World Monitor Mag WM_June 2018 web - Page 41

EXPERT OPINION keep abreast of regulatory changes and maintain open dialogue with regulatory bodies. 6. Cash optimization (1st in 2016) A recovery in commodity prices and successful cost-cutting initiatives have resulted in higher margins and improved cash generation. It is therefore critical for companies not only to prioritize effectively their cash commitments, but also to continuously improve their cost structures to cushion themselves from adverse price movements and anticipated extra expenditure. 7. Social license to operate (SLTO) (4th in 2016) Occupational accidents and diseases, as well as environmental issues may have an adverse impact on the image of industry players and the sector as a whole. To retain their SLTO, companies should closely monitor and address the needs and expectations of all stakeholders and shift from a reactive communication model to a proactive one. 8. Resource replacement (new) Exploration costs are as important for mining and metals companies as innovation costs for technology companies. Exploration is the first cost to be cut as commodity prices decline but it is not the first to be restored. It is, however, essential for sustainable sector growth. To address this risk, companies, in addition to increasing exploration spending, may form strategic partnerships and enter joint ventures, as well as invest in new projects or mines. 9. Access to and optimization of energy (7th in 2016) Mining and minerals processing requires a large amount of energy. To secure such energy supply, companies use a mix of energy resources, including fossil fuels, hydroelectricity and renewable energy. Following the global trend towards reduced emissions and water usage, industry players need to develop an effective energy policy and choose appropriate energy resources. 10. Managing joint ventures (8th in 2016) Finally, it should be noted that only three business risks out of the top 10 from 2008 are still critical today. During the supercycle, such risks as skills shortage and industry consolidation topped the list. Today, risks related to digital technology and cybersecurity are most critical. It is hard to predict which risks the industry will face in 10 years. To remain competitive and ensure sustainability companies therefore have to be highly flexible and adjust quickly to new conditions. The full version of the report in English is available at: /ey - 1 0 - r isks- mms -17-18 Companies usually enter into joint venture (JV) arrangements for risk mitigation. However, when JVs are managed badly, they can be extremely disruptive, particularly to project schedules and key decision points. supported by EUROBAK 39