Mining Companies' Biggest Risks
Updated: Oct 8, 2022
According to Ernst and Young's investigation of the top 10 business risks and opportunities for mining and metals in 2023, global mining and metals executives regard ESG, geopolitics, and the advancement of climate change as the top three threats impacting their company over the next year.
Theo Yameogo, EY Mining & Metals Leader says, “We’ve witnessed huge upheaval and change over the last year, namely due to the war in Ukraine, climate events, new governments in mining regions and shifting relationships in others — all coming together to drive substantial impact on the sector." According to him, these factors and a rise in inflation will continue to add pressure on stakeholders and business leaders, who will only be able to retain their firm’s competitive advantage if they are able to cope with such disruptions.
Mining and metals companies are attempting to incorporate ESG factors into all aspects of their business: “corporate strategies, decision-making, and reporting.” However, since they are huge contributors to climate change, and to an extent, contradict the values of ESG, they consider such factors huge risks to their business.
In addition to ESG, Yameogo urges people to consider that metal and mining firms have the responsibility to consider how closing mines affect the people that work there and the communities that surround them in the long run.
The survey also showcased that geopolitics was ranked as the second biggest business risk, with “72% [of respondents] identifying resource nationalism as the top geopolitical factor likely to impact their operations as governments seek to fill revenue gaps after spending throughout the pandemic and capitalize on higher commodity prices through new or increased mining royalties.”
It is also important to note that digital innovation was ranked the ninth biggest risk, despite its widespread relevance in mining today. As companies continue to innovate, I would expect it to be considered a bigger risk, possibly even on par with factors like ESG and climate change. This just goes to show how important aiming for sustainability in business has become for investors.
As COVID-19, the war in Ukraine, and increasing energy prices heighten pre-existing challenges that the world is already facing, survey respondents say their aims include, “end-to-end supply chain visibility, [to] leverage technology to improve operations and performance, and be more strategic when analyzing new technologies and supplier portfolios.” Hence, mining firms will now have to cope with new sustainability-focused expectations from investors, and revamp their corporate strategies while also dedicating time to research and development and improving their technology.