Mining executives are no strangers to turbulent times, but the recent instability in global commodity markets has had a profound impact, with a prolonged period of declining or stagnant demand and prices for most major products
A series of cost-cutting measures has been the reaction, as operations are scaled back and cash is being diverted from growth and channeled to long overdue maintenance projects. Companies have suspended major capital projects, and merger and acquisition activity is down by a third, as cautious buyers wait for either a further fall in prices or a return in shareholder confidence.
Managing risk and assuring stakeholders
Management strategies then focus more on delivering value than volume in order to build investor confidence. Boards and CEOs need to be confident that their chosen strategy is sustainable and that the organization is well-positioned to manage the associated risks. This requires:
- Good governance
- Incorporating sound risk and assurance processes
- Legal and regulatory compliance
- Effective stakeholder management.
By involving the Board in corporate strategy discussions from an early stage, and communicating the rationale behind major decisions, senior management can ensure that shareholders are aware of and comfortable with the risks being taken, and will not be surprised by subsequent decisions made over the lifetime of the project.
Building legal and regulatory obligation issues into the core strategy and planning process can assist leadership in identifying all the risks and gain a truer picture of the costs of major decisions. Failure to comply with tax and regulatory demands can have severe consequences.
Stakeholders, such as local communities or environmental activists, recognize that they hold the power to shape, delay -- or even prevent projects. Strategy should take account of the perspectives of the different groups who will be touched by the miner’s operations.
“Intermediates place a high priority on operations as they strive to shift existing properties from rapid expansion to steady state mode – to remain cost efficient.”
To learn more about strategy as a key driver of value, please click here to view the full report.