Risk Management is Essential for Mining Industry to Capitalize on Opportunities
The mining industry has always been a risky one, with worker safety concerns representing only a portion of the challenges. Increasingly strict regulations, the reliance on technology, inconsistent demand for raw materials and high commodity prices are concerns that every mining company has grappled with. Fortunately, most mining businesses are able to counteract this with effective risk management programs. Many industry executives are already ahead of the game in terms of their ability to effectively manage risks. They understand that big gains often come with taking big risks, and well-designed programs enable them to safely pursue those opportunities. Additionally, the Canadian Mining Journal notes that many mining companies are seeking risk management advice to help make important investment decisions.
This is almost a necessity, given the instability of their operational environment and the difficulty with assessing which opportunities will pay off. A risk management program allows mining companies ensure the success of their operations. Canadian Mining Journal contributor Michael Marino, who is also the assistant vice president at RSA Insurance, explains that effective collaboration with risk management experts could greatly benefit mining operations. The key lies in understanding all the risks before committing to any specific project. “Review the political landscape thoroughly before beginning a mining operation, as problems in this realm can halt an operation at any development stage,” Marino suggests. “Typical threats to supply chains include poor access to replacement equipment in remote areas, transportation barriers and difficulty accessing qualified laborers, so a review of these risks is non-negotiable in order to properly monitor project profitability,” he added.
Mining Risks in 2015
A separate report from Ernst & Young noted some of the key risks that mining companies need to look out for in 2015. While the environment in which they operate is always changing and presenting new threats, it’s crucial that business leaders in the industry are able to understand risk trends so they can develop more effective programs. One of the leading concerns in the industry is a skills shortage. During the economic recession, the mining industry went relatively unaffected and as such, attracted workers from other walks of life. Now that the global economy is normalizing, some of these people are returning to their previous sectors. Additionally, baby boomer miners are retiring and there isn’t an influx of talented workers to replace them. This can lead to project delays, greater labor costs and other production impacts.
Another key risk is resource nationalism. Countries are beginning to realize the value of the raw materials that stem from their land and as such, are beginning to impose higher taxes on foreign mining companies. This can increase the cost of operations significantly. There are dozens of risks that mining companies face on a regular basis, which is why it’s critical for them to develop an effective risk management programs that can help them deal with threats and capitalize on opportunities. By utilizing modern risk management software and tools, combined with the expertise of risk management consultants, mining businesses will be better suited to deal with volatile industry they work in.
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