Risky business

MINING companies are increasingly applying risk management to their businesses.
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An academic believes mining companies do not manage risk well.

Noel Dyson

Managing risk is becoming a staple of business. However, there are concerns that mining companies do not do it well.

University of New South Wales construction management professor Martin Loosemore said the mining industry had a poor reputation for managing risk.

“Although we rarely hear of the many good news stories and projects that exceed time, cost, safety and quality expectations, the industry’s reputation has been tarnished by many years of adverse media coverage of environmental degradation, poor safety and working conditions, illegal activity, corruption and insensitivity to the needs of community and minority groups,” he said.

Loosemore pointed out there were few diagnostic tools available to help managers understand their company’s specific strengths and weaknesses.

He applied his own risk management approach to a multi-media format developed in conjunction with a company called Cell-media.

Called the Risk & Opportunity Management System the CD-ROM package consists of two parts. Part one is an educational tool that spells out “how to do” risk management. The second part is a reporting system for those involved in the risk management process.

Cell-media director Steve Clarke said the system included an eight-stage process that people could work through to get them through the risk management process.

The product has received global attention. It was used as the basis for the risk management system applied by the Beijing Olympic Organising Committee to manage the 2008 Olympic Games construction projects. These included the “Birdsnest” Olympic stadium and the “Watercube” Olympic swimming centre.

Loosemore said experienced risk managers knew people were one of the best sources of risk management information and the most powerful weapon for managing it.

“The best risk management systems involve people intimately in the process and illuminate the talents, creativity and experience of the employees,” he said.

This is one of the reasons Loosemore favours the multi-media approach – it makes it easier for people to become involved with the risk management process.

“One of the advantages of multimedia is that it engages people in the risk management process,” he said. “Research indicates that people retain and understand up to 60 percent more when using multimedia to help enthuse employees and change their business culture.”

On the software side is a risk management product from Incom.

Incom CEO David Watson said the company had enjoyed an upsurge in the purchase of risk management software systems from the mining and energy sectors.

“There is a convergence of huge growth and profitability in these sectors with major increases in the value at risk due to risks involving critical third-party rail and port infrastructure, natural hazards, stock exchange compliance, reputation, workplace safety and the environment,” he said.

In the past few months Incom has supplied systems to Papua New Guinea’s Ok Tedi Mining, Eesti Energia Power in Estonia and Australia’s Monash Energy and ERM Power.

Brazilian company Gerdau Acominas has been using the software for nearly two years.

“Incom systems are either deployed enterprise-wide or for specific projects,” Watson said. “Some customers start small with a pilot system and then purchase extra user licences and functional options later.

“There is no need to reinstall any software as it is all controlled by the licence key. Importantly we can meet companies’ needs globally.

“The software is easily translated into any language and is easily learned, even where people have limited knowledge of risk management or little local training support.”

Incom’s Risk Register and Incident Register can stand alone or be fully integrated under Incom’s Enterprise Guardian. All of these products use the same Microsoft.NET framework and Microsoft SQL Server database.

“Many organisations are still trying to manage risks with spreadsheets and in doing so don’t have a good appreciation of their risk exposure – they may be piling up reputation risk, financial risk, legal risk and more,” Watson said.

Incom has helped more than 120 customers move from spreadsheet risk management to database driven risk management.

Published in the April 2008 Australia’s Mining Monthly

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