Strategic Risk in Equity
Corporate Finance
By
Frank Moxon CF FSI
Managing Director, Hoyt Moxon Ltd
Securities & Investment Institute
Risk Forum
10th April 2008
Appendix II - personal biography
Frank Moxon CF, FSI, FIMMM, FEI
Having trained initially as an equity research analyst at Capel-Cure Myers, Frank spent
eighteen years in the corporate finance departments of Beeson Gregory, Société
Générale, Old Mutual and was latterly head of corporate finance and head of natural
resources at Williams de Broë before heading up the mining team at its new parent,
Evolution Securities.
By the end of 2007, he had successfully completed over 120 corporate finance transactions (including 38 IPOs) raising well
over £900m in new funds and had acted as financial adviser or stockbroker to well over 30 Oil & Gas and Mining companies.
These included Cairn Energy, Premier Oil, SOCO International, Centurion Energy, Faroe Petroleum, Aminex, Lonmin, LionOre,
Aquarius Platinum, Petra Diamonds, European Goldfields, Centamin Egypt, Central Rand Gold, Celtic Resources and
Tanzanite One.
In addition to managing primary and secondary listings on the London Stock Exchange’s Official List and AIM Market, Frank
has advised companies with dual listings on the Nasdaq, Toronto (TSX and TSX-V), Australian, Johannesburg, Botswana and
Zimbabwe stock exchanges and has completed corporate finance transactions on the TSX-V, Oslo and Stockholm stock
exchanges.
In 2008 Frank established Hoyt Moxon Ltd which provides corporate finance and other advisory services to companies
primarily engaged in Oil & Gas and Mining activities.
Amongst other things, he is also Chairman of the Securities and Investment Institute’s Corporate Finance Forum and a Fellow
of the Institute of Materials, Minerals & Mining and of the Energy Institute.
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Background Research
1. Google
2. Amazon
3. Interviews with:
 Investment bank CEOs
 Heads of Corporate Finance
 Corporate Finance Directors
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What is strategic risk?
• strategic adj. 1 of or serving the ends of a strategy;
useful or important with regard to strategy (strategic
considerations, strategic move).
• risk n. & v. 1 a chance or possibility of danger, loss,
injury or other adverse consequences (a health risk; a
risk of fire). 2 a person or thing causing a risk or
regarded in relation to risk (is a poor risk).
(Source: The Oxford English Reference Dictionary)
So, if you are a corporate financier or a risk
professional, strategy is a good thing and risk is a bad
thing. Right?
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Well, strategy is only as good as your planning staff...
...and, in business, risk sometimes has to be embraced!
Practical experience is always better than theory
“Let us remember the unfortunate econometrician who,
in one of the major functions of his system, had to use a
proxy for risk and a dummy for sex.”
(Fritz Machlup, Austrian economist, in Journal of Political Economy
July/August 1974, p.892)
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Strategic Risk in Equity Corporate Finance
Corporate Finance Department
• Macro economic considerations
• Transaction & portfolio considerations
• Product considerations
• Competitive considerations
Higher Level Decisions
• Resource considerations
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Transaction & Portfolio Considerations
• Country risk
• Legal system risk
• Environmental risk
• Project risk
• Commodity risk
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Country, Legal & Environmental Risks
Landscape devastated by iron mining – Canada
Civilian poverty / co-lateral damage – Nigeria
AIDS victims - Honduras
Anti government rebels - Congo
Legal title
& the rule
of law –
Russia,
Zimbabwe
etc.
Project Risk
 Stage of Development:
 moose pasture
 advanced exploration
 pre-feasibility study
 bankable feasibility study
 construction
 production
● Reserves or Resources?
– Risked category
– Mining code
– Size
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Commodity Risk
 ”Freely Traded” Commodities:
- Precious metals: gold, PGMs, silver...
- Base metals: nickel, copper, iron, zinc...
- Gemstones: diamonds
- Other: coal, uranium...
 “Intermediate” commodities:
- molybdenum...
- tantalum, mineral sands...
 “Difficult” commodities:
- coloured gemstones (rubies, emeralds...)
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Product Considerations
 Variations on Equity (i.e. can use existing resources)
- private equity
- convertible securities
- preference shares
- corporate restructuring
- mergers & acquisitions: execution only
 New Product Lines (i.e. may need to hire new staff)
- mergers & acquisitions: search and select
- debt advisory
- project finance
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Competitive Considerations
 Client base
- potential for loss of clients
+ active attacks on rival’s client base
 Raising the game
+ “invent” new client retention/generation strategy
- too late to join a band wagon
 Knowing when to quit
+ poach new stars
- withdraw from a product or sector
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Potential Strategies:
Resource Considerations
• Strong equity distribution focus; CF income a bonus
• CF-led distribution house
• Best of both worlds
Commercial Equilibrium:
Corporate
Finance
- Independent advice
- Investment performance
Commercial Equilibrium:
- Going the extra mile
Equity
Sales
- Independent advice
- Placing power
Equity
Research
- Going the extra mile
Compliance Equilibrium:
Resource Equilibrium:
- Chinese walls intact
- Optimum deployment
- Regulatory obedience
- Minimise politics & dissent
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Conclusions: strategic risk in equity corporate finance
 Management risk focus tends to be on compliance
and other operational risk
 Strategic risk:
- no standardised approach in either theory or practice
- key decisions often left to individuals
- system probably works for now
- future regulatory changes might change this?
 The City doesn’t have a Staff College like the military:
- Management is largely self taught
- No formal schooling in strategy and tactics
- No courses in combined operations
- Career progress based on Machiavelli and luck?
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Afterthought
“Ce n’est pas en donnant la vie, c’est en risquant sa vie
que l’homme s’élève au-dessus de l’animal.”
(Simone de Beauvoir)
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Contact Details
Hoyt Moxon Ltd
153 Kennington Park Road
London SE11 4JJ
United Kingdom
Frank Moxon
Managing Director
T: +44 (0)20 7820 0280
M: +44 (0)7918 760 278
E: frank.moxon@hoytmoxon.com
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