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  • Mining: Risk Management considerations post COVID-19
Articles:

Mining: Risk Management considerations post COVID-19

02 July 2020

Carla Clamp , Director |

Covid-19 has changed the world forever, and based on what scientists and the medical experts are telling us, Covid-19 is not going away anytime soon. We therefore need to understand our new reality, and what risk management considerations need to be included in our planning going forward.

More often than not, there is no warning when issues arise. Simulations to plan for worst case scenarios before they arise should be a focus for all risk managers.  This will enable agile responses as circumstances change.  

Uncertainty is one of the key dilemmas currently facing organisations. Management’s key focus will be on dealing with the pandemic and restarting the business, while keeping up with changes as they arise; and figuring out the right low-risk decisions to make for all stakeholders. We believe that trying to balance the needs and requirements of all your stakeholders should be a key concern for all organisations, as the lockdown eases and we start to return to work and face the new normal.

As Covid-19 sweeps the world, the mining sector is just one of many that has been adversely affected. The risk landscape has changed, with quarantines preventing people and employees from going to work, uncertainties across the supply chain - affecting commodity prices, and concerns related to the health and safety of the workforce as business slowly starts to open its doors.  

A global pandemic will not have been a significant risk on many organisation’s risk register. Some are seeing this pandemic as a black swan event, but there have been many that have been predicting such an event for a while.

This article explores the consequences of the uncertainty and risks that need to be considered and mitigated as the economy starts up again.

Ethical performance and the decisions that companies take are going to be key going forward and the scrutiny will be on companies that have not managed this risk well.

With production stoppages due to the national lockdown, and the uncertainty around levels of restriction, business continuity and resilience are key strategies that all organisations need to contemplate to mitigate risks.

Understanding the new risk profile under the “new normal” way of operating is important. However, it is just as important for companies to consider the opportunities to change the way we do things to improve outcomes through a focus on risk mitigation, as there is no doubt, all organisations will be facing new and different risks as they navigate through the pandemic.

The key risk areas and scenarios that should be considered when updating the risk register include:

Stakeholder engagement and communication

This is one of the most important risks to manage, especially for mining companies that have many different stakeholders with varying interests from workers and the community, to suppliers, regulators and clients. Understanding and balancing these will help to ensure a positive outcome for the company and the stakeholders concerned.

These risk mitigation measures must include ensuring compliance with DME disaster management requirements, whilst still considering the social licence to operate and the safety of all stakeholders entering the mine.

Safety of employees, and by some extension, the safety of the community is going to be a significant risk to manage. This is due to the fact that there is limited access to a number of resources in the areas that most mines operate; including the scarcity of water to ensure continuous hand washing, the tight operating conditions in shafts, lifts and hostels on the mine, which make it very difficult to implement social distancing.

Risks related to the relationship between miners and mine owners could be one of the most strained in the longer-term. Mining unions across the world are already struggling to ensure their members are treated fairly and safely at work, and those mines that remain open during the pandemic will have a hard task to reassure unions that their operators have their workers’ safety top of mind. Some difficult decisions need to be made.  The main aim of the global lockdown has been to save lives – but if there are no or limited jobs for workers to return to, how are they going to survive and feed their families? This needs to be a delicate balance rather than a clear choice.

Financial Stability and Sustainability

Financial sustainability is also a key risk that needs to be managed carefully. The global Covid-19 pandemic is poised to create a global recession. Commodity prices are unstable and there is no answer to how long the global economy will take to bounce back, or the shape that the recovery curve will take. The ability to manage and mitigate this risk is very dependent on the external environment and very uncertain predictions. It is clear that work stoppages due to Covid-19 infections are going to create further disruptions, especially if teams or crews of miners are affected at the same time and have to down tools and be quarantined for up to 14 days at a time.

In addition, the costs of responding to the pandemic, ensuring safety of miners and the community, the treatment in mine clinics and the establishment of isolation units for quarantining those that test positive, are all adding to the financial challenges.

There are other difficult decisions that may need to be made to ensure sustainability of the organisation. These may include reduced hours and pay, putting people on compulsory leave or retrenchments, as a last resort. These actions need to be considered well in advance and communicated to the workforce so that they do not come as a surprise, but as a way to keep the business afloat during this difficult time. Adequate planning, re-prioritization of funds and maximising the use of government support policies and relief packages should be high on the list of actions for consideration.

Succession planning

Succession planning is even more important in these uncertain times. Although it is a key governance requirement, it is often neglected because it is a difficult topic and can create unhappiness in the workplace if not handled sensitively. Having succession plans in place for key roles and leadership positions is critical. If some or many of these positions are impacted by Covid-19, there will be a huge strain on the leadership team. This will be exacerbated if there is no clear plan on who will step into the shoes of those that are impacted.  A pre-determined plan on who should take over when someone is indisposed will assist in avoiding disruption and ensuring continuity. The considerations also need to factor in planning for an extended loss of the key person due to quarantine and treatment, reorganisation of the workforce and teams, looking at use of cross-functional response teams that can be deployed as required, re-looking business models to take into account remote working or enforcing social distancing through shift work, staggering start or work times, reduced hours etc.

The plan will also need to take into account whether the successor can step into a role without intervention, or whether development, shadowing and additional training will be required to ensure that there is a smooth transition when leadership or changes in key positions become necessary.

Supply Chain Management

As a result of global lockdowns, there have been shut downs and delays in the supply chains of many companies and this will also be a key risk that must be managed. A secure supply chain is important to all businesses. The longer the lockdowns continue, the higher the likelihood of supply chain disruptions increases — impacting on raw materials, goods manufactured and logistics. However, getting supplies into affected areas will also be a challenge.

Healthcare companies will likely face unique impacts, as demand for supplies like protective masks and trained professionals has already increased, but this also spreads to other supply chains. Although the consequences of a pandemic event are hard to predict, the risks always exist and are augmented with further globalization and integration of supply chains.

Mitigation considerations should include scenario planning, pro-active planning and the possibility of supporting SME’s and local suppliers, with an additional focus on how to make supply chains more sustainable and resilient in the longer term, with a key focus on business continuity.

Cyber-security

Although this risk may have been on your organisation’s risk register, there has been a dramatic, sudden, and unexpected increase in people working, learning, teaching, and consulting from home as a result of the Covid-19 pandemic. This largely unplanned transition from office-based and school-based network access to remote/home access has created some unique capacity, operational, and cybersecurity challenges. Many organisations who conduct digital transformations have realised gains in digital productivity, via increased speed and access to data, more rapid data analysis, and related data storage cost savings, especially when cloud- based data storage is included.

However, these same organisations have encountered increasingly costly cyber-attacks in the form of socially-engineered spear-phishing attacks, business email compromise (BEC) or spoofing attacks, and/ or ransomware attacks, because they did not adequately or proactively begin their digital transformation with cybersecurity in mind. 

The key to successfully mitigating this risk is to begin all digital transformation projects with cybersecurity in mind. By engaging with cybersecurity experts from the start of a project, or new business venture, an organisation can ask the right questions then develop a proactive and threat-based cybersecurity program. In the digital age an organisation can only achieve information integrity and data privacy through effective cybersecurity.   

Safety and security

Keeping employees safe is one of the key risks that most organisations are facing. Mitigating this risk is difficult when there are still so many unknowns about the virus. It means ensuring government regulations are fully complied with, including ensuring that staff are wearing appropriate PPE, providing employees with masks, sanitisers and sufficient access to water to ensure that employees can function effectively. A system for gathering information for contact tracing in the event of a positive case must be established, while still protecting personal information per privacy regulations.

Mitigating this risk needs consideration of different options to ensure flexibility beyond remote working opportunities by accommodating different start times, safe transfers to and from the mine sites, staggered working hours and general flexibility on when, where and how work gets done.

Emotional wellness of your workforce

Do not underestimate the emotional wellness of your team during this crisis. Employees will be distracted by health issues of their family, concerns over catching the virus from being at work, day-to-day concerns at home, being a home-school teacher, concerns regarding job security and financial security. This will make the separation of work and home-life concerns practically impossible.

As part of managing this risk, employers should assist their staff by creating a wellness platform or other online sharing tools for giving employees ideas on how to address family needs, acknowledging employee fears and stress levels and providing access to counselling should they need it. It is important to empower employees to contribute to the most critical needs of the business by clearly communicating work priorities and aligning resources with these.

Keeping in touch with employees is also important to allay fears, so team leaders touching base with their teams is critical. Providing on time communication about how the business is doing, achievement of objectives and any changes to salary, work days, safety measures and other news needs to be continual and timely. Transparency and clear messaging on key issues during uncertain times will be the only way to manage this risk. A healthy, productive and effective workforce will be key to also achieving the production goals and to ensuring that organisations can meet customer needs.

Conclusion

The potential impact of the Pandemic should be a key consideration for the Board of Directors during this time to assist management with direction and guidance, and to make sure that Management have re-assessed their risk profiles to ensure adequate consideration of the risks created by the pandemic. The aim will be to ensure a quick response to any disaster, communication plans and plans to recover or ensure business continuity. The art of rapid risk monitoring, understanding the speed at which risks can change, understanding whether the risk is increasing or decreasing should be areas of focus.

This will ensure that we are able to respond accurately and timely by managing continuity. Ensuring adequate reporting and communication to all key stakeholders during this time will be very important in ensuring that your organisation is able to weather this storm and come out the other end stronger.

Adequate risk mitigation in these difficult times will also help to ensure that the organisations reputation remains intact when the pandemic is over. With time, what seems abnormal now, will become the new normal going forward.

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