Page 31 - Annual Report 2020

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Risk process and despite controls such as emergency response plans
Our Risk Framework requires identification and management and equipment in place that are designed to reduce the
of risks to be embedded in business activities through the number of fatalities.
following process: Our focus for current risks is to prevent their occurrence or Strategic Report
minimise their impact should they occur, but we also consider
Risk identification how to maximise possible benefits that might be associated with
New and emerging risks are identified and each is assigned an strategic risks (as described in the Risk strategy section). Current
owner, or accountable individual, in the part of our business material risks are required to be evaluated once a year at a
where the risk is located. minimum to determine whether our exposure to the risk is within
our risk appetite.
Risk assessments
Risks are assessed using an appropriate and internationally- Emerging risk
recognised technique to determine their potential impacts and Emerging risks are newly developing or changing risks that are
likelihood, prioritise them and inform risk treatment options. highly uncertain and difficult to quantify. They are generally driven Governance at BHP
Risk treatment by external influences and often cannot be prevented, although
Controls are implemented to prevent, reduce or mitigate they can be prepared for. They also tend to be interconnected
downside risks and increase the likelihood of opportunities and often require solutions that draw upon expertise from across
being realised. our organisation.
Monitoring and review In FY2020, we introduced an enterprise-level watch list of emerging
Risks and controls are reviewed periodically and on an ad hoc themes that provides an evolving view of the changing external
basis (including where there are high potential events or environment and how it might have an impact on our business.
changes in the external environment, such as the COVID-19 These themes represent areas of risk where a shift in direction could
pandemic) to evaluate performance. have a significant impact on our operating environment, with the
potential to affect our strategy or business continuity. Remuneration Report
We maintain the watch list and use it to support the identification
Our Risk Framework includes requirements and guidance on the
tools and process to manage all risk types (current and emerging). and management of emerging risks through our normal business
activities and planning processes under our Risk Framework,
Current risk as well as to inform and test our corporate strategy.
Current risks may have their origin inside BHP or originate as a Once identified, our focus for emerging risks is on structured
result of BHP’s activities. These may be strategic or operational monitoring of the external environment, advocacy efforts to
in nature and include material and non-material risks. reduce the likelihood of the downside risks manifesting and,
The materiality of a current risk is determined by estimating the where appropriate, considering emerging risks (including
maximum foreseeable loss (MFL) if that risk was to materialise. opportunities) as part of our planning and strategy setting and Directors’ Report
The MFL is not an estimate of the probable impact to BHP if the risk review process. We also apply contingency controls, such as
was to materialise. Instead, the MFL is the estimated impact to BHP response plans, to reduce the impact should emerging risks
in a worst case scenario without regard to probability and assuming that are outside our appetite occur. These controls increase
that all risk controls, including insurance and hedging contracts, the resilience of BHP to shocks from the external environment.
are ineffective. For example, when calculating the number of Emerging risks are required to be evaluated once a year at a
fatalities to assess MFL in the event of an offshore well blow out, minimum to determine whether the risks remain emerging
we assume the personnel capacity of the drilling rig even though and if our exposure is within our risk appetite.
there may be fewer people on it at the time of an incident Financial Statements

Additional information

BHP Annual Report 2020 29 Shareholder information