2010 Annual Report - S&B

Risk ManagementS&B applies risk management practicesacross its functions and activities.Identification, assessment andcontrol of key business risks for allactivities are performed regularly.The main risks that could possiblyhave an impact on the operationalactivities, the profitability and thecash flows of the S&B Group areidentified and managed.Strategic riskThe strategic risk for the S&B groupis that of reliance, either on key industriesor on key geographies. Nevertheless,the very nature of ourbusiness provides for a “natural”hedge, as our operations and salesare dispersed across 20 and 76 countriesrespectively and we remaincommitted to further diversificationin terms of territories and applicationsserved. Additionally, our salesare directed to 15 different marketsegments with only foundry andcontinuous casting fluxes beingabove 20% of the total.Operational risksS&B faces specific environmental,health & safety risks and potentialliabilities arising from new stricterregulations, energy prices and transportationrisks. Management monitors,assesses and acts againstall the above risks.Environmental and Health& Safety (EHS) risksIn every country in which S&B operates,it is subject to regulationsconcerning air emissions, noise,waste disposal and post-mining siterestoration.Most of the industrial activities thatform S&B’s core business have animpact, even if only a limited one, onthe environment. In the majority ofcases, that impact is inherent in miningactivities and in facilities associatedwith the downstream processingof extracted minerals.S&B strives to minimize the environmentalhealth and safety impact of itsoperations and proactively managesenvironmental risks through implementationof appropriate measures.EHS related performance is monitoredvia a reporting and measurementgrid, which includes 54 indicators, aswell as, via ad hoc EHS audits of theoperations. S&B has rolled out a CorporateEHSQ (Environmental, Health,Safety and Quality) policy, emphasizingits commitment in monitoringand effectively addressing EHSQaspects that originate from its operations.The policy criteria are applied ina manner sensitive to local cultures,customs and circumstances.S&B has certified the Quality andEnvironmental management systemsof the majority of its globaloperations as per ISO 9001 (quality)and ISO 14001 (environmental)standards). In December 2009 andMay 2010 respectively, the Health &Safety (H&S) management systemof CCF operations in India and theH&S management system of theFrench subsidiary S&B S.A.R.L.,were certified as per the OHSAS18001 standards and other operationsin Germany and Greece are inthe process of preparation to obtainsuch certification.S&B strives to provide a safe workingenvironment for its employees andsub-contractors in an effort to protecttheir health, maintain superior businessreputation and minimize potentialcompensation liabilities. In thiscontext, management makes everyeffort in properly training its employeesand sub-contractors in theuse of explosives and in the operationof heavy mobile equipment, suchas underground mine equipment,trucks, loaders, forklifts and other. Acorporate EHS committee was establishedin 2006, aiming at a gradualharmonization of policies and proceduresacross the Group.Energy riskS&B is exposed to the risk of fluctuatingprices for the various fuel andenergy sources (mainly oil, naturalgas and electricity) which form a significantpart of its production andtransportation activities. The Group'sgeographical locations and energysupply sources remain diversified,but a general and sharp increase inenergy prices may have a significantimpact on its operating profitability.Additionally, as energy supplies aresourced regionally, some local marketsmay temporarily be subject to significantbut non-recurring pricevariations. Under these circumstances,management concentrates itsefforts on reducing the effect on marginsby focusing on energy savingsand productivity improvements,while adjusting, where possible, itscommercial policies. On a globallevel, the developments in energymarkets have caused significant volatilityin recent years. Managementcontinuously monitors the exposurein the context of evaluating alternativesourcing and hedging strategies.Transportation riskGiven the geographic distribution ofits mineral reserves, industrial facilitiesand markets, as well as the natureof its products, the Groupmakes extensive use of sea-goingvessels for its transportation needs.Principal exposure is evaluated tostem from the shipments of bentoniteand perlite from the east Mediterraneanto the North Americaneast coast, Northern Europe and toa lesser extent to the west Mediterranean.Part of this exposure is mitigatedby medium-term contractswith ship-owners and ship operators.Management continuouslymonitors this risk and explores alternativecontractual and hedgingstrategies for managing the exposure.Other means of transportation(trucks, river barges and rail) arealso extensively used, where themain risks that arise, come in theform of fuel price fluctuations.46 S&B Industrial Minerals S.A.