeting of risks within
those areas. Conflict Barometers is broad – best way to identify local
risks is by being on the ground using local sources = independent risk
assessments, information from suppliers and certification scheme
• There is a lack of guidance on practical deployment of upstream due
diligence. In addition, there is a lack of a common framework for
companies/audit firms to conduct upstream assessments
• We are still in an area of rapid development – with new rules like the
EU coming forward – companies need guidance to respond
effectively
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9. 9 www.rcsglobal.com
A practical approach to
3TG risk assessment and
mitigation in conflict
affected and high risk
areas
Harrison Mitchell
Director
harrison@rcsglobal.com
www.rcsglobal.com
May 2014