Anglo American Annual Report 2012

OPERATING AND FINANCIAL REVIEW RISKEFFECTIVE RISKMANAGEMENTDavid ChallenChairman, AuditCommittee“Understanding our key risks and developingappropriate responses is critical to our future success.We are committed to a robust system of riskidentification and an effective response to such risks.”Anglo American assessment of strategic, operational, project and sustainable development related risks1. Identifying risksA consistently appliedmethodology is used to identifykey risks across the Group; atbusiness units, operationsand projects. This has beeneffected through thedevelopment, roll-out andongoing implementation ofa Group integrated riskmanagement standard.2. Analysing risks andcontrols to manageidentified risksOnce identified, the processwill evaluate identified risks toestablish root causes, financialand non-financial impactsand likelihood of occurrence.Consideration of risk treatmentsis taken into account toenable the creation of aprioritised register.3. Determiningmanagement actionsrequiredEffectiveness and adequacyof controls are assessed.If additional controls arerequired these will be identifiedand responsibilities assigned.4. Reporting and monitoringManagement is responsible formonitoring progress of actionsto treat key risks and issupported through the Group’sinternal audit programme,which evaluates the design andeffectiveness of controls.The risk management processis continuous, key risks arereported to the AuditCommittee with sustainabilityrisk also being reported to theS&SD Committee.HOW WEMANAGE RISKManagement of risk is critical tothe success of Anglo American.Our Group is exposed to a varietyof risks that can have a financial,operational or reputational impact.Effective management of risksupports the delivery of ourobjectives and the achievementof sustainable growth.HOW DOES RISK RELATE TOOUR STRATEGIC INTENTS?Risks can arise from events outsideof our control or from operationalmatters. Each of the key risksdescribed on the following pages canhave an impact on our ability to achieveour strategic intents. This is illustratedby reference to each of our strategicintents; namely:• Investing in world class assets inthe most attractive commodities• Organising efficiently and effectively• Operating safely, sustainablyand responsibly• Employing the best people.As mining is a business that can spandecades, many of its attendant risksare long term in nature, and theremay not be any significant changeyear on year. During 2012, however,we experienced changes in our riskprofile; these are indicated in eachof our risk descriptions, withappropriate commentary wherewe have seen change.We also recognise that risks cannotbe viewed in isolation. Emergenceof one risk may be caused by one ormore other risks or may cause anotherrisk to emerge. For example, projectdelivery risk can be influenced byrisks relating to supply, inflation,political matters, legal and regulatoryrequirements, infrastructure orcommunity relations. Thisinterconnectivity and the relationshipof risks to our abovementionedfour strategic elements requiressignificant emphasis to be placedon the management of risk and theeffectiveness of our risk controls, withthe identification and understanding ofour risks being the first step in what is acontinuous process.48 Anglo American plc Annual Report 2012