Page 33 - Annual Report 2020

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A number of our principal risks may have impacts that are Risk factors
embedded in these scenarios. For example, operational risks This section highlights our principal risks, as illustrated in the
associated with occupational and process safety, asset integrity, Group Risk Architecture diagram in the Risk strategy section. Our
tailings storage facilities and third party performance may have principal risks have changed since FY2019, largely due to changes in
comparable impacts to an offshore well blow out. Similarly, risks our external environment and the continued evolution of our Group Strategic Report
associated with community, human rights and climate change Risk Architecture. These changes can be summarised as follows.
(such as civil unrest or a natural disaster, including the physical
impacts of climate change or a pandemic) may result in production Risks associated with tailings storage facilities, geotechnical
outages at one or more of our assets, while risks associated with stability, non-process fire and explosion, and sales security and
commodity prices, geopolitics and stakeholder relations may concentration have been identified as principal risks to provide
have impacts that result in a sustained low commodity price additional visibility of some of the Group’s most significant risks
environment (for example, an economic slowdown may be caused and to better recognise the importance of managing certain
by geopolitical events or responses of governments and other strategic risks. Tailings storage facilities risks are discussed in this
stakeholders to a pandemic). For further information on our section with asset integrity. Geotechnical failures and underground Governance at BHP
principal risks, see the Risk factors section. fires or explosions may pose significant threats to the health and
Stress testing demonstrated that the Group’s balance sheet was safety of our people and are therefore discussed with occupational
and process safety. Strategic risks associated with gaining and
put under the greatest stress by the least likely scenario that all maintaining access to the global markets that we rely upon
three hypothetical events occur together. In such circumstances, to trade our commodities are discussed with geopolitics and
the Board considered that the Group would have a number of stakeholder relations.
mitigating actions available to it, including deferral of discretionary
capital expenditure, issuance of debt and divestment of certain The scope of two of our principal risks was expanded in FY2020
assets. A further level of robustness is added given BHP would and they have been removed from the Group Risk Architecture
also have access to US$5.5 billion of credit through its revolving diagram. Returns sustainability risks are now captured by assets
credit facility. and growth options, which better supports and reinforces revisions Remuneration Report
The Board was also mindful of key risk indicator performance, made to our purpose and strategy in FY2020. Risks associated with
geopolitics and macroeconomics now fall within geopolitics and
regular balance sheet stress testing against low commodity prices, stakeholder relations in order to focus on broader macroeconomic
and the assessment of our portfolio against scenarios as part of and geopolitical trends that may affect BHP and our stakeholders.
BHP’s strategy and corporate planning processes to help identify The names of some of our principal risks have also changed in
key uncertainties facing the global natural resources sector order to better represent associated risks, although their scope
(including in relation to climate change, the COVID-19 pandemic remains the same.
and commodity price volatility).
In making this viability statement, the Board has also made Our principal risks are further described in the risk factors listed
on the following pages. Each of these could materially and
certain assumptions regarding management of the portfolio, adversely affect our business, financial performance, financial Directors’ Report
the alignment of production, capital expenditure and operating condition, prospects or reputation, leading to a loss of long-term
expenditure with five-year plan forecasts and the alignment of shareholder and/or investor confidence. While these represent our
prices with the cyclical low price case used in monthly balance most significant risks, BHP is also exposed to other risks that are
sheet stress testing. important to us (for example, health, safety, environmental,
Taking account of these matters (including the assumptions) and community, financial, reputational, legal or other risks) that
our current position and principal risks, the Board has a reasonable are not described in the risk factors.
expectation that BHP will be able to continue in operation and meet We have considered the implications of the COVID-19 pandemic
its liabilities as they fall due over the next three years. on our business, including through event tree analysis to assess
its potential medium- to longer-term cascading impacts on the
Group’s risk profile and our enterprise-level watch list of emerging
themes. We will continue to assess the implications of the Financial Statements
pandemic and have referenced impacts to our principal risks
in the following risk factors, where relevant. To the extent that
our business is adversely impacted by the COVID-19 pandemic,
any such impacts may also have the effect of heightening some
of the risks listed on the following pages. Additional information

BHP Annual Report 2020 31 Shareholder information