Risk Management

CIMIC defines risk management as the identification, assessment and treatment of risks that have the potential to impact materially the Group’s operations, people, and reputation, the environment and communities in which the Group works, and the financial prospects of the Group.

CIMIC’s risk management framework is tailored to its business, embedded mostly within existing processes and aligned to the Company’s objectives, both short and longer term.

Given the diversity of the Group’s operations and the breadth of its 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 out in the following table, together with the Group’s approach to managing those risks.

2016 Annual Report Risk Table

Risk description

Risk management approach

The Group’s operations require planning, training and supervision to manage workplace health and safety hazards.

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. Governance of safety is overseen by the Board and the Ethics, Compliance and Sustainability Committee.

The Group often works within, or adjacent to, sensitive environments.

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. The Ethics, Compliance and Sustainability Committee oversees environmental performance.

Work delivery is subject to various inherent uncertainties.

Work delivery challenges may manifest in actual costs increasing from our earlier estimates.

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.

External factors may affect the Group’s markets and growth plans.

Changes in economic, political or societal trends, or unforeseen external events and actions, may affect business development and project delivery.

The Group maintains a diverse portfolio of projects and investments across a range of markets and geographies. Regular and rigorous reviews of the Group’s current and potential geographies, industries, activities and competitors are undertaken. Oversight of key risks is maintained by the Audit and Risk Committee, supported by a quarterly Risk Report that aggregates and highlights risks to the Group achieving its objectives.

Reduction in demand for global commodities and/or price may cause resource clients to curtail or cease capital investment programmes, or adjust operations, thereby impacting existing and future contracts.

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.

The Group continually seeks opportunities to improve its operations and thereby the value proposition it delivers to clients

The Group’s reputation is critical to securing future work and attracting and retaining quality personnel, subcontractors and suppliers.

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.

The Group targets work that meets a defined risk appetite and appropriately balances risk and reward.

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.

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