We define risk management as the identification, assessment and treatment of risks that have the potential to materially impact our operations, people, and reputation, the environment and communities in which we work, and the financial prospects of the Group.
Managing risk
Our risk management framework is continually monitored, is tailored to our business, embedded largely within existing processes and aligned to our objectives, both short and longer term.
Given the diversity of our operations and the breadth of our 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 below, together with our approach to managing those risks.
Identified risks
Continued need to manage COVID-19 pandemic related constraints
Ensuring the safety of our people, clients and communities is the utmost priority of the Group during the current COVID-19 pandemic.
Established COVID-19 protocols, procedures and controls are in place across all CIMIC sites. These include regular rapid antigen testing for site staff, controlled contact for site staff outside of immediate team, COVID-19 specific reporting and compliance monitoring. Incremental COVID-19 cost impacts are monitored on a continuous basis with entitlements to compensation under contract pursued where appropriate.
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 which is managed by each Operating Company and their Management teams. Governance of safety is overseen by the Board.
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. Governance of environmental performance is overseen by the Ethics, Compliance and Sustainability Committee
Changes in economic, political or societal trends, or unforeseen external events and actions, may affect business development and project delivery
Reduction in demand for commodities and/or price may cause clients to curtail or cease capital investment, or adjust operations, impacting existing and future contracts. This may include market changes as a result of new ESG requirements
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. ESG related opportunities aligned to the Group’s capabilities are being closely monitored and pursued. The Group continually seeks opportunities to improve its operations and thereby the value proposition it delivers to clients with reference to ESG related market expectation.
The Group closely monitors changes to ESG requirements and impacts to potential markets and projects. The Group takes a continuous improvement approach to sustainable delivery and monitors ESG risks on an on-going basis, including evaluation of diversification opportunities, which will flow from these changes and requirements. The Group’s commodity related operations seek to leverage demonstrable ESG related improvements to enhance their value proposition to existing clients and new (metals related) commodity markets.
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.
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.
Work delivery challenges may manifest in actual costs increasing from our earlier estimates which could have a resultant impact on the Group’s revenue and returns
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.
People related resource constraints are closely monitored and managed through: mobility focus of our people from project to project; on-going commitment to learning & development from graduates to senior managers and leveraging technology to drive efficiencies.
Supply chain constraints for key material inputs, such as steel, are considered in the context of the commercial exposure to CIMIC. In the majority of cases, escalation provisions and / or the ability to pass through costs are provided in our contracts. In these instances, we work with our clients to determine optimal procurement strategies to achieve their objectives, including escalation risk management. In the limited cases where such provisions have not been allowed under contract, CIMIC seeks to procure ahead of expected price increases. While this results in higher working capital requirements, it is expected to reduce overall project spend through the life of the project.