Risk management
Effective and integrated risk
management sits at the heart
of true business sustainability.
Gold Fields has a well-established
Enterprise Risk Management (ERM)
process, which not only covers our
‘traditional’ operational and business
risks, but also our environmental,
social, health and safety risks.
The overriding purpose of the
ERM process is to help Gold Fields
become more resilient in the global
business environment and achieve
its strategic objectives – to grow
Gold Fields, to optimise its
operations and to secure its
future. It also supports our efforts
to achieve the highest levels of
corporate governance, as well
as full compliance with the risk
management requirements of South
Africa’s King III Code.
The ERM process is comprised
of two integrated and well-aligned
components: operational risk
management and strategic risk
management.
It is aligned with the ISO 31000
international standard on
risk management.
During the year, our international
operations were surveyed by the
IMIU (International Mining Industry
Underwriters) and our South African
mines by Zurich Risk Engineers,
part of Zurich Re. Both agencies
noted continued improvement in risk
management at these operations
and all of the mines are placed in
the top quartile of the approximate
400 mines assessed.
Gold Fields has operated for 11
years without making a property
claim into the insurance market.
IMIU risk management survey of our operations outside South Africa – showing improvements in all areas
| |
|
2009
|
2010 |
|
|
| |
|
%Risk Reduction |
Risk Exposure Number |
%Risk Reduction |
Risk Exposure Number |
|
| |
Agnew |
79 |
40 |
80 |
26 |
|
| |
St Ives |
79 |
28 |
80 |
26 |
|
| |
Australasia Region |
79 |
34 |
80 |
26 |
|
| |
Damang |
74 |
27 |
74.6 |
27 |
|
| |
Tarkwa |
74 |
21 |
76.5 |
17 |
|
| |
West Africa Region |
74 |
24 |
75.5 |
22 |
|
| |
Cerro Corona |
82 |
19 |
82.9 |
14 |
|
| |
South America Region |
82 |
19 |
82.9 |
14 |
|
Zurich risk management survey of our South African operations – showing a significant re-rating at South Deep and improvements at Beatrix and South Deep
| |
Zurich Criteria |
Beatrix |
KDC WEST
(Driefontein) |
KDC EAST
(Kloof) |
South Deep |
|
| |
Year of survey |
2009 |
2011 |
2009 |
2011 |
2009 |
2011 |
2009 |
2011 |
|
| |
1. Property
(Fire protection standards) |
79 |
62 |
71 |
62 |
74 |
61 |
30 |
29 |
|
| |
1.Business Interruption
(Flexibility / ability to recover) |
35 |
37 |
32 |
32 |
32 |
32 |
58 |
29 |
|
| |
1.Property
(Critical spares) |
46 |
47 |
46 |
46 |
46 |
46 |
70 |
64 |
|
| |
1.Business Interruption
(Spare capacity) |
35 |
36 |
15 |
15 |
21 |
21 |
96 |
43 |
|
| |
SOUTH AFRICA REGION |
49 |
46 |
41 |
39 |
43 |
40 |
64 |
41 |
|
| 0 - 50 Excellent risk |
51 – 100 Good risk |
101 – 150 Fair risk |
151 + High risk |
During 2011, the ERM process
at Gold Fields was reviewed by
PricewaterhouseCoopers, which
found that:
- The ERM process is fully
compliant with the risk
management requirements
of King III
- All the key principles of the
ISO 31000 risk management
guidelines have been adopted
- Gold Fields has established
a mature risk management
process that is leading many
of the approaches in the non-financial
sector
|
 Enterprise Risk Management process – definition
 Risk management review process
| |
| Risk Area |
Aspirations |
|
Tolerance level |
|
Targets |
|
2010 |
|
2011 |
|
| Optimise our assets |
|
|
|
|
|
|
|
|
|
|
| Safety |
Zero Harm |
|
Zero Harm |
|
FIFR – Zero |
|
0.11 |
|
0.12 |
|
| |
|
SIFR – 25% less1 |
|
2.22 |
|
2.64 |
|
| |
|
LTIFR – 25% less1 |
|
4.392 |
|
4.69 |
|
| |
|
MTIFR – 25% less1 |
|
7.162 |
|
5.68 |
|
| Health |
Zero Harm |
|
Zero Harm |
|
2013 MHSC milestones for Silicosis & NIHL |
|
On track |
|
On track |
|
| Environment |
Zero Harm |
|
Zero Level 4 and 5 incidents |
|
Zero |
|
Zero |
|
Zero |
|
| Gold Delivery |
5Moz by 2015
|
|
95% compliance |
|
3.5Moz |
|
3.5 |
|
3.5 |
|
| |
NCE 25% |
|
|
|
NCE 15% - 20% |
|
16% |
|
25% |
|
| Securing our future |
|
|
|
|
|
|
|
|
|
|
Human
Resources |
Pipeline of scarce and
critical skills |
|
60% – successor cover ratio for top 250 employees |
|
60% |
|
50% |
|
70% |
|
| |
|
|
|
|
|
|
|
|
|
|
| Licence to operate |
Global leader in sustainable |
|
Full compliance with
all legal and community commitments |
|
Full compliance |
|
100% |
|
100% |
|
Ethics and
Corporate
Governance |
Full compliance – SOX and
substantial compliance to
King III |
|
No material / significant
failures |
|
No material / significant
failures |
|
Nil |
|
Nil |
|
| Growing Gold Fields |
|
|
|
|
|
|
|
|
|
|
| Capital Projects |
Project delivered on time /
budget |
|
7% - 10% overrun |
|
South Deep, Chucapaca,
FSE, APP, Yanfolila |
|
On track |
|
On track |
|
Mergers &
Acquisitions |
Proper assessment of risk and returns commensurate with the risk |
|
IRR3 5% – Near-mine
IRR 10% – Greenfields |
|
As per IRR |
|
On track |
|
On track |
|
| Exploration |
Appropriate
balance between geological
potential & political risk |
|
Leaning towards
greater geological potentialin high
risk areas |
|
As per GBAR4 |
|
On track |
|
On track |
|
 |
Targets achieved |
 |
Improved on previous year |
 |
Targets not achieved |
| 1 |
South Africa only – other regions are subject to a 20% reduction
target for SIFR, LTIFR and MTIFR |
| 2 |
Restatement – LTIFR previously reported as 4.38 and MTIFR previously
reported as 7.09. |
| 3 |
Internal Rate of Return |
| 4 |
Global Business Area Rating system |
|
Risk review process
| |
The multi-stage strategic risk
management process starts with
quarterly strategic risk management
assessments at each of our mines
and service divisions. In addition, all
sites regularly conduct operational
risk assessments compliant with
standards set by Simrac (Safety
in Mines Research Advisory
Committee) in South Africa and the
AU/NZ Standard 4360 in Australasia.
Key strategic risks are identified and
analysed, and mitigating actions are
put in place (or reviewed if already
in place). The regions’ top risks are
forwarded to the egional executive
committees, which review the risk
register and decide on appropriate
mitigating actions.
The Group’s top strategic risks
are then reviewed by the Gold Fields
Executive Committee (ExCo) on
a biannual basis. Mitigation
strategies are developed on the
basis of this review, which are
presented at the Audit Committee’s
dedicated risk meetings and
reviewed after six months.
The Board and company
management are responsible for
risk governance and management.
Nonetheless, the integral involvement
of all line managers in the process is
essential to ensure the effectiveness
of the system. |
Top 10 Group heat map
| |
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, sustainability and financial risks, as extracted from
regional and operational risk registers. ‘Severity’ is based on a pre-determined scale that uses defined measures
depending upon the risk area being assessed. These include health and safety, business interruption, corporate
image, environment and earnings/capital at risk. ‘Probability’ is based on both percentage probability (10% to
100%) and frequency (once every 50 years to once a week).
|
Gold Fields risk review process
| |
- The Executive Committee of each operation and region conducts a risk
review of the top risks and mitigating strategies on a quarterly basis
- The Mine Manager presents the top 10 risks and mitigation actions to
members of the ExCo during quarterly business reviews. The impacts of
relevant mitigating actions are noted
- Next, the Group Risk Manager extracts all of the top risks from the regional
and operational registers in line with the tolerance levels, and compiles the
Group risk register
- The risks are then assessed and moderated in a Group context by the
relevant risk owners and ExCo members
- A top risk register review is conducted and Group-wide mitigating
strategies are set and monitored during the ExCo Risk Meeting
- A review of the top risks is conducted by the Audit Committee twice
a year
Note: All mitigation actions are evaluated in order to assess their effectiveness |
 |
|
Risk mitigation strategies
| |
| Risk: Safety-related stoppages |
 |
| • |
Renewed Safe Production Management approach, with a focus on engineering-out risk, capacity
building and compliance |
| • |
Enhanced visible leadership and behaviour-based safety initiatives |
| • |
Implementation of a comprehensive strategy to achieve South Africa’s 2013 mining industry milestones |
| • |
Ongoing constructive engagement strategy with the Department of Mineral Resources in South Africa |
|
| Risk: Non-delivery on planned gold output |
 |
| • |
Implementation of the Shaft Full Potential programme at our South African operations, as part of the Business Process Re-engineering (BPR) project. This programme includes initiatives such as |
| · |
Reserve flexibility through accelerated underground development |
| · |
Enhanced ore flow mapping and diagnostic analysis |
| · |
Enhanced management of mining mix procedures |
|
| Risk: Skills shortage and retention |
 |
| • |
Competitive remuneration and benefits strategy, based on salary surveys and benchmark |
| • |
Proactive support of tertiary education through bursary programmes and sponsorship of mining schools |
| • |
Proactive support of tertiary education through bursary programmes and sponsorship of mining schools |
|
| Risk: Erosion of NCE margin |
 |
| • |
Implementation of the BPR programme to achieve: |
| · |
Enhanced planning and sequencing to improve safety and efficiency |
| · |
Enhanced cost management and control systems |
| · |
Advancement of owner mining and maintenance at our Ghanaian and Australian operations |
|
| Risk: Regulatory, political and socio-economic demands |
 |
| • |
Implementation of empowerment transactions to meet transformation requirements in South Africa |
| • |
Implementation of Employee Share Ownership Plan for selected employees in South Africa |
| • |
Ongoing review and implementation of Social and Labour Plans (SLPs) |
| • |
Continued engagement with host governments |
|
| Risk: Non-delivery on project feasibility studies |
 |
| • |
Board oversight of projects through the Capital Investment Framework |
| • |
Enhanced strategic and capital planning processes |
| • |
Enhanced business and exploration risk assessment processes |
|
| Risk: Volatility in gold and copper prices and exchange rates |
 |
| • |
Enhanced strategic and capital planning processes |
| • |
Increased geographical and currency diversification |
| • |
Ongoing cost control, including BPR implementation |
|
| Risk: Loss of social licence to operate |
 |
| • |
Full compliance with the commitments made to communities |
| • |
Proactive stakeholder engagement and community investment strategy |
| • |
Review of our Sustainable Development strategy in our regions |
|
| Risk: Negative investor perception of host countries |
 |
| • |
Improved production performance of the South African mines |
| • |
Transparent engagement with investors on issues of concern |
| • |
Increased geographic diversification |
|
| Risk: Occupational illnesses |
 |
| • |
Enforcement of mandatory codes of practice and enhanced noise- and dust-control measures |
| • |
Regular medical surveillance of employees and contractors |
| • |
Implementation of a comprehensive strategy to achieve South Africa’s 2013 mining industry milestones |
|
|
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