Study Looks at Risk Management Challenges in Mining Industry

The world’s largest mining houses believe embedding risk management throughout their organizations is the key risk challenge in the next three to five years, according to a recent report. Attitudes to Risk in the Global Mining Sector, an Ernst & Young survey of most of the top 40 global mining houses, shows that a significant number of respondents (29%) nominated embedding risk management as the key future challenge. The report on the global mining companies follows from a survey of more than 400 corporate leaders on their attitudes to risk and a study of more than 130 major investors.

Although the surveys show mining companies have a more comprehensive risk coverage approach compared to the general corporate sector, establishing a “risk culture” remains a challenge.

“‘Operationalizing’ risk management is the single biggest challenge facing mining companies,” said Canadian mining leader for Ernst & Young, lan Slater. “The nature of the mining business is inherently risky, so to be successful companies have had to be proactive in dealing with risk—in terms of both minimizing threats and maximizing opportunities for competitive advantage.”

Despite comprehensive coverage, 55% of mining companies say some key risks are not being actively managed, including 18% that reported their environmental risks were under-managed. Key findings of the study include the following:

• 61% of respondents say the level of risk has increased;
• Nearly twice as many companies in the mining sector (71%), compared with the general corporate sector (37%), say their company’s attitude is to embrace risk;
• CEOs, CFOs and boards of directors now have greater accountability, involvement and focus on risk; however, there are fewer chief risk officers (CROs) in mining;
• Mining companies have more comprehensive risk coverage with a broader range of risk categories included in their formal risk assessments compared with the general corporate sector;
• Nearly a third of mining companies— compared with just 10% in the general corporate sector—believe investment in risk management will increase 40% or more in the next three years, and;
• Only half the mining companies surveyed have a specific policy on communicating risk management to major investors and other stakeholders, despite earlier research that shows investors apply a penalty if they think risk management is insufficient.