By Joseph MacDonald, BA, FCIP, CRM
Like all organizations, potash producers pursue business objectives for the benefit of their organizations and stakeholders. But extended periods of drought disrupting reliable and sustainable supply of water for potash producers or consumers of potash; periods of heavy precipitation which flood potash mines or remove arable land; volatility in the global market supply/demand dynamics; and changes to laws, regulations and applicable tax regimes represent examples of factors that create uncertainty for potash producers.
Uncertainty arises from the likelihood of such factors resulting in business objectives not being achieved by potash producers and the consequences of this for these organizations.
This uncertainty is considered risk.
Risk can be created by countless existing and emerging exposures, including, but not limited to, strategic risks such as changes in socio-economic or political developments and global trade developments impacting the potash industry. Financial risks can result from the volatility of both the prices of supplies or the market price of potash, or other factors impacting supply and customer chains, let alone fluctuations in currency exchange rates and/or interest rates. Uncertainty can also arise from operational risk resulting in disruptions involving operational systems, processes, or personnel impacting the achievement of business objectives.
In addition to these business risks, hazard risks such as natural catastrophes, mine accidents, cyber events, or global pandemics can result in personnel injuries or loss, property damage, disruptions to business and resultant net income loss, environmental, health or safety events, either directly or indirectly through claims from third parties made against potash producers and/or their directors, officers and employees.
These risks can impact the achievement of business objectives, and in the worst case, threaten the profitability or viability of potash producers.
However, risk management provides a risk assessment process of identifying, analyzing, and evaluating all key risks facing potash producers, leading to the design and implementation of risk treatment measures which can effectively and cost-efficiently manage risk.
Through managing their key risks, potash producers can bring uncertainty (risk) to within tolerable levels, adding value by increasing the likelihood of achieving their business objectives, while building resilience to the potential negative impacts of risks, thereby protecting the value of their organizations.
Risk management is a process, best incorporated into an organization’s business management infrastructure and culture that provides planned systems of programs, policies, and procedures designed to assist organizations to identify, analyze, evaluate, and treat risks in ways that align with and support the achievement of their business objectives.
Ensuring risk management is an integral part of all decision-making processes results in a holistic approach that can enhance and protect an organization’s value and the interests of all their stakeholders.
Incorporating risk management into decision-making leads to risk-adjusted decisions, increasing management’s confidence in pursuing value-generating opportunities, while understanding that potential downside risks are being effectively managed.
This furthers the achievement of business objectives and ensures resiliency and sustainability.
Designing and implementing risk treatment measures, including combinations of prudent risk retention, modification, non-insurance, and insurance risk transfer – as determined by risk assessment – can result in potash producers reducing the frequency and severity of loss events, protecting the health and safety of their personnel and operations, and improving their resilience to and recovery from disruptions. This can lead to potash producers having more confidence that value-added opportunities are not missed, profitability is maximized, and operational costs are effectively controlled.
Risk management can help potash producers comply with legal and regulatory requirements, fulfill their social responsibilities, address the increased scrutiny of regulators, suppliers, customers, analysts, capital providers, employees, communities, and other key stakeholders, and in doing so, maintain their ability to achieve their business objectives.
