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CIMIC Group Limited Annual Report 2016 |
Operating and Financial Review
RISK MANAGEMENT
CIMIC defines risk management as the identification, assessment and treatment of risks that have the potential to impact materially the
Group’s operations, people, and reputation, the environment and communities in which the Group works, and the financial prospects of
the Group.
CIMIC’s risk management framework is tailored to its business, embedded mostly within existing processes and aligned to the Company’s
objectives, both short and longer term.
Given the diversity of the Group’s operations and the breadth of its geographies and markets, a wide range of risk factors have the
potential to affect the achievement of business objectives. Key risks, including those arising due to externalities such as the economic,
natural and social operating environments, are set out in the following table, together with the Group’s approach to managing those
risks.
Risk description
Risk management approach
The Group’s operations require planning, training and supervision to manage workplace health and safety hazards.
A workplace health and safety incident
or event may put our people and the
community at risk.
The Group is committed to the health, safety and security of our people and the
communities in which we work. Safety policies and standards apply across the Group.
Compliance is regularly reviewed. The Group seeks continual improvement in safety
performance. Governance of safety is overseen by the Board and the Ethics, Compliance
and Sustainability Committee.
The Group often works within, or adjacent to, sensitive environments.
An environmental incident or
unplanned event may occur that
adversely impacts the environment or
the communities in which we work.
The Group is committed to the highest standard of environmental performance. Operating
Companies’ environmental policies and procedures are aligned with the Group Policy and
Standards. Should an incident occur, emergency response plans will be enacted. The Ethics,
Compliance and Sustainability Committee oversees environmental performance.
Work delivery is subject to various inherent uncertainties.
Work delivery challenges may manifest
in actual costs increasing from our
earlier estimates.
Significant resources are devoted to the avoidance, management and resolution of work
delivery challenges. Operating Companies provide project teams with guidance and
support to achieve project and business objectives. EIC Activities also helps to identify and
mitigate risk. Project oversight is maintained by regular performance reviews that involve
Operating Company and CIMIC management, commensurate with the scale, complexity
and status of the project.
External factors may affect the Group’s markets and growth plans.
Changes in economic, political or
societal trends, or unforeseen external
events and actions, may affect business
development and project delivery.
The Group maintains a diverse portfolio of projects and investments across a range of
markets and geographies. Regular and rigorous reviews of the Group’s current and
potential geographies, industries, activities and competitors are undertaken. Oversight of
key risks is maintained by the Audit and Risk Committee, supported by a quarterly Risk
Report that aggregates and highlights risks to the Group achieving its objectives.
Reduction in demand for global
commodities and/or price may cause
resource clients to curtail or cease
capital investment programmes, or
adjust operations, thereby impacting
existing and future contracts.
The Group maintains a project, contract and investment portfolio that is diversified by
geography, market, activity and client to mitigate the impact of emerging trends and
market volatility.
The Group continually seeks opportunities to improve its operations and thereby the value
proposition it delivers to clients.
The Group’s reputation is critical to securing future work and attracting and retaining quality personnel, subcontractors and suppliers.
Issues impacting brand and reputation
may affect the Group’s ability to secure
future work opportunities, investment,
suppliers or joint venture partners.
The Group is committed to the highest standard of ethical conduct, and statutory and
regulatory compliance. This is supported by a comprehensive range of Group level policies
and standards, including our Code of Conduct. CIMIC promotes clear governance through
the empowerment of individuals with delegated authority, appropriate segregation of
duties, and clear accountability and oversight for risks.
The Group targets work that meets a defined risk appetite and appropriately balances risk and reward.
Work procurement challenges may
impact our ability to secure high-quality
projects and contracts.
Application of the Group work procurement standards and approval process maximises the
likelihood of securing quality work with commensurate returns for the risks taken.
Pre-contracts assurance teams manage and assure the work procurement process. EIC
Activities supports the Group with project design, risk identification and engineering
solutions during the tender phase. The Tender Review Management Committee oversees
and approves the risk profile for key tenders.
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