TIDMRIO
RNS Number : 8127P
Rio Tinto PLC
22 February 2021
Rio Tinto publishes its 2020 Annual Report
22 February 2021
Rio Tinto today published its 2020 Annual Report and its
Sustainability Fact Book, which can be found at
https://www.riotinto.com/invest/reports . These documents
complement the publication of Rio Tinto's 2020 full year results
and our Climate Change Report on 17 February 2021.
Rio Tinto Chairman Simon Thompson said: "Our strong performance
during 2020 was overshadowed by the destruction of the ancient rock
shelters in the Juukan Gorge and I reiterate our unreserved apology
to the Puutu Kunti Kurrama and Pinikura (PKKP) people. We fell far
short of our values as a company and breached the trust placed in
us. It is our responsibility to ensure that the destruction of a
site of such exceptional cultural significance never happens
again.
"Since then, we have taken decisive action to implement the
recommendations of the Board review, resulting in stronger
management oversight and governance of cultural heritage. I am
confident that, as we continue to reflect on the lessons learned
through our ongoing engagement with investors, employees,
government, Indigenous leaders and, most importantly, Traditional
Owners we will emerge as a stronger company.
"The choice of Jakob as our new Chief Executive was a key
decision for the Board. His collaborative leadership style, strong
values and personal commitment to the role of business in promoting
sustainability made him the ideal choice to lead us forward. I am
delighted that Jakob has moved quickly to announce his new
Executive team and to identify his priorities for the Group,
focused on operational excellence, project development,
strengthening our ESG credentials, and rebuilding trust -
particularly in Australia.
"We have also refreshed the Board with the appointment of Hinda
Gharbi, Jennifer Nason and Ngaire Woods and are already benefiting
from their insights and expertise in governance, public policy and
sustainability. We are now seeking to strengthen representation on
the Board from our key countries of operation. Our priority,
following a turbulent 2020, will be to support Jakob and the new
Executive team in continuing to deliver the necessary changes after
Juukan Gorge and rebuilding the trust we have lost."
Rio Tinto Chief Executive Jakob Stausholm said: "In 2020, as the
COVID-19 pandemic threatened lives and livelihoods, we demonstrated
our agility and resilience in achieving a very strong safety and
financial performance. However, this was all overshadowed by the
tragic events at Juukan Gorge.
"I am committed to working with my leadership team, with the
support of the Board, to make Rio Tinto even stronger and, over
time, see our great company earn back its respect and credibility
with all our stakeholders. We have strong foundations to build upon
and a clear path forward: to become 'best operator', build
impeccable ESG credentials, and excel in development, along with a
clear focus on regaining a strong social license to operate."
Further information
Rio Tinto plc will hold its 2021 annual general meeting on 9
April 2021 and Rio Tinto Limited will hold its 2021 annual general
meeting on 6 May 2021. Notices of those meetings are expected to be
released in March 2021.
Rio Tinto plc has uploaded the 2020 Annual report and 2020
Strategic report to the National Storage Mechanism (NSM) and they
will shortly be available for public inspection at:
morningstar.co.uk/uk/NSM
Rio Tinto expects to file its 2020 Annual report on Form 20-F
with the United States Securities and Exchange Commission on or
around 1 March 2021. American Depositary Receipt holders will be
able to view Rio Tinto's 2020 Annual report and the 2020 Annual
report on Form 20-F on the Rio Tinto website.
Hard copies of these documents can be obtained free of charge on
request to the company secretaries, whose contact details are on
the following page.
In accordance with the requirements of Rules 4.1 & 6.3.5 of
the UK Listing Authority's Disclosure Guidance and Transparency
Rules, a description of the principal risks and uncertainties
affecting the Group and a responsibility statement are set out in
appendix 1 to this announcement.
LEI: 213800YOEO5OQ72G2R82
Classification: 1.1 Annual financial and audit reports
Contacts
media.enquiries@riotinto.com
riotinto.com
Follow @RioTinto on Twitter
Media Relations, United Kingdom Media Relations, Australia
Illtud Harri Jonathan Rose
M +44 7920 503 600 T +61 3 9283 3088
M +61 447 028 913
David Outhwaite
T +44 20 7781 1623 Matt Chambers
M +44 7787 597 493 T +61 3 9283 3087
M +61 433 525 739
Media Relations, Americas
Matthew Klar Jesse Riseborough
T +1 514 608 4429 T +61 8 6211 6013
M +61 436 653 412
Media Relations, Asia
Grant Donald
T +65 6679 9290
M +65 9722 6028
===================================== ================================
Investor Relations, United Kingdom Investor Relations, Australia
Menno Sanderse Natalie Worley
T: +44 20 7781 1517 T +61 3 9283 3063
M: +44 7825 195 178 M +61 409 210 462
David Ovington Amar Jambaa
T +44 20 7781 2051 T +61 3 9283 3627
M +44 7920 010 978 M +61 472 865 948
===================================== ================================
Group Company Secretary Joint Company Secretary
Steve Allen Tim Paine
Rio Tinto plc Rio Tinto Limited
6 St James's Square Level 7, 360 Collins Street
London SW1Y 4AD Melbourne 3000
United Kingdom Australia
T +44 20 7781 2000 T +61 3 9283 3333
Registered in England Registered in Australia
No. 719885 ABN 96 004 458 404
--------------------------------
This announcement is authorised for release to the market by Rio
Tinto's Group Company Secretary.
Appendix 1
Risk Management
Taking and managing risk responsibly is essential to running our
business safely, effectively and in a way that creates value for
our customers and shareholders, employees and partners.
Effectively managing our risks ensures we meet our strategic
objectives, mitigate threats and create opportunities in alignment
with our values - Safety, Teamwork, Respect, Integrity and
Excellence.
Our approach
Effective risk management is necessary to manage both threats
and opportunities to our strategy and operations. Our risk
management process helps us identify, evaluate, plan, communicate,
and manage material risks that have the potential to impact our
business objectives. While risk management is a key accountability
and performance criteria for our leaders, all employees have a
responsibility for identifying and managing risks. Our Board and
Executive Risk Management Committee provide oversight of our
principal risks and associated management responses described on
pages 95-105. The Audit Committee monitors the effectiveness of
risk management and internal controls. Our risk management system
is made up of six core elements (see page 93) - one of which is our
risk management framework, which sets out clear roles and
responsibilities, standards and procedures. We also have three
lines of defence to verify that risks are being effectively managed
in line with our policy, standards and procedures, including across
core business processes such as finance, health and safety, social
performance, environment and major hazards. You can view our risk
management standard at www.riotinto.com.
The overall effectiveness of the risk management framework
requires clear expectations and consistency of application of the
framework, across different product groups and businesses,
countries of operation and functional areas of expertise.
This clearly did not happen in the case of the events leading to
the destruction of the rock shelters at Juukan Gorge in May 2020.
Following the events at Juukan Gorge, we have made changes to
cultural heritage risk management within that framework. These
changes strengthen the first and second lines of defence,
establishing a Communities and Social Performance Area of Expertise
to deliver a more rigorous assurance framework with regard to the
way we manage host communities and cultural heritage risks across
our operations globally. The tragedy of Juukan Gorge highlights the
critical dependency on risks being identified and then monitored on
an ongoing basis by operational management (within the first line
of defence). From there, if circumstances change, the risk needs to
be escalated quickly and appropriately to senior leaders and the
relevant functional experts within the second line. The second and
third lines also need to be sufficiently well connected to identify
the true nature of the underlying risk and how this may then be
symptomatic or thematic for other assets or jurisdictions within
the Group.
Of course, all of this system of risk management and internal
control is predicated upon a culture that recognises and
prioritises cultural heritage specifically, and more generally
supports the timely and effective communication and escalation of
risk. Fundamentally, risk frameworks are only ever as good as the
information that flows through them, and the experience and
judgment of individuals in key positions. This is particularly
important in a group that is of our size, scale and complexity.
The Board, Audit Committee and our business and functional
management teams are all determined to play a part in making these
improvements to the overall culture and systems of risk management
and internal control to ensure that the lessons learned from Juukan
Gorge are applied to other risk areas, particularly other
environmental and social risks.
Every part of our risk management framework is there to
challenge and evaluate the status of our risk profile in the
pursuit of our business objectives. The way we challenge the status
is by having three lines of defence that support leaders in
critically reviewing and validating their own operating
assumptions.
Three lines of Responsibilities Accountability
defence of
1st - All operational Identification, management, verification Management
leaders and monitoring of risks and controls
--------------------- ---------------------------------------------- ---------------
2nd - Centre of Oversees risks, control effectiveness, Management
Excellence and advice on capability and ensures objective
Areas of Expertise assurance against Group's policies, standards
and procedures
--------------------- ---------------------------------------------- ---------------
3rd - Group Internal Provides independent verification that Board and Board
Audit risks and internal controls are being committees
managed effectively
--------------------- ---------------------------------------------- ---------------
--
Risk management
Risk assurance
- Assurance for management that risks and critical controls are being managed effectively.
Risk management framework
- Group's roles and responsibilities, standards, procedures and
guiding principles for effective, consistent and integrated risk
management.
Capability and culture
- Risk capability built through coaching and training for
leaders and teams across our business
- Risk culture of active management of risks is embedded into how we run our business
- Risk culture fosters collective ability to identify and
understand, openly discuss and respond to current and future
risks.
Risk analysis and management
- Risks are measured, monitored and managed, which requires that
critical controls performance is also being measured, monitored and
managed
- Risks and their control information are current, transparent and connected
- Leader-led analysis and management.
Systems, technology and data analytics
- Leverage systems and data analytics to support risk analysis, management and oversight.
Reporting oversight and insights
- Management's oversight is supported by proactive reporting and effective escalation
- Decision-making is supported by connected and insightful risk analysis.
Emerging risks
As a company, we are inherently exposed to long-term risks
because of our long-life operations and growth pipeline. We track
leading indicators of emerging risks and their likely impact on our
long-term prospects. We proactively analyse the impact of these
risks on our business model through plausible scenarios of the
interplay between geopolitics, societal expectations and technology
advancement.
The COVID-19 pandemic has brought additional uncertainty
globally and the recovery pathway remains unclear. Our agility and
resilience has enabled us to continue to operate, deliver products
to our customers and contribute to economies and communities. Since
early 2020, we have activated business resilience teams across our
global operations, introduced strict health measures to protect our
employees and communities, and adapted our systems to support a
significant number of employees working from home. We continue to
closely monitor the potential short-to-long-term impacts on our
business. This includes impacts on our employees, supply chain,
market demand and trade, as well as the resilience of global
financial markets to support an economy recovery.
Emerging risks by nature are highly uncertain, with scope for
rapid or non-linear evolution. The main categories of emerging
risks that we monitor continuously, and that could potentially have
an impact (positive or negative) on the Group are described
below:
Trade tensions: Trade is an essential part of our business, and
the mining sector in general, as the majority of our products cross
national borders. Throughout the year, we have seen the dynamics of
geopolitics causing volatile market conditions including the
introduction of tariffs on various goods between China and the US,
tariffs on Canadian aluminium imports to the US, a targeted
reduction on imports from Australia by China and tightening of
foreign investment laws in Australia and Canada. Although we have
not been significantly affected by these dynamics to date, we
monitor these trends closely, and in particular the evolution of
the relationship between Australia and China.
Increasing societal and investor expectations: In 2020, we
continued to see increasing expectations and focus on social
equality, fairness and sustainability - and how companies address
these issues. Financial institutions are also placing greater
emphasis on environmental, social and governance (ESG)
considerations when making investment decisions. The increasing
focus on ESG has the potential to shape the future of the mining
industry, supply cost structures, demand for global commodities and
capital markets. While this presents us with opportunities for
portfolio and product differentiation, it has the potential to
impact how we operate.
Host communities and cultural heritage: We are committed to
strengthening our relationships with host communities, including
Traditional Owners and First Nations and improving the way we
manage cultural heritage. We have taken a number of actions to
address the lessons learned from Juukan Gorge, including
establishing a standalone Communities and Social Performance (CSP)
Area of Expertise, which will deliver more rigorous assurance
across our operations and elevate communities risk processes. We
have also set up an Integrated Heritage Management Plan with strict
approval protocols at both the product group and Group levels. We
include more detail about the actions we are taking in response to
Juukan Gorge on 114-115.
Resource depletion: The continual replenishment of economically
viable resources is essential for our future growth. Our past
divestments, planned closures and uncertainty over resource
assumptions - without reciprocal resource replenishment through
exploration or acquisitions - could impact our growth options.
Additionally, our ability to access resources could potentially be
impacted as regulations evolve.
Transition to a low-carbon future: Climate change constitutes an
important part of our sustainability approach. Climate change risks
have formed part of our strategic thinking and investment decisions
for over two decades. The transition to a low-carbon future
presents both challenges and opportunities for our portfolio over
the short to long term. Key areas of uncertainty include future
climate change regulation and policies, the development of
low-carbon technology solutions and the pace of transition across
our value chains, in particular the decarbonisation pathways across
the steel sector.
We are targeting a 15% reduction in absolute emissions from 2018
levels by 2030, with an ambition to reach net zero emissions by
2050 across our operations. Overall, our growth between now and
2030 will be carbon neutral. We continue to enhance our monitoring
and management of greenhouse gas emissions, water and land use, and
rehabilitation.
We are also actively engaging in partnerships to explore ways to
improve environmental performance across our value chains, such as
with China Baowu Steel Group, Tsinghua University and Nippon Steel
Corporation in the steel sector, and the ELYSISTM joint venture in
the aluminium sector. We are also active participants in the
International Council on Mining and Metals and the Climate-Smart
Mining initiative. Please refer to our climate change report,
available on our website, for further details.
Structural change across commodity markets: The increasing focus
on ESG investors and the developments of current geopolitical
tensions, coupled with the transition to a low-carbon future, have
the potential to structurally change the supply and demand of
global commodities. Demand for our commodities could shift to
'greener' alternatives, with a higher dependence on recycling, ie
secondary supply. Alternatively, an increased focus on ensuring
supply security could see large volumes of supply enter the market,
potentially impacting future margins.
Technology advancement: Technological advances bring both
opportunities and threats for our business. Digital connectivity
has enabled us to conduct essential activities, including assurance
work, at remote sites where travel has been restricted due to
COVID-19. Technology will also be a key enabler to reaching our net
zero emissions ambition, through initiatives such as decarbonising
the electricity network at our Pilbara iron ore operations in
Western Australia and the ELYSISTM carbon-free aluminium smelting
process. However, cyber attacks are becoming more prevalent and we
have had to invest significantly in technology to enhance our cyber
security.
Longer-term viability statement
As discussed above, we closely monitor and assess the impact of
key emerging risks on our long-term prospects and, where possible,
proactively build response plans into our investment decisions.
Our long-term planning reflects our business model of running
our business in ways that are safer, smarter and more sustainable.
To ensure we remain resilient in the long term, our business model
is continuously stress tested against the key uncertainties within
the emerging risks, with recommended actions to mitigate potential
downside. These are presented to the Board on an annual basis as
part of the Group strategy discussions. We then develop our
strategy and make capital investment decisions based on this
assessment. We also regularly assess our financial investment
capacity to ensure our capital commitments can be funded in line
with our disciplined approach to capital allocation.
Our business planning processes include preparing a one-year
detailed financial plan and a longer-term life-of-asset outlook.
This planning process includes modelling a series of macroeconomic
scenarios and using a range of assumptions that consider both
internal and external factors. As part of our robust risk
management framework, we closely track, monitor and mitigate
principal risks to our business plan and model.
The key assumptions underpinning our long-term plan include:
- long-term economic growth and commodity demand in major markets, such as China;
- continued access to and economic viability of resources and
reserves to support organic and inorganic growth programmes;
- pathways to reduce carbon footprint;
- no significant industry-wide disruptive technology or
productivity enhancement that unlock very low cost supply; and
- no operational risks materially impacting the long-term plan.
Our business plan and macroeconomic forecast has its greatest
level of certainty in the underlying assumptions in its first three
years. However, our longer-term viability assessment examines the
first five years (2021-25) of the business plan. This not only
enables a detailed analysis of potential impact of risks
materialising in quick succession in the first three years but also
enables us to further stress test the business plan for risk
materialising towards the end of the time period, although with
lesser certainty. This allows directors to assess our capacity to
exercise financial levers available in both the three-year and
five-year time frame to maintain the Group's viability.
The principal risks and uncertainties included in our
longer-term viability assessment are as follows:
- Economic risk: A global financial crisis triggered as the
COVID-19 pandemic persists and global tensions intensify that lead
to positive but low growth in China and an economic downturn in the
rest of the world. Large negative pricing shocks are assumed in
2021, followed by persistent slow growth rates.
- Operational risk: A 'one-off' catastrophic event resulting
from a major operational failure, such as a tailings and water
storage facility failure, extreme weather event, underground or
geotechnical event resulting in multiple fatalities, cessation of
operations and significant financial impacts.
We quantify the expected financial impact of each risk based on
internal macroeconomic and business analysis, as well as internal
and external benchmarking on similar risks. We apply a
probabilistic approach to quantify risks and impacts where
relevant. Although the likelihood of more than one principal risk
materialising in close succession is unlikely, the stress test
assumes these risks could materialise individually and in multiple
combinations to create severe but plausible scenarios that could
threaten the Group's viability.
Applying these scenarios, the first five years of the Group's
business plan is stress tested to assess the impact on the Group's
longer-term viability, including whether additional financing
facilities will be required. In addition to liquidity and solvency,
the assessment also considers other financial performance metrics
such as cash flow, debt capacity and credit rating, as well as
dividend payments. These metrics are subject to robust stress tests
and reverse stress tests.
Taken in isolation, each risk does not threaten the viability of
our business model. The main impact from each risk is a significant
decrease in our free cash flow and subsequent reduction in the
dividend. We have levers in place to maintain adequate levels of
liquidity, including reducing discretionary capital expenditure and
accessing lines of credit.
The most 'severe' scenario, albeit unlikely, considers the
financial impact of both economic and operational risks
materialising in a single year at the start of the assessment
period, followed by a second operational risk occurring towards the
end of the five-year time period. This scenario would create both
an immediate and prolonged severe impact, followed by a second
impact on the Group's financial performance towards the end of the
period of assessment with an estimated negative free cash flow of
$11 billion. The Group has a suite of management actions available
to preserve resilience, including accessing lines of credit,
reducing capital expenditure and raising debt while maintaining the
shareholder return policy. Our financial flexibility could
potentially be limited during the peak of the crisis. The viability
of the Group under all the severe but plausible scenarios tested
remained sound.
Although we have made significant efforts to predict global
recovery pathways from the COVID-19 pandemic, there still remains
large uncertainty on how the situation will develop and how far
reaching the impact will be. We have assumed a 'severe' recovery
pathway to mitigate some of this uncertainty and give a greater
level of confidence to the directors in assessing our long-term
viability.
Therefore, taking into account the Group's current position and
the robust assessment of our principal risks, the directors have
assessed the prospects of the Group over the next five years (until
31 December 2025) and have a reasonable expectation that we will be
able to continue to operate and meet our liabilities as they fall
due over that period.
Principal Risks and Uncertainties
The principal risks and uncertainties outlined in this section
reflect the risks that could materially affect (negatively or
positively) our performance, future prospects or reputation.
We examine our principal risks and uncertainties to our business
objectives within the strategic context of our geopolitical,
societal and technological landscape. A principal risk is one or a
combination of risks that can manifest externally or internally, be
of any nature, and escalate from any area of the business. As such,
we set expectations that all our leaders and team members
understand their risks, assess them in line with Group policies and
procedures, and respond. Where risks are material to the Group,
they are escalated to the Executive Risk Management Committee and,
as appropriate, to the Board or its committees. This requires a
strong risk culture that we continue to develop and foster.
The principal risks, uncertainties and trends outlined in this
report should be considered as forward-looking statements and are
made subject to the cautionary statement on page 384. We regularly
assess the potential impact and likelihood of our principal risks
to support the prioritisation of our efforts and resources. The
assessment of these principal risks and the effectiveness of our
associated controls reflect management's current expectations,
forecasts and assumptions and, by definition, involve subjective
judgments and are subject to changes in our internal and external
environments. While we deploy preventative and mitigative controls
to reduce the likelihood and consequence of risks, and manage
potential impacts, the following describes the inherent risks to
our business. There remain certain threats, such as natural
disasters and pandemics, where there is limited capacity in the
international insurance markets to transfer such risks. We closely
monitor these threats and develop business resilience plans. We
also seek to bring a commensurate level of rigour and discipline to
our managed and non-managed joint ventures as we do to our
wholly-owned assets, through engagement and influence, in line with
applicable laws.
In 2020, the ongoing management and monitoring of these risks,
controls and response plans has continued to be the responsibility
of the Group's Executive Risk Management Committee (RMC) and, where
required, a dedicated management committee chaired by an Executive
member to oversee a specific principal risk. This year, we are
providing greater transparency to our shareholders in disclosing
not only the mitigations for principal risks but also where in our
business (resources, assets or relationships) the risk exists.
Additionally, we identify the interconnectivity of our Strategic1,
Economic2 and Operational3 principal risks within our investors'
Environment4, Social5 and Governance6 (ESG) approach.
Current assessment of principal risks
As of February 2021
-- -- -- Focus
Principal
risks
---------- --------------------------------------- ------------
1 Living our corporate values Strategic;
ESG
---------- --------------------------------------- ------------
2 Geopolitics impacting trade Strategic
and/or investment
---------- --------------------------------------- ------------
3 Transition to a low-carbon Strategic;
future ESG
---------- --------------------------------------- ------------
4 Execution of acquisitions and Strategic
divestments
---------- --------------------------------------- ------------
5 New ore resources Strategic;
ESG
---------- --------------------------------------- ------------
6 Strategic partnerships Strategic;
ESG
---------- --------------------------------------- ------------
7 Relationships with communities Strategic;
ESG
---------- --------------------------------------- ------------
8 Attract and retain requisite Strategic;
skilled people ESG
---------- --------------------------------------- ------------
9 Commodity economics Economic
---------- --------------------------------------- ------------
10 Access to capital through economic Economic
cycles
---------- --------------------------------------- ------------
11 Resources to reserves Economic
---------- --------------------------------------- ------------
12 Capital project delivery Economic
---------- --------------------------------------- ------------
13 Change in tax regulations Economic
---------- --------------------------------------- ------------
14 Safety incident or major hazard Operational;
event ESG
---------- --------------------------------------- ------------
15 Cyber breach Operational
---------- --------------------------------------- ------------
16 Physical impacts from climate Operational;
change ESG
---------- --------------------------------------- ------------
17 Water scarcity and management Operational;
ESG
---------- --------------------------------------- ------------
18 Natural disaster exposure Operational;
ESG
---------- --------------------------------------- ------------
19 Closure, reclamation and rehabilitation Operational;
ESG
---------- --------------------------------------- ------------
20 Civil unrest Operational;
ESG
---------- --------------------------------------- ------------
21 COVID-19 Operational;
ESG
---------- --------------------------------------- ------------
22 Breach of our policies, standards Operational;
and procedures, laws or regulations ESG
---------- --------------------------------------- ------------
1. Strategic - risks arising from uncertainties that may impact
our ability to achieve our strategic objectives.
2. Economic - risks that directly impact financial performance
and realisation of future economic benefits.
3. Operational - risks arising from our business that have the
potential to impact people, environment, community and operational
performance including our supply chain. HSE risks are specific
operational risks.
4. Environment - risks arising from our business that have the
potential to impact on air, land, water, ecosystems and human
health.
5. Social - risks arising from our business that have the
potential to impact on society, including health and safety.
6. Governance - risks arising from our workplace culture, business conduct and governance.
--
1. Living our corporate values
Strategic
ESG
Living our values (Safety, Teamwork, Respect, Integrity and Excellence)
goes to the heart of our Group's performance, future prospects and reputation.
Sharing and demonstrating our values through our behaviours together unlocks
opportunities for high performance in all that we do.
-------------------------------------------------------------------------------
Management response
Our code of conduct, The Way We Work, provides clear guidance on how we
should conduct our business, no matter where we work or where we are from.
The following programmes have been deployed to support our leaders and teams
in living our values:
* Leader and employee training in our values and
behaviours.
* Business integrity training tailored to their role
responsibilities and risk exposures.
Opportunities
Our reputation and ability to build respectful and trusting partnerships
is dependent on our business conduct consistent with our corporate values.
-------------------------------------------------------------------------------
Threats
COVID-19 travel restrictions have reduced the ability to have face-to-face
cultural and leadership development programmes. Hence, we are finding new
ways to engage, induct and develop our people through use of virtual and
online programmes.
-------------------------------------------------------------------------------
Potential impact
* Group reputation
* Licence to operate
* Future financial and operational performance
2. Geopolitics impacting trade and/or investment
Strategic
International geopolitics may impact our ability to operate
effectively and/or invest.
------------------------------------------------------------------
Management response
We aim to mitigate the impact of geopolitics by:
* Continually testing the resilience and optionality
from our diverse portfolio of commodities, markets
and jurisdictions.
* Ongoing monitoring of the political environments
where we operate as well as our key markets and
engagement with government and customers in those
areas.
------------------------------------------------------------------
Opportunities
Operations spanning diverse commodities and jurisdictions provide
resilience against country-specific tariffs.
------------------------------------------------------------------
Threats
Increased trade tensions may undermine rules-based trading system
and lead to trade actions (increased tariffs and retaliation),
potentially impacting key markets for our products.
Potential impact
- Future financial performance
- Liquidity
- Group reputation
3. Transition to a low-carbon future
Strategic
ESG
Climate change is a systemic challenge and will require co-ordinated
actions between nations, industries and society. Our risk is
that we do not adapt competitively to the requirements of a
low-carbon future, including expectations of Scope 3 commitments
in the products we produce and the way we operate our business,
resulting in reputation damage with key stakeholders eroding
investor confidence, market value and business resilience.
--------------------------------------------------------------------
Management response
Climate change has formed part of our strategic thinking and
investment decisions for over two decades. We continue to be
part of the solution by:
* Setting targets to reduce our emissions (on an
absolute and intensity basis) over the short, medium
and long term.
* Investing approximately $1 billion over five years in
emissions reduction projects.
* Engaging with key stakeholders on climate change
issues, including investors, industry associations
and governments.
* Partnering to reduce the carbon footprint across our
value chain. This includes the development of new
partnerships for technologies and responsible
sourcing to explore pathways with our customers and
suppliers to improve the environmental performance of
our product value chains.
* Investing in projects and research and development
initiatives that will increase the supply of the
materials essential to a low-carbon future.
* Considering climate change in our strategic and
operational decision-making, including the use of an
internal carbon price.
--------------------------------------------------------------------
Opportunities
Each of the commodities we produce has a role to play in the
transition to a low-carbon future - aluminium in electric vehicles,
copper in wind turbines, iron ore for critical infrastructure
and minerals for rechargeable batteries, such as lithium.
--------------------------------------------------------------------
Threats
Current and emerging climate regulations have the potential
to result in increased costs, change supply and demand dynamics
for our products and create compliance risks, all of which could
impact our financial performance and reputation.
Potential impact
- Business model value
- Future financial and operational performance
- Group reputation
- Partner to operate
4. Execution of acquisitions and divestments
Strategic
Acquisitions' (or divestments') actual realised value may vary
materially from original business case.
---------------------------------------------------------------------
Management response
We practise a disciplined approach to acquisitions and divestments
that includes:
* Detailed, objective due diligence on all material
divestments and acquisitions.
* Rigorous third-party due diligence and assurance.
* Involving business unit leaders early in the process
to manage post-acquisition integration into the
Group.
* Conducting post-investment reviews on divestments and
acquisitions to identify key learnings and embed them
in future initiatives.
---------------------------------------------------------------------
Opportunities
Proceeds realised from divested assets are greater than planned,
allowing more capital to be returned to shareholders or redeployed
into higher-returning or more productive uses. We successfully
acquire and integrate businesses on acceptable terms that provide
sustainable future cash flow and/or future growth options.
---------------------------------------------------------------------
Threats
Value is not realised from divestment or acquisition through
changing or incorrect assumptions, unanticipated liabilities
or integration costs.
Potential impact
- Valuation
- Future financial performance
- Solvency
- Liquidity
- Group reputation
5. New ore resources
Strategic
ESG
The success of exploration programmes and/or acquisitions may
be insufficient to offset depletion.
---------------------------------------------------------------------
Management response
We have grouped the reporting lines of our Exploration, Mergers
and Acquisitions and Group Strategy teams under one Executive
Committee member to better leverage our collective knowledge
of opportunities. This enhances our ability to:
* Continually review opportunities in the exploration
and acquisitions portfolios and prioritise
accordingly.
* Leverage and develop new technologies for exploration
and evaluation of reserves/resources.
* Create and maintain third-party partnerships to grow
our portfolio.
Opportunities
Exploration and/or acquisitions have the potential to increase
resources in commodities currently within our portfolio or diversify
into new commodities. We focus our activity on our highest-value
projects, particularly on evaluating the Resolution Copper project
in Arizona, US, and advancing our Winu copper/gold deposit in
Australia. When determining targets, we consider our customers'
and society's needs for new products and design our strategy
to maximise opportunities.
---------------------------------------------------------------------
Threats
Recent assessment indicates a net decrease in our resources
and reserves across all commodities. New large, long-life deposits
are increasingly scarce and those that are known require advances
in processing technology and/or significant capital investment
in infrastructure.
Potential impact
- Valuation
- Future financial and operational performance
- Group reputation
6. Strategic partnerships
Strategic
ESG
Strategic partnerships play a material role in delivering our
growth, production, cash or market positioning, and these may
not always develop as planned. Strategic partnerships include
our Traditional Owners, customers, joint ventures partners (managed
and non-managed), governments and our suppliers.
----------------------------------------------------------------------
Management response
We approach investments and partnerships with a view to long-term
development of relationships rather than short-term transactional
advantage. To support that we:
* Actively participate within the governance structures
of joint ventures to promote, where possible,
alignment with the Group's policies and strategic
priorities.
* Modernise our agreements with Traditional Owners,
which includes modifying clauses to ensure respect,
transparency and mutual benefit.
* Engage in partnerships to explore ways to improve
environmental performance across our value chains,
such as with China Baowu Steel Group and Tsinghua
University and the ELYSIS.
In addition, our code of conduct, The Way We Work, provides
clear guidance on how we should conduct our business, no matter
where we work or where we are from.
----------------------------------------------------------------------
Opportunities
Strategic partnerships offer opportunities to create mutual
benefits for all parties involved by leveraging the differing
strengths of the participants. This may be realised through
increased community participation in employment and procurement
opportunities, access to resources, increased shareholder returns,
or reduced political, portfolio and operational risks. Where
we partner in operations, we seek to bring a commensurate level
of rigour and discipline to our managed and non-managed joint
ventures as we do to our wholly-owned assets, through engagement
and influence and in line with applicable laws.
----------------------------------------------------------------------
Threats
Disruption to our partnerships may limit the expected benefits
received by participants and lead to interruptions to our operations,
development projects and exploration activities. For non-managed
operations, the decisions of the controlling partners may cause
adverse impacts to the value of our interest in the operation,
or to our reputation, and may expose us to unexpected liabilities.
Potential impact
- Group reputation
- Future financial and operational performance
- Valuation
7. Relationships with communities
Strategic
ESG
We may not be viewed as a trusted partner by society and governments,
affecting our ability to operate and grow through collaborative
and mutually beneficial partnerships.
----------------------------------------------------------------------
Management response
We aim to make a positive contribution to the communities in
which we operate through:
* Establishing a Community and Social Performance (CSP)
Area of Expertise to deliver a more rigorous
assurance framework across our operations and elevate
CSP risk processes.
* Ensuring respect for communities' human rights,
aligning our commitments with international
standards.
* Modernising our agreements, which includes modifying
clauses to ensure respect, transparency and mutual
benefit.
* Implementing an integrated cultural heritage
management system with strict approval protocols at
both the product group and Group levels.
* Developing mutually beneficial partnerships with
local communities and establishing appropriate social
performance targets.
* Instigating community investment programmes.
* Implementing local procurement policies and targets.
* Setting local content commitments for major capital
projects.
----------------------------------------------------------------------
Opportunities
Strong relationships with the communities in which we operate
have the potential to provide stable operating environments.
Respectful and positive engagement with communities, governments
and other stakeholders can support access to new resources,
create stable and predictable investment and operating environments,
and shape mutually beneficial policies and legal/regulatory
frameworks.
----------------------------------------------------------------------
Threats
Access to land and resources may be impacted if we are not considered
a trusted partner in certain regions. Other potential actions
can include litigation, expropriation, export or foreign investment
restrictions, increased government regulation and delays in
approvals, which may threaten the investment proposition, title,
or carrying value of assets.
Potential impact
- Group reputation
- Future financial and operational performance
8. Attract and retain requisite skilled people
Strategic
ESG
Our ability to maintain our competitive position is dependent
on attracting, developing and retaining services of a wide range
of internal and external skilled and experienced personnel and
contracting partners.
------------------------------------------------------------------
Management response
Attracting, developing and retaining the best people is crucial
to our success. We aim to achieve this by:
* Investment in leadership and team member skills to
develop an environment of inclusion to attract and
leverage our diversity.
* Talent management and planning.
* Engagement strategy that is able to respond to
changing external and internal expectations of
people.
* Maintain a safe working environment.
* Maintain competitive remuneration and benefits.
* Provide learning and career development opportunities
for our people to build skills for today and our
future.
------------------------------------------------------------------
Opportunities
Enhance productivity and business resilience through building
operational and commercial excellence. Higher local employment
can increase our business resilience and community trust.
------------------------------------------------------------------
Threats
Business interruption or underperformance may arise from a lack
of capability in people, standards, processes or systems to
prevent, mitigate or recover from an interruption which results
in a material loss to the Group.
Potential impact
- Future financial and operational performance
- Communities and social performance
- Group reputation
9. Commodity economics
Economic
Commodity prices, driven by demand for and supply of our products,
vary and may not be as expected over time. China is the largest
market for our products and its growth pathway could affect
demand for our products.
-----------------------------------------------------------------------
Management response
We operate in global markets and accept the value impact of
exchange rate movements and market-driven prices on our commodities.
Our approach includes:
* Maintaining low-cost production, allowing profitable
supply throughout the commodity price cycle. We
deliver this through productivity initiatives that
seek to create value and/or reduce waste and
procurement and supply chain management practices
that respond to changes in input costs.
* Maintaining a diverse portfolio of commodities across
a number of geographies.
* Maintaining a global portfolio of customers and
contracts.
* Leveraging market-facing sales, marketing and trading
resources in the Group.
* Monitoring multiple leading indicators and
undertaking detailed industry analysis to inform our
forecasting assumptions and using scenarios to test
the resilience of our portfolio and exploring
opportunities.
-----------------------------------------------------------------------
Opportunities
A rise in commodity prices or favourable exchange rate movements
generates more cash flow from our operations, enabling us to
pursue growth options or capital expansions, pay down debt and/or
increase returns to shareholders. New opportunities for 'green'
supply.
-----------------------------------------------------------------------
Threats
Falling commodity prices or adverse exchange rate movements
reduce cash flow, limiting profitability and shareholder returns.
These may trigger impairments and/or impact our credit ratings.
Extended subdued prices may reflect a longer-term fall in demand
for our products, and the reduced earnings and cash flow streams
resulting from this may limit investment and/or growth opportunities.
Unfavourable changes in the cost of production can arise, such
as increased fuel prices.
Potential impact
- Future financial performance
- Solvency
- Liquidity
10. Access to capital through economic cycles
Economic
External events and financial discipline may impact our ability
to access capital and support our strategy.
------------------------------------------------------------------------
Management response
We aim to manage the liquidity and financing structure of the
Group using forecasts and sensitivity analysis tools to actively
monitor, determine and enable access to the appropriate level,
sources and types of financing required. This process is strengthened
by:
* Ensuring compliance with our Treasury policy and
standard, which outlines the fundamental principles
that govern our financial risk management practices.
* Committing to prudent financial policies and
financial discipline, including credit and liquidity
metrics commensurate with a strong investment grade
rating.
* Maintaining the liquidity and financing structure of
the Group through regular forecast, sensitivity and
stress testing tools to actively monitor, determine
and enable access to the appropriate level, sources
and types of funding required.
* Subjecting funds invested to credit limits, dynamic
risk scoring, and maturity profile based on
Board-approved frameworks to ensure appropriate
liquidity and risk diversification.
* A disciplined capital allocation process supported by
Evaluation and Investment Committee.
* Board approval of the financial strategy, long-term
planning and cash flow forecasting.
* Applying a shareholder returns policy that allows
shareholder returns to adjust with the cycle.
------------------------------------------------------------------------
Opportunities
Favourable market conditions and strong financial discipline
could increase our liquidity and/or balance sheet strength,
allowing us to pursue investment or growth opportunities, pay
down debt and/or enhance returns to shareholders.
------------------------------------------------------------------------
Threats
Our ability to raise sufficient funds for capital investments
during a major economic downturn.
Potential impact
- Future financial performance
- Solvency
- Liquidity
- Group reputation
11. Resources to reserves
Economic
Our estimates of ore resources and reserves may vary. The volume
of material reported in Resource and Reserve is based on the
geological, commercial and technical information available at
the date of the report and is, by its nature, incomplete. As
new information comes to light, the economic viability of some
Ore Reserves and mine plans may be reassessed with material
impacts (positive or negative).
-----------------------------------------------------------------
Management response
We invest in developing our orebody knowledge to inform our
company's organic growth pathways and projections of financial
performance. This includes:
* Compliance with the Group's Resources and Reserves
standard.
* Establishment of the Orebody Knowledge (OBK) Centre
of Excellence.
* Development of operational KPIs to ensure inputs to
Mineral Resource and Ore Reserve calculations remain
valid. This includes spatial plan conformance and
grade and tonnage reconciliation.
* Compliance with processes for optimal asset
development and Resource and Reserve maintenance.
-----------------------------------------------------------------
Opportunities
Through operational efficiencies, deployment of new technologies
or increased orebody knowledge we can improve the discovery
of new Resources, convert a greater proportion of Resource to
Reserve, and extract them in a more economical way.
-----------------------------------------------------------------
Threats
Inadequate knowledge of our Resources and Reserves increases
production costs and ore loss within our production systems.
Failure to capture the benefits of new technologies may reduce
our volume of available Reserves.
Potential impact
- Future financial performance
- Valuation
12. Capital project delivery
Economic
Large capital investments require multi-year execution plans
and are complex. Our ability to deliver projects to baseline
plan - principally in terms of safety, cost and schedule - may
vary due to changes in technical requirements (eg geotechnical),
law and regulation, government or community expectations, or
through commercial or economic assumptions proving inaccurate
through the execution phase.
--------------------------------------------------------------------
Management response
We develop large-scale capital projects through a specialised
division. Our methodology includes:
* Implementation of the project management control
framework and assurance activities to ensure
compliance.
* Stakeholder engagement is managed by the product
group that will have ownership of the project through
to operation.
* Following a rigorous project approval and
stage-gating process, including monitoring and status
evaluation, as articulated in the project evaluation
standardand guidance.
* Maintaining a strong focus on contractor management.
* Undertaking strategic workforce planning to ensure
the critical roles are appropriately managed.
Opportunities
An ability to develop projects safely, on time and within budget
enhances our cash flow, licence to operate and investor confidence.
Effectively implementing optimisation programmes reduces cost
and accelerates development schedules, resulting in higher returns
earlier.
--------------------------------------------------------------------
Threats
A delay or overrun in a project schedule and/or a significant
safety or process safety incident could negatively impact our
profitability, cash flow, ability to repay project-specific
debt, asset carrying values, growth aspirations and relationships
with key stakeholders. A failure to secure the required approvals
(regulatory and from partners) may cause delays in project delivery
with a corresponding increase in costs. In 2020, COVID-19 has
affected the delivery of major projects due to restrictions
on travel and supply chains, though some mitigation activities
have reduced these impacts.
Potential impact
- Future financial and operational performance
- Health, safety, environment and security (HSE&S)
- Solvency
- Liquidity
- Group reputation
13. Change in tax regulations
Economic
The international tax policy landscape is becoming increasingly
contentious with discussion related to digital taxes raising
threats of trade wars and providing the impetus to implement
significant changes to the global tax framework.
---------------------------------------------------------------------------
Management response
Our approach to tax policies and governance seeks to keep pace
with increasing community standards, increasing tax authority
and government expectations, and civil society initiatives promoting
responsible tax and transparency. We aim to achieve this by:
* Engaging constructively in local and international
tax reform dialogue to contribute to the development
of sustainable and effective tax systems.
* Maintaining our commitment to the B Team Responsible
Tax Principles, which are intended to provide a
leadership standard driving best practice in tax
governance, reporting and interactions with tax
authorities. These principles are embedded in our tax
policy.
* Verifying our compliance to our tax policy through
our Internal Audit, which sets the following
expectations:
* Full compliance with statutory obligations
accompanied by full disclosure in our Annual Taxes
Paid report.
* High standards of tax risk management.
* Transparent and constructive working relationships
with tax administrators.
* Proactive management of taxes pursuant to a robust
tax governance framework.
---------------------------------------------------------------------------
Opportunities
We actively promote transparent and responsible tax practices
and will further increase our transparency to adopt, in full,
the new Global Reporting Initiative (GRI) tax transparency standard.
This presents an opportunity to demonstrate our commitment to
meeting regulatory and social obligations consistent with increasing
community standards.
---------------------------------------------------------------------------
Threats
Tax revenues play an important role in assisting governments
to provide essential services and provide an opportunity for
companies to contribute to the communities in which they operate.
Tax policy settings are a relevant factor in investment decisions,
particularly for industries that require significant upfront
investment. Changes to the global tax framework must provide
appropriate outcomes in the allocation of taxing rights between
countries and provide certainty for companies seeking to invest.
The potential for policy design that does not consider the features
relevant to capital intensive industries or the adoption of
unilateral approaches risks uncertainty, complexity and double
taxation, which may adversely impact future investment decisions.
Potential impact
- Financial
- Valuations
- Stakeholder relations
14. Safety incident or major hazard event
Operational
ESG
Our operations and projects are inherently hazardous, with the
potential to cause illness or injury, damage to the environment,
and disruption to communities. Major hazards include process
safety, underground mining, surface mining and tailings and
water storage.
-----------------------------------------------------------------------
Management response
Nothing is more important than the safety and wellbeing of our
employees, contractors and communities. We believe all incidents
are preventable, so we concentrate on identifying, understanding,
managing and, where possible, removing the hazard or removing
people from the hazardous area. Key initiatives include:
* Development of Centres of Excellence for key
technical capability in major hazard and asset
management.
* Implementation of slope geotechnical, tailings
management, underground mining and process safety
technical and safety standards and procedures.
* Business resilience planning and execution exercises
for 'severe but plausible' scenarios.
* Oversight by the Sustainability Committee, supported
by the Group's Executive Risk Management Committee,
as well as second and third line defence activities.
The second line of defence is provided by our central
support functions and technical Centre of Excellence
(CoE) teams to verify compliance with Group policies,
standards and procedures.
* Regular review and audit of HSE&S processes, training
and controls to promote and improve effectiveness at
managed and (where practicable) non-managed
operations.
* Monitoring monthly HSE&S performance at the Group
level and sharing learnings from HSE&S incident
investigations.
* Building safety targets into personal performance
metrics to incentivise safe behaviour and effective
risk management (see Remuneration Report).
* Focus on fatality elimination through our critical
risk management programme, which verifies safety risk
controls are in place before work starts.
-----------------------------------------------------------------------
Opportunities
Meeting and exceeding our commitments in safety and hazard management.
-----------------------------------------------------------------------
Threats
Failure to manage our health, safety, environment or community
risks could result in a catastrophic event or other long-term
damage that could harm our financial performance and licence
to operate.
Potential impact
- Multiple fatalities
- Operations disruption
- Communities and social performance
- Group reputation
- Financial loss
15. Cyber breach
Operational
Cyber risk may disrupt our operations, affect how our employees
work and/or breach data privacy and other sensitive information
related to customers, contractors and suppliers. Cyber breaches
can arrive from malicious external or internal attacks, but
also inadvertently through human error.
Management response
We continue to invest in our information systems and technology
(IS&T) infrastructure and teams not only to advance our automation
projects but also to safeguard our assets. Measures include:
* Cyber controls including detection, identification,
protection and recovery.
* Group standard and procedure with improved monitoring
and compliance.
* Improved IS&T asset management with executive level
sponsorship and oversight from our Cyber Security
Steering Committee.
* New technology solutions implemented to improve cyber
threat detection and response for critical assets.
* Third-party risk management through contractual
inclusions and proactive compliance assessments.
* Business resilience plans for cyber breaches across
all critical assets.
---------------------------------------------------------------------
Threats
The growing volume and sophistication of cyber threats is increasing
the likelihood of compromise, offset by significant improvements
in the effectiveness of control measures.
Potential impact
- Operational disruption and/or breach of operational integrity
- Breach of data privacy or commercially sensitive data
- Group reputation
- Financial loss
16. Physical impacts from climate change
Operational
ESG
Our operating sites may be vulnerable to the physical impacts
of climate change including extreme weather events, rising sea
levels or extreme temperature impacts on operating environments.
------------------------------------------------------------------
Management response
We conduct climate change physical risk assessments to identify
vulnerabilities across our portfolio including over the life
of our assets in the way we design, operate and close them.
Additionally we have:
* Introduced a new Energy and Climate Change Centre of
Excellence that uses scenarios to assess medium- and
long-term risks.
* Implemented a series of controls to manage the threat
of extreme weather, including structural integrity
programmes across all critical assets, emergency
response plans and flood management plans. These
controls keep our people safe and help our operations
return to normal capacity as quickly as possible.
* Implemented a Critical Risk Assessment programme,
including natural catastrophe modelling, to support
our insurance programme.
------------------------------------------------------------------
Opportunities
By understanding specific exposures across our portfolio, we
can build in measures as part of our capital programmes to reduce
losses in the event of a natural disaster.
------------------------------------------------------------------
Threats
Climate change has the potential to significantly reduce rainfall
in areas where we operate, which may lead to water shortages.
Conversely, an extension of the tropical cyclone season in the
Pilbara, Western Australia, would impact our iron ore operations.
A significant warming trend, particularly influencing maximum
temperatures, would also impact the way we operate.
Potential impact
- Multiple fatalities
- Operational disruptions
- Financial loss
17. Water scarcity and management
Operational
ESG
Water is a key part of our operational environmental footprint
and a critical, shared resource for people, the environment
and economic prosperity. In some regions where we work, water
scarcity is an inherent risk, like the Gobi Desert in Mongolia.
In others, rainfall can vary greatly from year to year, such
as Weipa in Queensland, Australia. Many of our sites are also
experiencing changes in rainfall and water availability due
to climate change.
------------------------------------------------------------------------
Management response
We aim to balance our operational water needs with those of
local communities, Traditional Owners and ecosystems. We manage
our water risks against four themes: water resource, quantity
and quality, dewatering and long-term obligations. This framework
allows us to identify, assess, manage and communicate water
risk, controls and actions both internally and to the communities
where we operate. Risk management measures include:
* Site water management plans and controls including
monitoring data collection and interpretation.
* Improved methodology for calculating our water risk
exposure; recalculation is underway.
* Identification global controls for the four water
management risk areas: water resource, quantity and
quality, dewatering, long-term water obligations.
* Actively supporting and reporting our practices
against the commitments outlined in the International
Council on Mining and Metal's position statement on
water stewardship: to apply strong and transparent
water governance, manage water at operations
effectively, and to collaborate to achieve
responsible and sustainable water use.
------------------------------------------------------------------------
Opportunities
We improve the way we design and run our operations to avoid
permanent impacts to water resources and carefully manage the
quality and quantity of the water we use and return to the environment.
------------------------------------------------------------------------
Threats
Our water management causes unacceptable operational, environmental
or community impacts. Sources of this risk exposure are diverse
across geographies and commodities, with both financial and
non-financial implications without proactive management in new
asset developments, operations and closures.
------------------------------------------------------------------------
Potential impact
- Financial
- Valuations
- Production and growth constraints
- Group reputation
- Ecosystem impacts
- Stakeholder relationships
18. Natural disaster exposure
Operational
ESG
A natural disaster occurs with significant operational interruption
or damage to our assets and/or communities.
-------------------------------------------------------------------------
Management response
We aim to prepare for and mitigate the impact of a natural disaster
event by:
* Enhancing our communication plans and co-ordination
with local, regional and state agencies.
* Increasing our understanding of our exposure at each
asset through programmes such as our critical risk,
asset integrity assurance, and climate change
physical impact assessment programmes.
* Improving our business resilience plans and emergency
response plans, training and annual exercises to
prepare for a natural disaster event.
Opportunities
Improving the resilience of our operations to minimise impact
to our communities, customers and supply chain.
-------------------------------------------------------------------------
Threats
This primarily includes major impacts to our Pilbara iron ore
operations due to Category 5 cyclone storm surges hitting coastal
operations and nearby communities, causing significant operational
interruption or damage to mines, rail, port and/or other infrastructure.
Non-financial impacts may include multiple fatalities or severe
permanent impairment to multiple people. Other natural disasters
that can affect our operations, depending on their location,
include bush fire, drought, earthquakes and tsunami. In 2020,
our Kennecott copper operation in Utah, US, was impacted by
an earthquake.
Potential impact
- Operational disruptions
- Fatalities
- Financial impacts
19. Closure, reclamation and rehabilitation
Operational
ESG
Planning for the future of our sites after they cease operating
is a core business function governed by our Closure Steering
Committee. Estimated costs and liabilities are provided for,
and updated annually, over the life of each operation. However,
estimates may vary due to a number of factors that create either
opportunities or challenges.
------------------------------------------------------------------
Management response
We have established a Closure Division to ensure we manage the
future of our site after operations cease in a sustainable and
cost-efficient manner. We aim to achieve this through:
* Compliance with Group policies and standards, which
provide guidance concerning risk management,
communities and social performance. This is overseen
by our Sustainability Committee and Closure Steering
Committee.
* Collaboration with key stakeholders and participation
in strategic partnerships and/or governance
structures to create opportunities and mitigate
threats.
* Developing long-term relationships with a range of
international and national stakeholders.
* Monitoring jurisdictional risks, including sovereign
risks, and taking appropriate action.
Opportunities
We are actively assessing opportunities to find solutions to
repurpose and reuse sites for future economic or social benefit
through working collaboratively with our stakeholders. For all
new asset developments, we incorporate closure into their design,
and find ways to optimise decommissioning, remediation and any
long-term management obligations. For existing operations, where
possible, we progressively rehabilitate land throughout the
life of the operations.
------------------------------------------------------------------
Threats
Plans and provisions for closure, reclamation and rehabilitation
may vary over time due to changes in stakeholders' expectations,
legislation, standards, technical understanding and techniques.
In addition, the expected timing of expenditure could change
significantly due to changes in the business environment and
orebody knowledge, which might vary the life of an operation.
Potential impact
- Valuation
- Future financial and operational performance
- Group reputation
20. Civil unrest
Operational
ESG
Civil unrest may expose our employees and/or operations to significant
threats or impact our key markets and customers, potentially
resulting in compromised employee safety, and damage to or loss
of assets.
----------------------------------------------------------------------
Management response
The safety of our employees is our priority. Avoiding damage
or loss of our assets is important to sustaining our business.
We manage this through:
* Implementation of a new country entry procedure to
increase risk awareness.
* Business resilience planning for operations and
communities at risk.
* Communication plans and co-ordination with local,
regional and state agencies.
----------------------------------------------------------------------
Opportunities
Strong relationships with the communities in which we operate
have the potential to provide stable operating environments.
----------------------------------------------------------------------
Threats
Where there is potential for civil unrest, our access or operational
continuity may be disrupted. Our African and South American
operations and exploration sites have the most exposure to this
risk.
Potential impact
- Group reputation
- Future financial and operational performance
- Health, safety and security
21. COVID-19
Operational
ESG
The potential for transmission across our teams, communities
and supply chains continues to be a threat that requires proactive
management to guard against business impacts.
---------------------------------------------------------------------
Management response
The safety and our ability to operate with minimal disruption
is vital to our success. Our business resilience teams across
the Group have helped mitigate the impact of the pandemic through:
* Trigger, action and response plans.
* COVID-19 screening and testing protocols.
* Segregation measures to prevent transmission among
vulnerable people and communities.
* Hygiene practices, PPE and industrial cleaning
practices.
* Physical distancing.
* Health and wellbeing support.
* Contact tracing.
---------------------------------------------------------------------
Opportunities
The introduction of stringent health measures to protect our
employees, partners and host communities resulting in an improved
reputation among communities and key partners.
---------------------------------------------------------------------
Threats
COVID-19 transmission has the potential to compromise the health
of employees, partners, communities and, in particular, vulnerable
populations (eg elderly, First Nations, immuno-compromised people).
A large-scale outbreak could lead to the complete shutdown of
operations, affecting the flow of products to customers.
Potential impact
- Health, safety and security
- Future financial and operational performance
- Group reputation
22. Breach of our policies, standards and procedures, laws or
regulations
Operational
ESG
This risk may greatly impact our reputation, licence to operate,
and potentially exposes us financially. It is important that
we foster a culture aligned with our values, provide education
and guidance to employees, and implement proactive compliance
monitoring.
----------------------------------------------------------------------
Management response
* Our dedicated legal and compliance teams work closely
with our businesses and help them to identify,
understand and comply with current and emerging laws
and regulations.
* We continue to train and create awareness on
regulatory obligations for employees working in
high-risk roles and third parties.
* We maintain ongoing assurance of compliance to our
policies, standards and procedures and conduct an
internal audit review of our third-party risk
management framework.
* We have reorganised our structure to create a
centralised Litigation Team and Centres of Excellence
in the areas of Anti-Bribery and Corruption,
Anti-Trust, and Export Controls & Sanctions.
* Aligned with living our corporate values, leaders and
employees receive training in our values and
behaviours.
----------------------------------------------------------------------
Opportunities
Good corporate citizens are acknowledged to operate to a high
ethical standard, attracting talent and securing access to resources
and investment opportunities.
----------------------------------------------------------------------
Threats
Investigations by regulatory authorities and litigation (regardless
of the ultimate finding) may have a serious impact on our reputation.
Fines may be imposed for breaching laws and/or regulations or
for other inappropriate business conduct, as well as resulting
in a loss in share price value and/or assets or loss of business.
Other consequences could include the criminal prosecution of
individuals and/or Group companies, imprisonment, and reputational
damage to the Group.
Potential impact
- Group reputation
- Licence to operate
- Future financial and operational performance
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END
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(END) Dow Jones Newswires
February 22, 2021 02:00 ET (07:00 GMT)
Grafico Azioni Rio Tinto (LSE:RIO)
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Grafico Azioni Rio Tinto (LSE:RIO)
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