Licence to operate is still the biggest risk faced by mining companies, retaining its top spot for the third year in a row in Ernst & Young’s (EY) top 10 business risks and opportunities report for 2021.
A latest survey of more than 250 global mining executives showed that concerns over licence to operate had intensified due to the COVID-19 pandemic.
EY global mining & metals leader Paul Mitchell said COVID-19 had heightened stakeholder expectations around how miners managed and monitored all high-impact risk exposures.
In addition, the ability to manage high-impact risks – those that are rare but company destroying – is closely linked to a company’s licence to operate.
High-impact risks, in fact, climbed from seventh to second position over the year.
“Who could have predicted what would follow in 2020? At that point, we anticipated that disruption would soon hit the sector but didn’t expect it to come from a global pandemic that has now accelerated other disruptive factors,” Mitchell said.
Geopolitics and volatility now ranked as top risks (fifth and eighth positions, respectively) due to the shifting balance of power between the world’s largest economies.
Mitchell pointed that some governments had even already moved to impose tariffs or export bans to protect domestic producers.
“Fifty-six per cent of the survey respondents expect to see royalties and taxes increase as governments seek to raise revenue in response to the pandemic,” he added.
However, falling in the 2021 risks list were previously prominent issues such as the future of the workforce and digital and data optimisation.
This is a sign of mining companies gaining confidence in managing these risks, according to Mitchell.
“For many, they are considered business as usual, and for others they represent a key opportunity,” he said.
“… There is a huge opportunity to remove complexity, overcome historical obstacles to change, and accelerate a transformation agenda that will create long-term value for individual companies, the entire industry and communities.
“Now companies have the opportunity to reflect upon changes and focus on retaining the capabilities that enable agility and preparedness for future events.”
EY’s top 10 business risks in mining:
- Licence to operate (same as 2020)
- High-impact risks (up five rankings)
- Productivity and rising costs (up 10 rankings)
- Decarbonisation and green agenda (same as 2020)
- Geopolitics (new)
- Capital agenda (same as 2020)
- Workforce (down two rankings)
- Volatility (new)
- Digital and data (down three rankings)
- Innovation (down nine rankings)