Risk management

Risk governance

The board, supported by the risk committee, is ultimately responsible for governing risk-management processes in accordance with corporate governance requirements.

The risk committee reviews the group’s risk appetite and tolerance levels relative to specific risks and risk-management policy and processes. It recommends the approval of the group risk-management plan for the ensuing year by the board. The investment committee reviews, within the framework of the board-approved delegations of authority, capital and other applications for recommendation to the board.

Appropriate risk-management measures, which include accountability for risk management as a key performance area of line managers, exist throughout the group to counter significant business risks which could undermine the achievement of business objectives. Policies and guidelines on risk management and control support management in discharging its risk responsibilities.

The effectiveness of risk-management efforts are assessed by internal and external assurance providers in terms of the group’s combined assurance model.

Further to the inputs of its sub-committees, the board monitors, reviews and assesses all aspects related to the appropriate management of economic, social and environmental risk and opportunity at each quarterly board meeting.

The group’s executive management encourages a risk-conscious business culture by embedding agreed internal controls and mitigating actions through all levels of management and supervisory staff.

Risk-management framework

The Grindrod risk-management framework, which reviews identified risks and accounts for new and emerging opportunities and risks, is supported by continuously updated operational risk registers. The effectiveness of this framework is reviewed by internal audit.

High-level strategic and external risks are assessed by the board, supported by the risk committee, with executive and operational management being responsible for the continuous identification, assessment, mitigation and management of risks within their areas of operation.

Risk-management process

Risk-management processes are designed to identify, quantify, prioritise, respond to and monitor the consequences of both internal and external risks and their associated opportunities. The processes also promote the ownership of risk areas and risk-management accountability within the group.

Identified risks are evaluated in terms of potential impact and probability in terms of the likelihood of occurrence. Areas include the risk of harm to people and environment, business interruption, financial loss, legislative and regulatory compliance and reputation. The evaluations of the impact and probability establish the basis for determining the inherent risks and their significance to the business. Residual risk is determined based on the risk-mitigation plans developed and implemented by management.

The internal audit charter provides for an internal audit plan that is aligned with the risk framework.

The board, supported by the risk committee, reviews the effectiveness of both the processes and procedures adopted by management for identifying, assessing and reporting on significant business risks, and the roles of assurance providers with respect to risk management.

Grindrod’s identified key risks and associated mitigation strategies are as follows:

Risk/impact   Mitigation/opportunities
Continued, reduced commodity demand, which impacts asset utilisation and income.   Maintain internal market-analysis systems, diversify across commodities and geographies, include
take-or-pay clauses in contracts and engage with clients and suppliers to facilitate financially viable logistics solutions.
Volatility in global shipping markets, which negatively influences return on assets and revenue streams.   Continuous assessment of asset value against targeted returns, joint-venture, charter and pooling arrangements to optimise market penetration and a fleet-replacement programme that ensures fleet efficiency in terms of cost and returns.
Liquidity risk, which impacts the funding of operations and projects.   Managing businesses to continue generating cash from operations, maintaining an optimal balance between equity and debt funding and committed and uncommitted facilities with banks, with the renegotiation of funding terms and covenants when required.
Supplier and partner concentration risk, which could distort sustainable income across businesses in the case of a default.   Structured engagement with relevant suppliers and partners at strategic and operational levels to ensure mutual commitment and unlock the potential of infrastructural assets. Continued assessment of concentration risk in terms of established risk models.
Political and sovereign risk, which threatens investments made in foreign countries. Expropriation of assets or concessions and political instability constitute the biggest impacts.   Thorough country and investment assessments in terms of the group investment policy prior to board approval, including political-risk insurance where appropriate. Collaborative and consultative engagement with regional governments and communities, focused investment in social upliftment initiatives and partnerships with local businesses that are knowledgeable and reputable are integral to managing the associated risks.
Loss of key management staff, which could jeopardise business continuity.   Talent-management, performance-development and retention initiatives for key posts are in place, as is succession planning for top executives, which is monitored at board level.
SHERQ risks, which can cause harm to employees, contractors and the environment and jeopardise the sustainability of the business.   SHERQ risks are mitigated according to a SHERQ and sustainability policy, through transparent structures which include the group SHERQ management committee, SHERQ and legal-compliance KPIs at senior employee levels, the development of integrated ISO management systems and a rigorous incident-reporting, investigation and remedial-action procedure which includes board involvement in the case of serious incidents.
Employment equity/B-BBEE risk, which could exclude the business from sourcing and retaining customers in terms of relevant legislation and industry charters.   Driving equity compliance across the business and investigating and securing partnerships with like-minded B-BBEE companies through shareholding at group level or partnerships at operational level. This risk is also mitigated in foreign countries, through measures required by those countries.
One Grindrod implementation risk, which could impact on the enablement of business growth and the ability to capitalise on opportunities.   Continued enhancement and restructuring of common systems and processes within a shared-services model together with the continuous evaluation of integrated business opportunities through business development at a group level.
Reputational risk, which could tarnish the market perception of the group as a reputable and dependable supplier, with a resultant negative impact on earnings and enterprise value.   Enforcing sound governance structures to prevent adverse situations as a result of inadequate management and operational controls and a focused drive to keep stakeholders informed of business developments, both positive and negative.

 


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