Each quarter, the Board reviews the risk register, the heat map classification, and the risk evolution over the last period. As the focus remains on increasing value creation and minimizing value destruction, the discussions focus more on the critical risks having major or catastrophic impacts on Group Profits, on the risk management and mitigation measures to always steer the Group to create both short-term and long-term value for all stakeholders. This year, we have four risks in that category facing the Group: risk ID10, with catastrophic impacts and risk ID4, ID5 & ID18 with major impacts.
The name of the game remains resilience and sustainability, and risk management at Anglo African is a set of holistic activities, analysing impacts on strategy and as well as on our Capitals. Our risk management approach based on active lines of defence, ensures that any changes in risk likelihood and impact are identified, evaluated and managed appropriately, taking into consideration the Group risk appetite. This approach is described hereunder:-
The risks that are vital to achieving our strategy are identified using a top-down and bottom-up approach analysing business functions, processes and activities that created the risks. The Integrated Risk Management (IRM) Framework is used to channel the IRM process.
Risks are analysed based on their potential impacts on the group profit, and the likelihood of the risk occurring. They are then categorised in the risk register and assigned an owner.
Mitigating actions are assigned to each risk. The relevance of these responses is overseen by the ARM committee, and then presented to the Board. The risk owner is responsible for implementing the actions. Internal audit provides assurance as to the relevance and effectiveness of these mitigating actions.
The risks are managed and monitored on an ongoing basis. Quarterly risk updates are provided to the Board. Detailed reports are provided to the ARM committee every 6 months.
Something that we could not do in our previous Integrated Reports due to lack of data, we are this year visualising the changes in our critical risks over the last three years in our Risk Evolution section. This is an important activity for us, to be able to journey through the change of importance of our critical risks. 17 total risks in year 2016, evolved to 16 in year 2017, to finally 18 in year 2018. The two new risks ID19 & ID20 essentially arose from our new operations and from economic uncertainties in our main markets, while risks ID1 & ID2 were eliminated in year 2017.
The risks in the register, and in the Heat Map Classification chart, have been assessed over the short-, medium- and long-term, and provide an overview of the assessment of the strategic risks considered from a 1-2 years time horizon. The risks have been depicted utilising their residual rating (assessment of the risk after taking mitigating actions into consideration). The color of the bubbles describes our risk appetite: red being low risk appetite, orange being medium, and green being high risk appetite.