Page 32 - Annual Report 2020
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1.5.4 Risk management continued
Risk intelligence
The Board and senior management are provided with insights on trends and aggregate exposure for our most significant risks, as well as
performance against risk appetite, by the Risk team. The Board also receives reports from other teams to support its robust assessment of
BHP’s emerging and principal risks, including internal audit reports, ethics and compliance reports and the Chief Executive Officer’s report.
A summary of the risk reports delivered by the Risk team and how these provide additional intelligence to the Board is outlined below.
BHP Board
CEO/ELT Risk and Audit Committee Sustainability Committee
Material risk report Material risk report Material risk report
Financial Risk
Management Committee Robust risk assessment Priority Group Risk Reviews
and viability statement
Material risk report
(Finance focused)
Priority Group Risk Reviews
Viability statement
Material risk report includes:
Business Risk and • Update on the implementation
Audit Committee of the Risk Framework
• Risk proile overview
• Material changes in the risk proile
Material risk report • Key risk indicators
(Region focused) • Chief Risk O icer opinion (or Head
of Risk Business Partners opinion for
Business Risk and Audit Committee)
Other management • Priority Group Risk summaries
committees • Update on emerging risk themes
As required
Robust risk assessment and viability statement
The Board has carried out a robust assessment of BHP’s emerging The viability assessment took into account, among other things:
and principal risks, including those that could result in events or • BHP’s commodity price protocols, including low-case prices
circumstances that might threaten BHP’s business model, future • the latest funding and liquidity update
performance, solvency or liquidity and reputation. • the long-dated maturity profile of BHP’s debt and the maximum
The Board has assessed the prospects of BHP over the next three debt maturing in any one year
years, taking into account our current position and principal risks. • the flexibility in BHP’s capital and exploration expenditure
The Board believes a three-year viability assessment period is programs under the CAF
appropriate for the following reasons. BHP has a two-year budget, • the reserve life of BHP’s minerals assets and the
a five-year plan and a longer-term life of asset outlook. As reserves-to-production life of our oil and gas assets
highlighted in the Risk factors section, there is currently increased • the Group-level risk profile and the mitigating actions available
uncertainty in the external environment, including due to should particular risks materialise
heightened political and policy uncertainty, growing civil unrest • any actual and further anticipated impacts of the COVID-19
in some countries in which we operate and market volatility and pandemic on BHP’s two-year budget and five-year plan
geopolitical tensions resulting from the COVID-19 pandemic.
This may increase the risk of commodity price and exchange rate The Board’s assessment also took into account additional stress
volatility and also affect the longer-term supply, demand and price testing of the balance sheet against a number of scenarios that
of our commodities. These factors result in variability in plans and model three hypothetical events occurring individually and
budgets. A three-year period strikes an appropriate balance together in various combinations over the three-year viability
between long- and short-term influences on performance. period. These hypothetical events were:
1. an offshore well blow out involving a drilling rig that we operate
2. simultaneous, short-term production outages at some of our
most significant assets
3. a low commodity price environment in FY2021 and FY2022,
followed by a gradual recovery by FY2025
30 BHP Annual Report 2020
