REG - Rio Tinto - Annual Financial Report

Rio TintoAnnouncement

22/02/2021 07:00

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
Illtud Harri
M +44 7920 503 600
 
David Outhwaite
T +44 20 7781 1623
M +44 7787 597 493
 
Media Relations, Americas
Matthew Klar
T +1 514 608 4429
 
Media Relations, Asia
Grant Donald
T +65 6679 9290
M +65 9722 6028
 


Media Relations, Australia
Jonathan Rose
T +61 3 9283 3088
M +61 447 028 913
 
Matt Chambers
T +61 3 9283 3087
M +61 433 525 739
 
Jesse Riseborough
T +61 8 6211 6013
M +61 436 653 412




 
Investor Relations, United Kingdom
Menno Sanderse

T: +44 20 7781 1517

M: +44 7825 195 178
 
David Ovington
T +44 20 7781 2051
M +44 7920 010 978
 


 
Investor Relations, Australia
Natalie Worley
T +61 3 9283 3063
M +61 409 210 462
 
Amar Jambaa 
T +61 3 9283 3627

M +61 472 865 948




 
Group Company Secretary
Steve Allen
Rio Tinto plc
6 St James's Square
London SW1Y 4AD
United Kingdom
T +44 20 7781 2000
Registered in England
No. 719885


 
Joint Company Secretary
Tim Paine 
Rio Tinto Limited
Level 7, 360 Collins Street
Melbourne 3000
Australia
T +61 3 9283 3333
Registered in Australia
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 defence


Responsibilities


Accountability of




1st - All operational leaders 


Identification, management, verification and monitoring of risks and controls


Management 




2nd - Centre of Excellence and Areas of Expertise


Oversees risks, control effectiveness, advice on capability and ensures objective assurance against Group's policies, standards and procedures 


Management 




3rd - Group Internal Audit 


Provides independent verification that risks and internal controls are being managed effectively


Board and Board committees



·              
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



·                        Principal risks


·                      


·                      Focus




1


Living our corporate values


Strategic; ESG




2


Geopolitics impacting trade and/or investment


Strategic




3


Transition to a low-carbon future


Strategic; ESG




4


Execution of acquisitions and divestments


Strategic




5


New ore resources


Strategic; ESG




6


Strategic partnerships


Strategic; ESG




7


Relationships with communities


Strategic; ESG




8


Attract and retain requisite skilled people


Strategic; ESG




9


Commodity economics


Economic




10


Access to capital through economic cycles


Economic




11


Resources to reserves


Economic




12


Capital project delivery


Economic




13


Change in tax regulations


Economic




14


Safety incident or major hazard event


Operational; ESG 




15


Cyber breach


Operational




16


Physical impacts from climate change


Operational; 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 and procedures, laws or regulations


Operational; 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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