Assessment of the risk management process at Xstrate Coal South Africa
Thesis (MBA)--Stellenbosch University, 2012.
ENGLISH ABSTRACT: Severe flooding in Queensland, Australia in late 2010 and into February of 2011 resulted in significant losses to infrastructure, equipment and coal production. Xstrata Coal (XC) mines suffered billions of dollars worth of losses, resulting in insurance premiums increasing drastically in subsequent months. These events prompted Xstrata‟s top management to reconsider the way in which they managed risk. Initial revelations were that the focus of Risk Management had largely been on the areas of Health and Safety and that, particularly in South Africa, the outcome of all management‟s efforts to manage risk had been to comply with the relevant legislation. There was clearly an attempt to avoid litigation resulting in potential prosecution. The most stringent of this legislation was that of the Mine Health and Safety Act (No. 24 of 996), as promulgated by the Department of Mineral Resources. The requirements were prescriptive to the extent that mine management was required to utilise the Hazard Identification Risk Assessment process to identify hazards, assess the associated risk and apply mitigation, largely in order to prevent incidents which could affect the health and safety of employees. Little regard was given to the fact that mining houses could endure severe financial losses as a result of catastrophic events, which could stop production for significant periods of time. Whilst Xstrata did recognise Business Continuity Risk (BCR), the risk assessment process which was introduced along with the CURA risk register displayed a distinct division between Health and Safety Risk and BCR. Furthermore, this was not a systematic process. Initial risk categories were prescribed by XC mainly based on experiences in Australia. The floods prompted a rethink and Xstrata‟s prescription to conduct business continuity risk assessments (BCRAs) coincided perfectly with this writer‟s exposure to the Enterprise Risk Management Elective at the University of Stellenbosch‟s Business School. As the General Manager of the iMpunzi Complex that comprises three coalmines, it was the responsibility of the writer to carry out the instruction to review the business continuity process. Consequently, the research is intended to assess the current Risk Management environment within Xstrata Coal South Africa by means of an analysis of current documentation and interviews with select key personnel who largely influence and impact the management of risk in the company. Thereafter, the study will progress to the methodology involved in the Risk Assessments, followed by an assessment of the knowledge, skills and qualifications required for the relevant, accountable managers appointed to manage the risks. The findings of the research were that whilst there was quite a rigid framework, which was aligned with ISO 31000 principles for risk management, there were shortcomings in the methodology of the risk assessment process, as well as the considerations for dealing with latent or residual risk. To this extent, the writer recommended: A risk assessment template which prescribes, but is not limited to, the hazards which may be prevalent on a coal mine, including hazards specific to iMpunzi Complex; A revised template for the Risk Treatment Plan, which takes cognisance of Residual Risk; Other recommendations, which may deal with minor findings of the study.