Risk management
	RISK PHILOSOPHY
	It is Kumba’s vision to outperform the mining and mineral sector in creating value for stakeholders through exceptional people and superior processes. To achieve this: We are committed to develop and maintain an integrated, enterprise-wide risk management programme (ERM). In this process, Kumba will apply a logical, systematic and repetitive methodology that will identify, analyse, assess, treat and monitor all risks, whether they are insurable or not We communicate accurate and timeous information to people within the organisation tasked to minimise losses and maximise opportunities, to assist them in achieving their respective strategic business objectives We recognise the complexity and diversity of risks that face Kumba and we are integrating all our efforts to maximise opportunities and minimise exposures to risk and to reduce it, where necessary, to levels commensurate with our risk appetite.
	RISK APPETITE
	The board, guided and assisted by the executive risk management committee, defines, approves and communicates Kumba’s risk appetite or risk-tolerance capacity.
	The risk-bearing capacity (tolerance) of Kumba is a function of the company’s ability to endure unforeseen losses and the effect such losses may have on the company’s share value and market capitalisation.
	Risk-bearing capacity cannot be expressed as a static value as it constantly changes due to: International supply and demand for our products Production cost which in turn is constantly influenced by changes in input costs The quantity and value of fixed and current assets used in the production process.
	The main objective for the determination of the risk-bearing capacity is to establish the optimal risk-tolerance capacity of Kumba.
	The most effective way for the board to demonstrate its risk appetite (and commitment to the ERM programme) is to exceed shareholder expectation in terms of performance. Through its actions and proven commitment, the board can clearly demonstrate: How much risk will be allowed to be taken to achieve strategic business objectives That risks that could impact on performance have been identified, tracked and monitored How the process could potentially increase shareholder value.
	A clearly-formulated risk appetite or risk-tolerance strategy communicated by the board in terms of monitoring and governance procedures, a centralised ERM hub dedicated to strategic direction and policy development and risk committees operating at divisional level expediting ERM policy reflect an embedded ERM programme.
	Our ERM approach is aimed at: Minimising losses caused by adverse events Reducing surprises to earnings and reputational damage Contributing to the protection of shareholder value.
	Kumba’s view is that business is about taking calculated risks, weighed and measured against the company’s risk appetite.
	RISK CULTURE
	Kumba strives to achieve zero tolerance for compliance failures and to speedily identify and rectify any deviation. Constant emphasis is placed on the promotion of a risk-conscious culture throughout the company and this proactively supports the achievement of strategic business objectives.
	Continuous monitoring of the existing and changing risk profile of the company is the responsibility of each risk owner.
	Divisional risk committees play an important role in the identification of operational risk as well as in the development and application of generic mitigating strategies. They also have a risk oversight function by being closer to activities that could cause an adverse outcome.
	The committee operates under the chairmanship of the head of the business centre and meets once every quarter. The group risk manager attends all these meetings.
	At Kumba, a healthy exchange of information on potential, new and resolved risks occurs across commodities. This management communication underscores Kumba’s risk-conscious culture that is embedded vertically as well as horizontally in the company.
	Integrated, enterprise-wide risk management programme firmly in place
	RISK MANAGEMENT OBJECTIVES
	The ERM process adopted in Kumba is solely aimed at providing an effective and consistent risk management methodology. The process is continuous, consisting of well-defined steps which, when taken in sequence, support better decision-making by contributing a greater insight into risks and their impacts. Risks from all sources are identified and once these surpass the materiality threshold, a formal process begins in which casual factors and consequences are identified and the correlation with other risks and the current risk-mitigating strategy are reviewed.
	Enhanced decision-making through greater insight into the impact and likelihood of risk
	TOP RISKS
	Probability of   Risk Impact occurrence Control measures • Impact of continued rand and Australian dollar strength on profitability   High     High      Kumba business improvement programme launched with rigorous tracking. Judicious hedging policy.         • Sluggish titanium slag market recovering slowly, affecting heavy minerals’ profitability High Medium Analysis of TiO2 market forces; cost reduction-initiatives; sustained focus on continuous improvement and ramp up to position for recovery.     • Changes in environmental legislation can result in increased rehabilitation costs and/or demand on cash resources High Medium Increased emphasis on ongoing rehabilitation during life of mine; proactively study and manage proposed legislation; implement best practices; demonstrate responsible corporate citizenship.       • Optimum value release for Kumba combined with mining charter compliance not achieved High Medium Coordinated process between Kumba and its major shareholder; business models to assess scenarios and implications; pursue sound value-release initiatives.     • Insufficient availability of zinc concentrates of acceptable quality and cost High Medium Secure alternative suppliers; long-term concentrate off take agreements from foreign mines; maximise Rosh Pinah and Black Mountain offtake.     • Delays in infrastructure capacity expansions constraining growth in iron ore exports High Medium Ongoing constructive engagement on operational efficiency and initiative to ensure short- and medium-term additional capacity through a project-managed by a joint Kumba/Transnet steering team. New contract for the transport and handling of export iron ore and additional capacity signed.           • Inability to deliver growth and add value for Kumba stakeholders Medium Medium Maintain bankable capital structure. Strategic equity partners. Capital raising.   • Delay in RBCT Phase V will result in higher distribution cost and lower export prices Medium Medium Ongoing engagement of role players in Phase V expansion project and ensuring through put commitments by participants.
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