responding to
challenges proactively
It is imperative to identify, analyse and mitigate the key risks to achieve our strategic objectives, protect stakeholder interests and ensure regulatory compliance.
We take both ‘top-down’ and ‘bottom-up’ approach for
assessment of risks and opportunities. The identified risks
are relevant for us over a period of one to three years.
We have identified more than 45 risks, which are classified
into three broad categories – strategic risks, operational
risks and external risks. Thereafter, we have prioritised the
top 10 risks across categories that have material impact on
our operations, profitability and cash flows.
The Risk Management Committee of the Board assesses and provides oversight to management relating to identification and evaluation of the identified risks, including Sustainability, Information Security, etc.
Key risks associated with the climate/environment are
identified and mapped as per the disclosure standards
prescribed by the Task Force on Climate-related Financial
Disclosure (TCFD).
Primary risks
The following table represents the primary risks identified by us for having significant potential impact on our business. We have devised and applied relevant mitigation strategies for each risk, depending on the gravity of impact and likelihood of occurrence.
| Key risks | Mitigation strategy |
|---|---|
Maintaining market position Continue to maintain and then build on the market position in times of High volatility, Uncertainty, Complexity, and Ambiguity (VUCA), especially given the demand contraction caused by COVID-19 pandemic |
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Resource availability and price A rise in input costs increases overall cost of production |
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Environment and sustainability Environment protection is of paramount importance, considering the energy-intensity of the sector |
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Cyber security Threat from cyber attacks |
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Health and safety Ensuring health and safety of employees in the organisation |
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Sustainability related risks and opportunities
Following are the identified sustainability related risks and opportunities and Ambuja Cement’s responses to address them appropriately:
| Key risks and/or opportunities | Mitigation initiatives | Material topics |
|---|---|---|
Energy Energy cost remains one of the major cost components for cement manufacturing. Escalation in energy cost, stressed supply and quality fluctuations remain major concerns |
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Water availability Water availability has become a significant risk area, considering the depleting water tables |
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Sustainable construction/ green building Ensuring optimum resource utilisation and minimising environmental impact of various materials in construction. There is a likelihood of strong regulatory measures to promote the use of environment-friendly materials. This is also an opportunity to launch innovative solutions with environmental benefits for downstream use |
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Logistics Increasing logistics expense and distribution cost are concern areas for the industry. Rail is a preferred mode of transport for distances above 250 km; however, rail transport has always been impacted by the shortage of wagons, particularly during the peak period. Policies of the Railways (preference to food and power companies) have posed a challenge in the movement of cement to the consumption centres, adversely impacting the production schedule and increasing the overall transportation cost |
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Mining Limestone and other fuel mining are core to cement manufacturing. The key challenges associated with mining operations are land acquisition, mineral distribution, mineral quality, mine rehabilitation, biodiversity, and groundwater table intersection |
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Local communities We have manufacturing sites in rural areas of India. Rural communities suffer from widespread income inequalities, which often become a reason for discontent and social unrest In addition, there are demographic changes owing to the large inflow of migrant workers/truck drivers in the area. The communities have high expectations from Ambuja Cement. Support from the communities help in the smooth running of business |
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Regulatory changes Changes in regulations take place in a fast-developing country like India, in areas like environment, tax and competition, among others. Non‑compliance can lead to reputational and financial consequences, while compliance too comes at a cost for innovation, alternatives, transformation and upgradation, among others |
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Emerging risks and opportunities
| Key risks and/or opportunities | Mitigation initiatives | Material topics |
|---|---|---|
Scarcity of natural resources We recognise the pressure on natural resources arising out of the nature of our business. We have evolved our portfolio and processes with products and solutions that reduce the risk of unsustainable consumption of natural resources like limestone, fossil fuel (coal) and other resources like water |
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Climate change Being in an energy and resource‑intensive industry, climate change poses risks which are evident in our operations and their mitigation represents a key aspect of our sustainability strategy Increase in the frequency and intensity of precipitation/extreme weather events such as cyclones can lead to floods and submergence that can potentially disrupt our supply chain and operations including our sea transport terminals From the transitional risk perspective, we face regulatory risks such as increase in carbon tax on coal, Renewable Purchase Obligations (RPO), volatility in fossil fuel prices and increase in prices of AFR due to growing market demand |
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