Thursday, 15th November 2018

Consultants face scrutiny but are locked into their Saudi business

As Turkey drags out the aftermath of the Jamal Khashoggi affair and Saudi Arabia responds by seeking culprits higher up the hierarchy – with links to Crown Prince Mohammed Bin Salman (MBS), amid suspicions but not yet evidence that he ordered the operation – western companies continue to review the risks of doing business with the kingdom. Consultants and strategy advisors are particularly exposed to scrutiny because of their close involvement with MBS, and because the bread and butter of their business is government policy and planning. Chief risk officers are worried not just about the reputational damage of being associated with unsavoury authoritarian security practices, but also the chance that large volumes of business may disappear overnight should there be a change of leadership or direction. Some firms have already decided to withdraw, at least for the immediate future (GSN 1,068/9).

At the think tank and lobbying end of the spectrum, BGR Group, Harbour Group, Glover Park Group and the Brookings Institution are among entities which have cancelled contracts with Riyadh. But project delivery consultants at the ‘nuts and bolts’ end of the spectrum probably feel they are so deeply committed and dependent on Saudi revenues that there is no easy escape.

A clear hierarchy has emerged since MBS has come to power among the consulting firms responsible for delivery of government contracts. At the top of the pile, and occupying the business class seats on the Emirates flight from Dubai every Sunday morning, are consultants from McKinsey & Company, Booz Allen Hamilton and Boston Consulting Group (BCG). In the Ministry of Defence, work is often shared between these three firms, in part so that each can keep an eye on the other, reducing the risk of a failure in oversight of projects. Observers in Riyadh say the division of responsibilities is complicating matters, as co-ordination between the three firms involved in different segments of particular projects has frequently been poor, as one might expect between competitors. Another feature of these big operators’ consultants is that while all are skilled in presenting and selling a plan, there is often little expertise about local conditions. It is no secret that sophisticated concepts that are appropriate to the developed world are pitched as best practice but cannot easily be taken forward by Saudi staff who lack the necessary applied skills and work habits.

Slightly further down the pecking order are consultants from the ‘Big Four’ firms (led by PwC) as well as others from Cap Gemini and Oliver Wyman, whose particular skills include quickly assembling the teams necessary to execute major project implementations. Typically, these teams are responsible for kick-starting projects and seeing the first few phases of the implementation programme through to the point where the tasks can be handed over to Saudi staff. They are involved in a diverse range of projects. Among them, consultants have designed a new Joint Force structure for the armed forces and have also then been responsible for writing job descriptions and interviewing candidates for the posts being created. Another project saw young social science graduates flying in from the United States to oversee the implementation of health control measures in remote areas of the kingdom to control the outbreak of the deadly MERS ‘camel flu’ virus – a deployment that was necessary because no Saudi organisation could mobilise the necessary resources sufficiently quickly.

Given the scale and scope of consultant-led projects across the kingdom, many firms engaged in Saudi Arabia have become heavily dependent on the revenues being earned from this one market. Some have acquired well-established local companies to improve their market penetration – in April 2017, for example, McKinsey acquired Hani Khoja and Sami Alzuhaibi’s Elixir – and they have enthusiastically bid for further project work, especially in areas where MBS is pushing for quick results. BCG’s success has been driven by its Middle East managing director Joerg Hildebrandt, who has developed strong relationships with Saudi ministers. Personal links remain as important as ever. Saudi middlemen who broker the hiring of consultants and act as advisers to ministries are a key factor for any consultants wanting to expand the scope of their activities.

In the current climate few consulting companies can afford to withdraw from the Saudi market, whatever the reputational risks or the likelihood of instability. Indeed, the heightened risk may provide another opportunity to sell further services. Reports in The New York Times and other media have shown an upsurge of consultancy firms selling services and software to aid with social monitoring and the tracking of dissidents. In response to one story, McKinsey said it was “horrified by the possibility” that a report it had prepared about online reaction to Saudi government policies might have been used by Riyadh to target dissidents; the report named a number of individuals said to be driving negative comments about the government on Twitter. Consultants may become more cautious as the Khashoggi affair plays out. But business is likely to remain largely as usual.

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