MYTILINEOS HOLDINGS - SUSTAINABILITY REPORT 2013 - page 59

57
KEY RISK FACTORS WITH POTENTIAL DIRECT IMPACTS
ON THE GROUP'S OPERATION
Market Risk
Increase in the cost of raw materials
Availability of Greek bauxites
and Market Concentration
Health & Safety and environmental
rules and regulations
Climate Change, relevant laws and
regulations and Global Warming
Political, Legal and Regulatory issues
In this context, the Group takes a number of measures to offset its exposure to market
risk, improve its cost structure and ensure its liquidity. These include the following: Re-
structuring of energy cost components; implementation of programmes for optimal util-
isation of assets; implementation of cost reduction programmes; development of plans
for production process improvements etc.
To address this risk, the Group seeks to negotiate and “lock” its key freight contracts with
competitive terms. In parallel, it has introduced a new system for the evaluation of sup-
ply prices for raw materials, and is also implementing an ongoing cost optimisation and
reduction programme.
The Greek bauxite market is already fairly concentrated in a small number of suppliers. This,
coupled with the possibility of further concentration, could impact negatively on the Group’s
costs for the procurement of Greek bauxites in the future. For these reasons, the Group
seeks to negotiate multi-annual bauxite contracts and strategic alliances with Greek pro-
ducers.
The Group's activities are subject to laws and regulations on health, safety and the en-
vironment.
The cost for compliance with these regulations involves either investments or significant
spending in actions regarding safe management of industrial waste and environmental re-
habilitation.
Environmental issues for which we may be held responsible could arise in the future in our
current facilities and in facilities which we previously owned or operated in, even if to this
day such issues are not or could not be known to the Management or have not yet aris-
en.
The Group’s operational margins might be affected by changes which may be made to its
production facilities whose greenhouse gas emission levels are high, as well as to Group
facilities with increased requirements in energy, as a result of regulatory acts primarily in
the EU, where the Group is active. The potential impact of future legislation and of the
regulatory framework on climate change, as well as of the European and international con-
ventions and agreements, cannot be estimated with any certainty, given the wide-rang-
ing purposes of these potential changes. The Group may be forced to carry out significant
investments in the future, as a result of the need to comply with the revised legislation
and the new provisions.
The delays in the substantial liberalisation of the energy market may impact on the Group’s
activities and future results, as well as on the value of the Group’s energy or other assets
whose operation requires significant consumption of energy products. In addition, the Group
may also be affected by potentially adverse developments for the Group in political and
regulatory issues impacting on its activity in EPC projects abroad, especially so in coun-
tries characterised by political instability.
We are already in the process of defining a concrete, comprehensive and well-established Risk Management organisational structure. To this
end, all our senior management executives are involved in the identification and initial assessment of risk factors, in order to facilitate the Man-
agement Councils of each business area and the Board of Directors of each subsidiary in planning specific Risk Management policies and pro-
cedures and obtaining approval for them.
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