8. Key areas of concern
The Company’s comprehensive risk assessment and management framework effectively aids in identifying risks and opportunities along with preparing contingency plans to tackle internal and external variables and unknowns, which cannot always be accounted for.
Business Risk Management process involves identification and prioritization of risks through risk maps, business risk environment scanning and risk assessments. Both ‘Top down’ and ‘Bottom up’ approach is taken for risks/opportunities assessment, which is then consolidated/calibrated to get an overview of the entire organization.
The Risk management committee under the chairmanship of Mr. Rajendra Chitale, Independent Director, reviews and discusses the risk trends, exposure and potential impact analysis. All this is done while maintaining the appropriate controls to ensure effective and efficient operations and regulatory compliance.
The Company has formulated a risk management policy and has a mechanism in place to apprise the Board about risk assessment and mitigation process. Following key risks were identified for the year 2019:
Cement industry in India is a myriad aggregation of small and large players. In such an environment, the risk of maintaining market position is persistent. Capacity addition is an ongoing process in the industry, which is currently witnessing consolidation. One of the lingering challenges facing the Company is the stability of its market position in a rapidly evolving competitive environment. Also, our peers have increased their pace of market expansion and outreach programs.
To mitigate this risk, the Company has invested in Greenfield clinkerization and cement grinding project in Rajasthan, which will increase the Company’s cement output by 4.5 million tonnes p.a. This in turn will help us improve our market position in the northern, western and central regions. We are also enhancing our cement output by increasing production of blended cement in the eastern and western regions.
To further strengthen our market position and to remain competitive, the Company is continually working towards enhancing its brand equity through innovation, digitization and widening the product portfolio, strongly supported by value added services.
Given the high correlation between inflation and cost of production,, any changes in fuel prices – coal, pet coke and other fuel – can significantly impact the overall costs.
To mitigate this, we are working on ways and means to establish long deliveries and optimizing fuel mix, improving plant efficiency and increasing usage of alternate fuels and raw materials (AFR). Substantial investments have also been made in Green energy like Waste Heat Recovery Systems (WHRS) and solar power.
Procurement of the right quality and quantity of raw materials (primarily fly ash & slag) at an economical cost, is vital for production efficiency. Long term agreements are drawn and linkages at economic cost are made, to ensure uninterrupted availability. The Company has adequate reserves of limestone, which is an essential raw material required for production of clinker.
The Company is exposed to risks associated with the discharge of waste and emission of harmful gases in the environment.
Various initiatives have been undertaken by the Company including installation of bag filters to reduce dust pollution, plantation drives and creation of green belts to de-risk and protect the environment. Ambuja has a formalised Sustainability Policy, Green Procurement Policy and Climate Change Mitigation Policy. These policies equip us with the artillery to address and tackle climate change issues and make necessary changes in the planning stage with a view to ensure conduct of operations in a responsible and sustainable manner. The Company has a proactive approach towards reporting and disclosures on carbon emissions, in line with the protocol of the World Business Council on Sustainable Development (WBCSD).
In 2019, the Company’s ranking on the Dow Jones Sustainability Index (DJSI) improved to 4th position in the list of global sustainable companies under the Construction Material (COM) category. We would also like to highlight that we are 8 times water positive and we have achieved this by reducing the salinity of water and engaged in water harvesting techniques in the vicinity of our large mining operations. Our fly ash absorption for the year 2019 stood at 32.5%.
Digitization and technology have altered the ways in which companies engage in their business-as-usual activities. On one hand, advancements in the areas of Artificial Intelligence (AI), Internet of Things, Data Science And Block Chain have enhanced the overall ease of doing business, the flip side of it is the disruption of traditional business models, and more importantly, the heightened risks of cyber-attacks.
To manage cyber security risks, we have systematic back-up procedures and firewalls in place. Systems are upgraded and monitored at pre-defined intervals, in line with the latest security protocols. Cyber security policies, tools, guidelines and FAQs are updated in a periodic manner and frequent training and awareness sessions are conducted to educate employees on data protection techniques and eliminate data leakages.
Complexity of operations and behavioural issues increase the risk of health and safety, especially in our plants and facilities.
As part of the group’s ‘Zero Harm’ initiative, health and safety of the employees and workers continue to be of paramount importance to the organization. In addition to reviewing our systems, processes, procedures and plugging the gaps in terms of loopholes in the health and safety mechanism, we focused on improving frontline safety through our 'Boots on Ground' program which entails leadership’s extended presence on locations.
Our continued efforts, both on-site and off-site, are supported by regular assessment of dynamic risks associated with safety. The year-on-year improvement witnessed in key metrics measuring health and safety parameters is a testament to our ‘Zero Harm’ initiative.