Our operating environment is evolving rapidly, and it is imperative for us to identify, assess and respond appropriately to both the upside and downside of uncertainties to achieve our strategic objectives and protect the interests of our stakeholders. Our ability to create long-term value depends on how we mitigate the impact of these risks and leverage emerging opportunities.
We take both the ‘top-down’ and the ‘bottom-up’ approaches for assessing risks and opportunities. The identified risks are relevant for us over a period of one to three years. More than 45 risks have been identified across three broad categories – strategic, operational and external. We have prioritised top 10 risks across categories that have a material impact on our operations, profitability, cash flows and long-term value creation for our stakeholders.
The Risk Management Committee of the Board reviews and provides oversight to the management regarding the identification and evaluation of the identified risks, including sustainability, information security and so on.
We put special emphasis on sustainability and have identified the key risks associated with our business, with impact on the climate/environment. We have mapped these risks as per the disclosure standards prescribed by the Task Force on Climate-related Financial Disclosure (TCFD).
The following table represents some of the key risks identified by us. We have devised and applied relevant mitigation strategies for each risk, depending on the gravity of impact and likelihood of occurrence.
STRENGTHENING MARKET POSITION
Key risk
Mitigation
Impact
Key risk
Risk context
External macro factors remain extremely volatile. Many factors such as policy uncertainty, access to funds, higher interest rates and the continuation of the pandemic may impact growth prospects
Value creation opportunities
Our ability to navigate the external uncertainties helps us create opportunities for stronger growth, increased returns and better market positioning
Mitigation
With government spending focused on infrastructure and housing, the cement sector is poised for growth. This is further backed by favourable interest rates and government policies. We have presence in both key and emerging markets and progressively expanding our market reach. We are always evaluating the emerging socio-political and economic trends and aligning our strategies accordingly
Impact
Strategic objectives
Accelerating Growth Expanding Products and Solutions
Capitals impacted
Risk trend
INPUT COST AND AVAILABILITY
Key risk
Risk context
Continuous rise in prices of key inputs and limited availability of natural resources could impact our operations as well as profitability
Value creation opportunities
We relentlessly optimise input cost, use alternative raw materials and industrial waste that help us reduce consumption of natural resources
Mitigation
We continuously look for new sources for raw material and use alternative raw materials. We recently started underground mining of Gare Palma Coal Block, securing coal supply for our Bhatapara unit. Our investments in WHRS units across plants are helping us utilise waste better and reduce input cost. Infrastructure for enhanced use of fly ash is under construction
Impact
Strategic objectives
Delivering Superior Performance
Capitals impacted
Risk trend
ENSURING HEALTH AND SAFETY OF OUR PEOPLE
Key risk
Risk context
Our employees who work at the manufacturing units or mines are exposed to inherent health and safety risks. We remained operational during the second wave of the pandemic by stringently following all safety norms
Value creation opportunities
A safe and healthy work environment underpins our commitment to being a responsible corporate citizen
Mitigation
We have implemented necessary measures to ensure ‘Zero Harm’ and protect employees, contractors and third parties from injury, illness or fatality, both on-site and offsite. We have guidelines in place for ‘Operating in with and without COVID’, handling of day-to-day operations and surge requirements (shutdowns, maintenance, etc.), and focus on personal safety behaviour while at work. We have emergency preparedness in line with the COVID Trigger and Response Plan (TARP) along with mental resilience programme
Impact
Strategic objectives
Delivering Superior Performance
Capitals impacted
Risk trend
Financial capital
Manufactured capital
Intellectual capital
Natural capital
Social capital
Relationship capital
Human capital
Sustainability-related risks
Key risk
Mitigation
Impact
WATER AVAILABILITY
Key risk
Risk context
Water availability has become a significant risk area, considering the depleting water tables
Value creation opportunities
We are working continuously to reduce water consumption, recycle process water and recharge groundwater to remain water positive
Mitigation
We are optimising our water consumption through various initiatives including water harvesting. We track specific freshwater withdrawal, consumption and efficiency through monthly Water Management Reports (WMRs) for efficient utilisation. Our Sustainability Committee and executive committees of the management regularly monitor the performance of water-related KPIs
Impact
Strategic objectives
Leading in Sustainability
Capitals impacted
Risk trend
SUSTAINABLE CONSTRUCTION AND GREEN BUILDINGS
Key risk
Risk context
To guarantee long-term viability of the sector, it is imperative to ensure optimum resource utilisation and minimise the environmental impact of building materials. There is a likelihood of stronger regulatory measures to ensure sustainable practices and products
Value creation opportunities
This provides us with the opportunity to introduce innovative products that have limited impact on the environment
Mitigation
We promote sustainable construction with focused product development, R&D and technical assistance to our customers. We have created a sustainable product portfolio; more than 89% of our responsible products such as PuraSand, AAC Cool Wall Blocks, Ambuja Kawach, Ambuja Plus, Compocem etc.
Impact
Strategic objectives
Accelerating Growth Expanding Products and Solutions Leading in Sustainability
Capitals impacted
Risk trend
LOGISTICS
Key risk
Risk context
Increasing logistics expense and distribution cost are areas of concern 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 Indian Railways (preference for 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
Value creation opportunities
This provides us the opportunity to optimise cost by using digitalisation for route optimisation. It also helps in reducing our carbon footprint
Mitigation
We are using ships that run on biodiesel to optimise cost and reduce our carbon footprint. We are further reducing distribution and logistics costs by enhancing movement by rail in collaboration with Indian Railways as per agreed terms of long-term freight revenue commitment and assurance on the availability of wagons. We are also increasingly leveraging digitalisation and Master Service Agreement (MSA) with ACC Limited for route optimisation and minimise delivery cost
Impact
Strategic objectives
Delivering Superior Performance Leading in Sustainability
Capitals impacted
Risk trend
MINING
Key risk
Risk context
The key challenges associated with mining operations are land acquisition, mineral distribution, mineral quality, mine rehabilitation, biodiversity, and groundwater table intersection
Value creation opportunities
We continuously work towards enhancing mining efficiency. The use of waste helps us in conserving natural resources
Mitigation
Limestone from our captive mines allows us to have better operational control and maintain product quality. We are using state-of-the-art environmentally friendly and safe mining techniques that cause minimal disturbance to the people, land and the environment. We have installed Overland Belt Conveyor (OLBC) systems for the transportation of limestone from the mines to our plants. We have in place policies on mine rehabilitation and biodiversity protection post-mining. We are a signatory to the India Business and Biodiversity Initiative (IBBI) of the CII and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and implement IUCN guidelines
Impact
Strategic objectives
Accelerating Growth Leading in Sustainability
Capitals impacted
Risk trend
LOCAL COMMUNITIES
Key risk
Risk context
We have manufacturing sites in rural areas, where income disparities and other inequalities often lead to discontent and social unrest. The inflow of migrant workers and truck drivers also cause demographic changes. Support from the communities is essential to conduct business operations
Value creation opportunities
Our approach is to minimise the impact of our business, and engage openly and honestly to build lasting relationships and foster socio-economically resilient communities
Mitigation
We engage with the community through our CSR arm, the Ambuja Cement Foundation (ACF). We have established Community Advisory Panels in our locations, comprising representatives from the Company and the community to discuss community issues and arrive at a consensus to implement programmes for them. We stringently monitor all programmes through the Social Engagement Scorecard
Impact
Strategic objectives
Leading in Sustainability
Capitals impacted
Risk trend
REGULATORY CHANGES
Key risk
Risk context
Changes in law and regulations may result in disruptions. Non-compliance can lead to reputational and financial consequences, although compliance too comes at a cost of innovation, alternatives, transformation and upgradation, among others
Mitigation
We ensure compliance in all areas. New emission control systems have been installed to comply with the new emission standards for cement industry
Impact
Strategic objectives
Accelerating Growth Expanding Products and Solutions Leading in Sustainability
Capitals impacted
Risk trend
SCARCITY OF NATURAL RESOURCES
Key risk
Risk context
Depleting natural reserves, new regulations, availability, price, currency exchange rate volatility and other factors have led to a steady increase in the cost of raw materials, power and fuel
Value creation opportunities
This gives us the opportunity to work on alternative raw material mix and use higher share of waste in the manufacturing process
Mitigation
Our portfolio and processes have evolved with emerging needs. Our products and solutions reduce the risk of unsustainable consumption of natural resources such as limestone, fossil fuel (coal) and other resources like water. We are promoting circular economy that helps us address concerns arising from scarcity of natural resources through the use of waste-derived resources
Impact
Strategic objectives
Accelerating Growth Expanding Products and Solutions Leading in Sustainability
Capitals impacted
Risk trend
CLIMATE CHANGE
Key risk
Risk context
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
Value creation opportunities
Through our focused climate change programme, we strive to ensure emissions and climate change issues are identified, understood and monitored
Mitigation
There are four focus areas for lowering carbon emission in our operations—reduction in clinker factor; improving electrical and thermal energy efficiency and process technology; waste heat recovery; and optimising fuel composition. Our climate change risk assessment is based on Task Force on Climate-related Financial Disclosure (TCFD) guidelines, which also helped us identify the action plans to address the risks and opportunities. The identified opportunities are to the tune of 7% of EBITDA (as of 2021)
Impact
Strategic objectives
Leading in Sustainability
Capitals impacted
Risk trend
Financial capital
Manufactured capital
Intellectual capital
Natural capital
Social capital
Relationship capital
Human capital