International – Although productivity improvement was the top business risk facing mining and metals companies worldwide in 2014, last year’s second biggest risk - the switch to growth – has kicked productivity into second place and emerged as the biggest risk facing the mining industry going forward, according to professional services firm EY’s annual ‘Business risks facing mining and metals 2015/16’ report released this week.
EY notes that the switch to growth is looming and assets are now still relatively cheap and ripe for opportunistic acquisition. Given the long lead time to develop new supply, decisions to invest for future growth have to be made now or long-term returns will be lowered.
While, some work has been done on improving productivity, there is still sizeable scope for improvement which is why the productivity improvement risk remains high up on the list at number two. EY believes that while most miners have commenced actions to regain the productivity lost during the “production at any cost” boom years, the need for sustainable and enduring productivity improvements remains vital for survival and prosperity going forward.
New entrants to the top 10 risk list from last year include cybersecurity and innovation, at number 9 and 10, respectively.
Cyber hacking in the mining sector has become more widespread and sophisticated – in the EY ‘Global Information Security Survey 2014’, 65% of mining and metals companies said they had experienced an increase in cyber threats over the past 12 months.
Meanwhile, the focus on regaining lost productivity has brought to the fore the almost complete lack of innovation in the sector, which is vital to protecting and sustaining margins in the long term, and is key to maximising revenues in the future.
Top 10 risks:
- Switch to growth
- Productivity improvement
- Capital Access
- Resource nationalism
- Social license to operate
- Price and currency volatility
- Capital projects
- Access to energy
- Cyber security
For a fully copy of the report visit www.ey.com