Risk management

Figure below indicates whether management are operating within the risk tolerance levels set for them by the Board. Tolerance levels are reviewed and reset every year as part of our annual risk management plan.

Risk performance (pre-unbundling)

	Risk area	Risk appetite	Tolerance level	Targets	C2009	C2010	C2011	C2012	x\√
OPTIMISING OUR OPERATIONS	Safety	Zero Harm	Zero Harm	FIFR2 – Zero	0.16	0.11	0.12	0.11
				SIFR3 – 25% less	2.29	2.22	2.64	2.40
				LTIFR4 – 25% less	3.91	4.39	4.69	5.161
				DLIFR5 – 25% less	180	198	208	227
	Health	Zero Harm	Zero Harm	Less than 5% 0,1 mg/m3	4.3%	3.2%	1.2%	4.7%
				All Machinery < (110 dB(A))	5.9%	3.0%	0.9%	0.8%
	Environment	Zero Harm	Zero – level 4 and 5 incidents	Zero	Zero	Zero	Zero	Zero
	Gold delivery	5Moz/2015 Short-term NCE 20% Long-term NCE 25%	95% compliance	NCE6 20%	3.58 20%	3.50 16%	3.49 25%	3.25 17%
GROWING GOLD FIELDS	Capital Projects	Project delivered on time/budget as per current schedule	7 – 10% overrun	South Deep Chucapaca Far Southeast Arctic Platinum
	Mergers and Acquisitions	Proper assessment of risk returns commensurate with the risk	IRR 5% – Near-mine IRR 10% Greenfields	As per IRR7	On track	On track	On track	On track
	Exploration	Appropriate balance between geological potential and political risk	Leaning towards greater geological potential in higher risk areas	As per GBAR8	On track	On track	On track	On track
SECURING OUR FUTURE	Human Resources	Pipeline of scarce and critical skills	60% – successor cover ratio for top 250 employees	60%	54%	50%	70%	100%
	Licence to operate	Global leader in sustainable gold mining	Full compliance with all legal and community commitments	Full compliance	100%	100%	100%	100%
	Ethics and Corporate Governance	Full compliance – SOX and Substantial compliance to King III	No material/ significant failures	Nil	Nil	Nil	Nil	Nil

The top 10 risks and mitigating activities on the website are the same as those reflected in the Annual Report.

The heat map below sets out the top 10 Group risks, as identified through our Enterprise Risk Management (ERM) process. This represents the Group’s top operational and strategic risks, based on our operation- and region-level risk registers as at the end of 2012.

We formalised a Combined Assurance approach following the approval of the Audit Committee in November 2012.

The approach is based on the application of three levels of assurance on all our significant risks:

• Level 1: Management self-assurance
• Level 2: Internal assurance
• Level 3: Independent assurance

Combined Assurance aims to:

• Provide appropriate levels of assurance on all significant risks facing the Company
• Demonstrate due diligence by management
• Monitor the relationships between various assurance providers and their activities

By adopting this approach, we are doing everything reasonably practical to give the Board assurance that we are executing effective control measures to avoid and/or mitigate our risks – thereby ensuring the continuity and sustainability of all our operations.

The process is monitored by our risk, internal control and compliance functions. Recommendations are made to management for additional assurance where required or to identify areas where assurance is duplicated.

The Combined Assurance approach is formally reviewed every year as part of our annual risk management plan.

Mitigation strategies for top-10 risks (pre-unbundling)

Risks		Mitigation strategies
		• Reintegration of the cultural transformation and internal safety engagement pillars into the Safe Production Management Strategy • Enhanced safety enforcement measures, including increased resourcing • Introduction of a Safety, Health and Environment Committee at South Deep, chaired by the CEO • Engineering-out of safety risks, including fall of ground hazards • Establishment of a seismic task team and upgrading of secondary support standards
		• Engineering-out of health risks, including tip filters, mist sprays, settling agents and enhanced dust measurement • Enhancement of personal protective equipment performance through our Respiratory Protection Programme • Detailed preparation to determine potential litigation and liability – including consolidation of historical data
		• Portfolio Review to optimise cash generation and investment payback • Acceleration of destress mining at South Deep to support production ramp-up targets • New, high impact and strongly incentivised ‘24/7/365’ operating model at South Deep and development of new training and maintenance facilities • Stabilisation of production at Damang, through the upgrading of the processing plant and re-evaluation of existing Mineral Resource model • Consolidation and optimisation of owner-mining at our Australian and West African operations
		• Firm defence of the gold mining sector’s existing two-year Collective Wage Agreement – whilst bringing forward changes to job grades and entry level wages (p139) • Increased engagement with unions at regional and national levels • Strong emphasis on responsible security provision and the avoidance of violence • Close engagement with mining peers, unions and government to establish a mutually acceptable labour negotiation framework for the next formal wage negotiation in 2013 • Increased focus on enhanced, direct communication with our workforce
		• Submission of a new, enhanced ‘second round’ Social and Labour Plan (SLP) for South Deep, including accelerated distribution of funds from the South Deep Education and Community Trusts with greater involvement from relevant outside stakeholders • Implementation of a comprehensive programme to upgrade accommodation, with a strong focus on the construction of family units, promotion of home ownership and dismantling of legacy hostel issues • Ongoing programmes addressing local procurement, broad-based transformation, training and skill development and enhanced community development programmes • Establishment of grass-roots Sustainable Development Forums and comprehensive stakeholder mapping/analysis in South Africa
		• Geographical diversification to broaden operational base and reduce overall risk • Enhanced political monitoring and government engagement (direct and indirect) • Establishment of Group-wide crisis management programme, including Corporate Crisis Management Support Team, Regional Incident Response Teams and Emergency Response Teams
		• Development of a new Community Handbook and community engagement tools by the Sustainable Development department to ensure consistent, best practice approach across all operations and projects • Delivery of shared value through our Socio-Economic Development contributions • Minimisation of negative environmental impacts – with a focus on water quality and availability under our new Water Strategy • Review of the Ruggie Framework and other human rights standards to analyse human rights performance at Gold Fields and ensure best practice
		• More transparent communication with host governments on the state of the industry, cost structures and future outlook, with a view to fostering a better understanding of the sector’s challenges and competitive position • Enhanced measurement/communication of our local economic shared value contributions • Ongoing and constructive engagement with host government on a bilateral and multilateral basis (p52, 150)
		• Prioritisation of cash generation with respect to both current production and future growth – including Gold Fields Portfolio Review and delivery of full run rate at South Deep • Focus on leveraging the gold price for investors through the payment of strong dividends • Transparent measurement and communication of all-in costs using Notional Cash Expenditure
		• Continuous business process re-engineering to maximise efficiency • Portfolio Review to improve cash flow generation • Increased geographical and currency diversification • Strict application of stage gate process to ensure future growth projects contribute to cash generation