This paper explores how mining multinational enterprises (MNEs) manage risk in local communities with weak institutional environments by providing public good services to nearby towns and villages. When MNEs support institutions, community dependence grows stronger as they become increasingly reliant on the resource commitment. This is the case even though the study finds that local communities are experiencing serious health and social issues directly linked to the local mining project. The paper argues that, by solidifying their legitimacy in support of the institutional environment, MNEs reduce the risk that communities will engage with civil society actors who can threaten business continuity. The resource commitment thus serves a dual purpose by making communities reliant on MNEs that strengthen the institutional environment in the absence of a fully functioning state and acting as an effective risk mitigation tool that keeps civil society actors from collaborating with local communities. While the strategy does not guarantee a ‘license to operate’, it is seen as an effective risk mitigation tool and a precondition for ensuring legitimacy. Using cases from the Armenian mining industry, the paper contributes to the MNE risk management literature by highlighting the role of institutions.
- risk management