Governance
Risk Management Program
Introduction
Objective
The primary objective of risk management is to ensure that the risks facing the business are appropriately managed. This gives stakeholders confidence to deal with or invest in the business.
Commitment
The Board of Deltana Energy Limited and its senior management is committed to managing its risks in order to both minimise uncertainty and to maximise its business opportunities. Pursuant to this commitment the Board has approved and adopted this document.
Risk Definition
The definition that is applied across Deltana Energy Limited of what constitutes “risk” is:-
“An event or activity which may have an impact on the achievement of Deltana Energy Limited objectives, strategies and its key business tasks.”
Risk Management Framework
The framework upon which Deltana’s approach to risk management is based is Australian Standard AS/NSS4360:1999.
Risk Identification
The risks have been identified a through a series of workshops that have considered what risks are, why they happen and how they occur.
New risks will be identified as each new initiative/project is considered and also at a bi-annual review workshop with managers, which will review all existing risks and identify any new risks.
A Risk Identification Chart is annexed to this document.
Risk Analysis
Each risk has been analysed by management by using the following ratings:-
- Probability of the risk occurring;
- Impact of the risk if it did occur;
- Ascertaining what level of controls and maintenance are currently being employed; and
- How effective these controls are.
Risk Evaluation
Management have evaluated each risk through a process of allocating an appropriate rating of probability impact, risk and effectiveness controls.
This evaluation process determines whether the current management of each risk is within a predetermined acceptable level or whether action needs to be taken to treat the risk. It further identifies what monitoring is required i.e. active or periodic and whether review by Board or management.
Risk Treatment
The following risk treatment has been allocated to each risk:-
- Tolerate the risk
- Void the risk
- Reduce the risk
This treatment is designed to reduce the probability or impact or increase the risk controls. As there will normally be a cost associated with risk reduction, the objective is to reduce the risk to an acceptable level consistent with established risk criteria. Any one of several decision points that may be taken include:-
- A satisfactory solution
- The most cost effective solution
- The accepted practice (industry norm, best practice etc.)
- The best achievable result
- The absolute minimum to satisfy corporate legislative or project needs.
The risk can be reduced by transferring the risk. This may involve the transfer of risk in part or in full to a contractor, a supplier or to a product buyer for example. Insurance is a common way of transferring risk. Insurance is normally taken for low probability, high impact events.
When a risk treatment action is undertaken, it may not result in elimination or prevention of a risk, but will often result in reduction of the risk. A residual risk will remain that should be less than the company’s level of tolerable risk.
Risk Reporting
The identified risks have been separated into Strategic, Operational and New Initiative risks. Each risk has then been rated according to inherent risk (probability and impact of the risk) and control rating (risk controls present and the evaluation of those controls).
Risk evaluation forms have been completed for each of the strategic and operational risks which are reviewed by the Board in accordance with the level of reporting identified on the evaluation form.
Risk Monitoring and Review
Monitoring the status of each risk and any necessary action plans relating to their treatment takes place on a regular basis by controlled self assessment as well as by management’s quarterly review of risk action plans.
The risks and risk evaluation forms are also reviewed by the Audit Committee bi-annually.
The high level strategic and new initiative risks are reviewed annually by the Board at their annual strategic planning meeting. Identification of any new initiative risks or new strategic risks also takes place at this meeting.
Any action or recommendations arising out of these review processes are implemented by management and then checked by the reporting system to the Company Secretary.
Each risk identified for each manager is incorporated into the manager’s key performance indicators for that year and is monitored by that manager and reviewed by the manager’s direct report on an annual basis.
Ratings
Probability Parameters
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