Investigating the value of integrated risk management strategies at a South African opencast colliery

Abstract

Economic markets continue to become more complex, creating challenges for many mines. The scope, complexity, and interdependencies of emerging risks necessitate the need for a more robust and integrated strategy to risk management. To this effect, integrated risk management (RM) or Enterprise Risk Management (ERM) has been the topic of increased attention in the coal mining industry. It is critical to understand RM because of the high-risk environment that coalmining intrinsically is. Not reaching higher RM maturity levels poses an immense risk to the mine in terms of potential revenue losses (millions of Rands), legal implications to the mine, job insecurity and thus livelihoods of personnel, value delivered to stakeholders as well as ultimately the sustainability of the mine. The very real danger to life and limb faced by miners is also a fundamental risk of modern coal mining. The need for the implementation of a formal RM strategy/framework is growing, as mines becomes more competitive and threats become greater with every passing year. While safety, health and environmental risks are subject to tighter controls every year, coalmines face a rising tide of various other risks, which will be discussed in this study. The primary research objective of the study is to investigate if integrated RM is perceived to be a value adding strategic function to the mine with specific reference to site managers, employees and contractors as well as if it is an effective tool to the mine. The study also evaluated whether RM affects productivity and it furthermore highlighted the critically high ranked risks for the mine to address. Finally, the study aimed to determine if there was a change in RM perception especially from a safety RM mind-set to an integrated RM or ERM focus after knowledge about integrated RM has been gained via the questionnaire. An empirical study was conducted on 151 participants at an opencast colliery in South Africa. The majority of the participants agree (77.5%) that RM is valuable and is thus effective at the colliery to mitigate the various risks it is exposed to. Managers, employees and contractors strongly agree (88.0%) that RM is effective at the colliery to mitigate these various risks. The participants agree (71.3%) that the risks listed in the questionnaire are risks that must be addressed by the mine because these risks are critical and must to be mitigated as much as possible. The risk that was ranked as the most serious current risk is the recent financial credit rating downgrade because this affects the future of the mine. Ranked in second place is political influence and instability especially in Eskom tied coalmines with the third most critically ranked risk being safety. Most personnel initially thought that RM was mostly about safety whereby 61.59% of individuals believed safety accounts for 90% of RM and the other risks the remaining 10% of RM. However, Participants agree (66.8%) that their risk perception has to a certain extent changed after going through sections B1, B2 and B3 of the questionnaire, thus the ranking of safety RM in third place and not first place (evaluated in section C). The participants also agree (75.3%) that the productivity of the mine is affected by integrated RM strategies. Managers, employees and contractors tend to have different views on the extent of RM implementation or adoption at the mine. Mangers feel that RM is in order and under control whereas employees and contractors beg to differ. Managers and employees in general believe that contractors are a higher risk and thus need to be managed with more caution. Managers see mechanisation as the future whereas employees and contractors feel that it is a threat to their jobs and are therefore not in support of it. Another key problem facing majority of mining companies is the skillset deficiency in the industry. One significant risk discussed is the threat of substitution of coal via greener and cleaner non-carbon based fuels for energy e.g. renewables. The researcher recommends that the mine implement an integrated RM strategy such the ISO 30001 or the COSO framework that is aligned with effective internal controls. The intense focus on ‘only' safety needs to be changed to accommodate an integrated RM mind-set. Therefore, RM training about the various risks that affect the mine and the coal mining industry must be given to all personnel. There must also be a feedback system in place in order to ensure the effective management and communication of the RM strategy to the entire workforce. The mine also needs to appoint a chief risk officer or a senior manager (for the time being) for this purpose. Full ‘Board' and ‘top management' support of RM is vital and must be attained because it is pertinent to the achievement of the mine's strategic RM objectives.