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Business risks facing mining and metals 2011 - 2012 - EY - Global

Business risks facing mining and metals 2011 - 2012

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Organizations that succeed, do so because they are best able to optimize the risk and reward equation for both strategic and operational issues.

Summary: Our report reveals that the top three global business risks for mining and metals in 2011 and 2012 are resource nationalism, skills shortage and infrastructure access. The top 10 business risks facing the sector are identified through our discussions with mining and metals leaders and from our analysis of organizations around the world. While this is not an exhaustive list of risks, it provides a snapshot of the most significant challenges currently facing the sector.

The trends of 2010 and implications for 2011 and beyond

In our 2010 report we revealed that Capital allocation was the number one business risk facing mining and metals companies. The more uncertain economic environment at the time, combined with a number of other factors, like volatility of prices, limited cash flow and availability of debt capital, all made the decisions on how to allocate capital in 2010 more complex than ever.

One year on and our analysis shows that while Capital allocation still remains a significant business risk, it is more for the reason of returns matching risk appetites. As a result, its position as number one in our top business risks list has been overtaken by the increasing threat posed by Resource nationalism. In 2011, Resource nationalism has become the number one risk for mining and metals companies as governments globally continue to make demands in order to increase their slice of the profit pie.

Interestingly, climate change, which was deemed number 10 on the list last year, is now no longer on the radar possibly due to increased confidence that any action that will impose real costs on mining and metals is still a long way off.

By contrast, Maintaining a social licence to operate does not appear to have been impacted much by change in either economic terms or priorities from clients. In our 2010 report it was ranked number five, and in 2011 and beyond it remains a significant risk, sitting at number four on the radar.

Fraud and corruption, which was just ‘off the radar’ last year (ranked number 14), has now moved up to number 10 on our list given recent regulatory developments, while Interruptions to supply is new to the top 10 this year.

The top 10 business risks for mining and metals

  1. Resource nationalism
  2. Skills shortage
  3. Infrastructure access
  4. Maintaining a social licence to operate
  5. Capital project execution
  6. Price and currency volatility
  7. Capital allocation
  8. Cost Management
  9. Interruptions to supply
  10. Fraud and corruption

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