> Business risks facing mining and metals 2012 - 2013
Business risks facing mining and metals 2012 - 2013
9 Sharing the benefits
Non-financial metrics are becoming increasingly important to CFOs - Strongly agree or agree
Base: All (247) ANZ (111) Asia (136)
The DNA of the CFO wheel
“Mahatma Gandhi once said, “Earth provides enough to satisfy every man’s needs, but not every man’s greed.” More effort is being expended in sharing the benefits rather than growing the benefits.”Mike Elliott Global Mining & Metals Leader, Ernst & Young
As the mining sector continues to flourish while other sectors flounder, a wider range of stakeholders are looking for a greater share in the perceived profits.
These stakeholders feel entitled to a portion of the profits and balancing these varied and competing expectations is challenging.
Governments are placing pressure on mining and metals companies to take a greater role in supporting the broader community through social and logistical infrastructure, community developments, and local hiring and procurement Practices
Local communities are not just looking for minimal disruption but also to share the economic and social benefit from local mine operations. They have a lot of power to disrupt projects if their needs and interests are not met
Employees are seeking higher wages and greater workplace benefits and can incite industrial unrest if they are not achieved
Suppliers can charge greater premiums as mining and metals companies are dependent on their goods and services to increase production output
Shareholders are expecting a greater return on their investments for the perceived risk of owning mining and metals stock, squeezing the profits already shared amongst the other stakeholders
Steps mining and metals companies can take to respond to this risk:
Assess stakeholder claims in the context of mine valuation
Obtain trade-offs that limit the impact on mine valuation
Use risk transfers as a value creating trade-off
As sharing the benefits is short term, locking in the stakeholders for the long term is a positive trade-off
Increase the transparency in reporting about who benefits from a mine or a facilitye clear, objective governance — checks in place to manage internal lobbying
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