Working together creates new opportunities and competitive advantages

Managing sustainable risks is a challenge every business has to face and one that every risk manager has to consider. That was the verdict of Mark Robins, Senior Vice President, Group Safety, Environment and Risk at AngloGold, speaking to risk managers at the recent breakfast seminar held by the Institute of Risk Management South Africa in Johannesburg. Focusing on sustainable risk, Mr Robins stresses, however, that risk and reward are inextricably linked and every business needs an element of flexibility and risk if it is to survive. “Boards and management need to have a view on how much risk to take and it needs to be linked to a commercial strategy,” he says. “The next thing is to look at the risk maturity of your organisation—very few of us are at the resilient end of the curve,” he warns.hide“The old approach was to operate in silos but now the approach is to be more strategically focused, with an increasing move towards making sure your company is resilient. From a sustainability point of view, it is essential one identifies the risks. I think in mining we are pretty good in knowing what type of risks are there but not that good at understanding what other people’s needs are in terms of managing strategy.” For example, he says, mining houses may not have been good at managing the risks around licences to operate “but we have learnt it is critical”. Mr Robins points to the bowtie model used by many risk management departments, believing it can help understand the risk, while a risk register can help focus the team on the issues. “For some of the risks we do hundreds of controls, which makes you assume it is properly controlled but it is not,” he warns. Mr Robins warns that is without also considering the “oh shit” moments. “Think about what happens if you are five minutes late for work—maybe your alarm clock was set five minutes too late so to mitigate the risk, you might set two clocks. If you are late again at least you can show your boss that you were thinking about the risk and trying to reduce it.” Learning from past incidents is also crucial, says Mr Robins. “We realised half our incidents were related to pipe bursts, so we dealt with that and now the number of incidents has halved too. “I started out thinking risk management would be easy,” he remembers, “however, actually it is quite difficult to maintain thinking what could happen and what could go wrong. It is about maintaining the discipline of thinking what are my risks and what controls do we have?” Mr Robins also cautions: “Don’t get into the trap of thinking what will happen to risk management, don’t scare yourself to death—uncertainty is also a time of great opportunity so don’t become inflexible.” He suggests risk managers need the support of their boards, as well as good internal processes, which should be benchmarked as much as possible. “I am amazed how helpful people are at sharing information—you need to have risk champions and you need a live source of information to get a view of the risk status. You need to provide central support and it is critical someone else sense checks the effectiveness of the risk function.” Incidents resulting in some form of pollution are a daily occurrence, Willie Buitendag, of Rapid Spill Response, warns. “During transport, in the workplace, these incidents happen and they impact air, water and soil,” he says. Mr Buitendag says that, too often, people will feel they are immune from risk, for example, because they are in the food industry and do not believe their products are poisonous to the environment. However, even the most benign product will pollute an environment if it is not meant to be there and even food products need transport and packaging, which can pose risks. “Molasses, for example,” he says, “will destroy the water it lands up in. One litre of oil can pollute one million litres of water.” With new rules in South Africa around pollution, Mr Buitendag stresses that risk managers must think beyond their own borders in terms of impact. If a vehicles crashes while carrying the business’ products, then the business will be just as liable for clean-up costs. Communities often own the land alongside highways and use it for grazing, for example, and any kind of spill can destroy that good land. Alongside the physical clean-up costs, companies must also factor in reputational damage, which can often follow an incident, particularly if the firm does not respond in what is considered a proper way. “We have seen cases where firms have had an incident that was not managed properly and at the end of the day doors close,” he warns. “Smaller companies carry a bigger risk.” Outlining the new National Environment Management Act (NEMA), Ray Tlhavani, Senior Associate at law firm Norton Rose, says the objective is to provide cooperative environmental governance. Drawing together many different rules, the new Act sets out responsibility in the event of any event and a set of general obligations. NEMA, he says, contains a long list of activities to be considered, investigated, assessed and reported to the relevant competent authority. Mr Tlhavani says the law imposes strict liability and has a retrospective element and it does not matter whether the pollution was accidental or intentional. Penalties can amount to R10m or 10 years in prison and directors are jointly and severally liable. Marinda van der Merwe, BU Managing Partner at ERM Southern Africa, agrees with Mr Buitendag that stakeholder expectations are increasing. Pointing to the Marikana incident, she explains: “It turned the mining industry upside down and it is really about stakeholder expectations.” Ms van der Merwe says consumers have a lot more demands than ever before while companies are expected to commit to meeting global sustainability goals. “Sustainability risks are not just limited to environmental risks. We are starting to look at sustainability in a much more holistic way as well as looking at a changing environment,” she stresses. “We are also looking at reputational risk and the effect of reputational risks.” Pointing to the recent Volkswagen scandal as well as the BHP Billiton incident in Chile, Ms van der Merwe says: “All these incidents have an impact on shareholder value and then on the regulators. Legislation and regulation is becoming more stringent.” Running through the lifecycle of a business, Ms van der Merwe discusses the varying risks for the business and for stakeholders but she says increasingly questions are being asked at every level and this is impacting shareholder and stakeholder value. Giving live case studies, she says it is no wonder boards are reacting to the new rules and are becoming a lot more demanding, while suppliers are equally anxious to be doing the right thing and are also asking more questions. Ms van der Merwe warns against thinking of any risks in isolation, however, adding that there can be benefits to considering all the risks. “Clients were considering investment in a brownfield development. We found 15 unidentifiable and unidentified risks they had never costed for—something which made the board reconsider their position. “Risk managers play an incredibly [important] role in bringing everyone together into one room. We see risk managers as the conductor of the orchestra.” Like the others, Alex Russell, Business Risk, Governance & Compliance at Sasol Gas, sees the benefits of risk management and not just the downside of considering the bad things that could happen. “Understanding sustainability risk and the competitive advantage it can bring a company is important,” she explains. “Strategic risk and sustainability are part of a triangle and it all works together and without one, it all falls down.”

Working together creates new opportunities and competitive advantages

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