Mining Executive Risk Study by KPMG Highlights New Challenges

KPMG’s global mining report for 2022 checked in on 301 mining executives around the world in part to find out what they saw as the top risks facing the industry. Representing the 12th such annual industry survey completed by KPMG, the results serve to demonstrate the dramatic shifts taking place in the risk landscape in mining and perhaps even broader commodities industries. After a sustained period of lock downs and disruption due to the COVID-19 pandemic, it seems that management attention is now placed squarely on ESG. 

The dynamics are changing

Historically KPMG say that executive risk focus has been commodity price risk and given the volatility of metals prices these last few months, perhaps it still should be? However, environmental considerations including new regulations jumped to the top of the perceived risks facing the industry in 2022. Yet, the risks identified by these executives also echo very well a world that is replete with geopolitical risks that can impact sourcing, supply chains and consumption. This is reflected with risks like supply chain uncertainty, global trade conflict and political instability/nationalisation also all appearing on the list of top risks. The environmental aspects are also seen in risks like community relations and social license to operate and permits. Commodity price risk is still important, but it has dropped to second in rank according to the report. Meanwhile, talent is also seen as another emerging risk and global pandemic is no longer considered a top 10 risk. 

1Commodity priceEnvironmental considerations including new regulations
2Global pandemicCommodity price
3Economic downturn/uncertaintyCommunity relations and social license to operate
4Community relations and social license to operatePolitical instability/nationalisation
5Environmental considerations including new regulationsGlobal trade conflict
6PermitsAbility to access and replace reserves
7Political instabilityPermits
8Access to capital, including liquiditySupply chain uncertainty
9Ability to access and replace reservesTalent crisis
10Regulatory changes and compliance changes/burdenRegulatory changes and compliance changes/burden
ESG continues to be a major issue

Clearly, ESG became a serious issue for all in the commodities space in 2021 as various bodies and Governments around the world started to focus in on net zero and carbon in a very systematic manner. Although the focus is there a lot of the detail remains unclear and in part, it is this, that increases the ESG risk considerably – lack of clarity around new regulations, standards, and audits. ESG also impacts financing and liquidity since many of the traditional financiers are now also insisting on attention environmental measures and activist shareholders are also working behind the scenes. These new regulations, standards and audits will impact every aspect of a miners’ business from exploration and planning through to supply chain management. Certainly, Brady is placing much emphasis on understanding and readying our software solutions in this area. 

However, although the survey was performed early in Q1 2022 by KPMG, the Russia-Ukraine war has since had a massive impact. Supply uncertainty resulted in massive volatility for certain metals, sanctions and further geopolitical supply chain disruption has also taken place at a time when raw materials and particularly battery metals are needed to fuel the energy transition and broader carbon initiatives. This has resulted in some hesitancy on the part of Governments and regulators with respect to certain aspects of ESG and it remains to be seen how all these conflicting drivers will be reconciled. What it does mean, however, is more change, greater risks across the board and price volatility. Inflationary pressures and FX considerations are now also very key risks meaning that liquidity and funding are rising as risks to be managed.

The role of CTRM technology

That technology will play a role in managing these risks is certain and 87% of the executives polled believe that technology and innovation will play a role in meeting the ESG challenge specifically. Technology and software will also aid in other areas like supply chain management, risk management, optimisation and more and as KPMG conclude – “Whatever the application, it’s clear that increasing technology adoption is very much on the executive radar,” and as one of the executives quoted in the study says, “There is an opportunity for growth from embracing technology. You don’t necessarily need to buy or find more ore. There’s technology emerging now that is starting to let us reduce cut-off grades, for example, and produce more of what we already have and do that profitably.”  – Jeff Parr Vice Chairman, Agnico Eagle Mines Limited. Brady will be one of those companies working to ensure that this vision is turned into reality. 

Written by

Tasja Botha

Business Lead, Commodities Portfolio

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Mining Executive Risk Study by KPMG Highlights New Challenges