Hiring and retaining the highest-caliber employees poses challenges for any employer. That's especially true for Western companies with plans to expand in Africa.

As you'll read in "Uncovering Africa's hidden talent pool" on page 32, the continent's expanding labor force offers numerous opportunities for businesses exploring growth in this region of the world. But taking this step is not without risk. In fact, according to the Aon Hewitt People Risk™ Index, which rates 110 cities worldwide, the eight African cities in the index pose comparatively high risk across the board. From adult literacy rate to crime rate to talent development resources, these cities present greater risk factors than most Western cities included in the index.

Measuring Risk

Unveiled in 2010, Aon Hewitt's People Risk Index is a first-of-its-kind tool for executives to assess global people risk by location. It measures 25 factors within five categories: demographics, government support, education, talent development and employment practices.

The index quantifies people risk by assigning numerical ratings to each city based on a compilation of all 25 factors. Toronto, Canada, has the lowest people risk in the world with an overall rating of 70; Dhaka, Bangladesh, and Phnom Penh, Cambodia, share the highest risk with a 189 rating.

While conditions on the ground in many parts of sub-Saharan Africa are improving, the index shows that considerable perils remain for employers. Accra, Ghana, ranked second to last in terms of people risk with a 185 rating. Lagos, Nigeria, and Nairobi, Kenya, also scored in the bottom 10 cities worldwide.

Linking the Rankings to Employment Prospects

For employers, people risk often revolves around tactical issues such as attracting and interviewing top candidates, and developing systems to retain successful hires and compensate them appropriately. In formulating the index, Aon incorporated every stage of the employee life cycle, including recruitment (finding qualified applicants), retention, and redeployment (resulting from layoffs, relocations, etc.).

People risk does not exist in a vacuum. Most Western European cities scored well in part because of their residents' strong education level and multi-language skills. But the risk can increase in the years ahead if, as demographers predict, an aging population in these cities creates a shrinking workforce.

By contrast, it's possible that people risk in many major African cities will decrease over time. More government funding for education and growing secondary and tertiary school enrollment reflect the desire of a young population to acquire the requisite skills to pursue viable career opportunities.

A Brighter Future

Despite Africa's relatively high people risk compared to most other regions of the world, global companies seek to grow in countries such as Nigeria and South Africa. On June 10, U.S. Secretary of State Hillary Rodham Clinton and Western officials and business leaders convened in Lusaka, Zambia, for one of the biggest American delegations in Africa in years. A top area of focus: how U.S. employers can catch up with China and India in capitalizing on Africa's economic growth. Africa "is projected to grow faster than any other global region over the next five years," The Wall Street Journal reports.

Along with its people risk, the continent promises rich rewards for employers who apply best practices in identifying where and how to expand in Africa.