Page 34 - Annual Report 2020

1.5.4 Risk management continued

Asset integrity and tailings storage facilities
Risks associated with operational integrity, tailings storage facilities and performance of our assets.

Why is this important to BHP?
Maintaining the operational integrity and performance of our assets is crucial to protect our people, the environment and communities in which
we operate. We have onshore and offshore assets in a variety of geographic locations, all of which exist in and around broader communities and
environments. A tailings dam failure, other serious incidents (for example, structural failure of onshore or offshore production infrastructure or a
vessel incident through our supply chain, including groundings, collisions and hydrocarbon release) or the failure to appropriately maintain or
develop our assets could have an impact on our people, surrounding communities and environments, as well as our reputation, cash flow, operations
or the longevity of our assets.
While we seek to design and implement the right strategy and processes to maintain the operational integrity and performance of our assets, we may
not always be effective in doing so. The impacts of any serious incidents that occur may also be amplified if we fail to respond in an appropriate manner.
Threats
Failure to maintain the operational integrity and performance of our • loss of workforce confidence
assets may reduce their value and could lead to or exacerbate • impacts on our ability to access capital (for example, an operational
operational incidents, such as structural failure of production incident may affect our ability to retain the confidence of shareholders
infrastructure, dam failure or a vessel incident. Such failures and/or and other stakeholders, including financial institutions)
operational incidents could result in: A failure to maintain the operational integrity and performance of our
• multiple injuries and fatalities assets may adversely impact asset value, including due to production
• extensive community disruption, including impacts to personal safety, shortfalls, loss of development options or a delay in asset development
livelihood and quality of life (for example, structural failure of critical ship loading infrastructure, such
• short- and long-term health and safety risks to our people or the as at our iron ore operations in Port Hedland, could result in a production
community (for example, exposure to diesel particulate matter, silica shortfall). Such failures may also negatively impact cash flows and
or coal mine dust from our mining operations may result in acute profitability, result in financial write downs (for example, due to a need
and/or chronic illness, such as coal mine dust lung disease) to abandon remaining reserves where it is uneconomic to reconstruct
• environmental damage (for example, as a result of a dam failure or recover the asset following a major incident) or increased costs or
releasing tailings, a hydrocarbon release or a vessel incident through other commercial impacts.
our supply chain that affects air quality, biodiversity, water resources We take steps to maintain the operational integrity and performance
or environmentally sensitive areas) of our assets through planning, design, construction, operation and
• loss of licences, permits or necessary approvals to operate assets closure. However, our projects are complex and may be adversely
• other adverse impacts on the communities in which we operate, impacted by factors out of our control, such as natural disasters or
including loss of community infrastructure and services, such as national crises. The COVID-19 pandemic has resulted in controls being
power, water or transport, and damage to cultural heritage sites implemented by BHP and third parties that may affect the performance
• failure or redundancy of mining, processing or support infrastructure of our assets. For example, workplace entry and travel restrictions may
or equipment, such as a structural collapse or failure of a conveyor, result in the delay of key personnel or external consultants accessing our
petroleum platform or rail line sites to undertake inspections or other activities, potentially resulting in
• disruption to essential supplies or delivery of our products (for example, unidentified asset integrity issues or production shortfalls.
where channel blockage is caused by an owned, chartered or third Our risk financing approach is, where appropriate, to self-insure for
party vessel incident, including at Port Hedland in Australia where our certain risks, including property damage and business interruption,
operations rely on a channel used by vessels unrelated to BHP) sabotage and terrorism, marine cargo reinsurance, construction,
• significant repair, recovery or reparation costs public liability and applicable employee benefits, or to not purchase
• interruption in production or other critical activities and loss of revenue external insurance for certain risks. Business continuity plans may
from operations that are directly or indirectly affected by an incident not provide protection for all costs that arise from such events.
(for example, a loss of power supply or wider shutdown of operations Where external insurance is purchased, third party claims may exceed
pending safety reviews) the limit of liability of policies or our insurers may become insolvent or
• litigation (including class actions), fines or investigations by authorities, otherwise unable to make payments under our policies. Any uninsured
and reputational damage or underinsured losses could impact our financial position or the
financial results of our assets.
Management
We employ a number of measures designed to protect the operational • defining key accountable roles, and providing training and
integrity and performance of our assets, and to detect, eliminate, prevent qualifications for staff and contractors
and mitigate operational incidents and outages. These measures include: • maintaining local availability of critical skilled personnel within BHP,
• BHP’s standards on health, safety, the environment, communities, where possible, to increase operational resilience by ensuring the
water and tailings storage facilities, maintenance, security, crisis and continuity of critical inspections and other activities (for example, this
emergency management, and event and investigation management has mitigated the impacts of workplace entry and travel restrictions
• planning, designing, constructing, maintaining and monitoring mines, imposed on our assets in response to the COVID-19 pandemic)
dams and equipment to avoid incidents • maintaining evacuation routes, supporting equipment, emergency
• maintaining and improving production infrastructure and equipment preparedness and response plans, and business continuity plans
to protect our people and assets (for example, controls to maintain the • collaborating with industry peers and relevant organisations on
structural integrity of dams) minimum standards (such as a minimum maritime standard for bulk
• inspections and reviews (for example, independent dam safety ore carriers) and improvement of third party risk management
practices to reduce exposure to external events, as well as identifying
reviews to assess the management of significant tailings storage
facilities, both active and inactive as described in section 1.7.10) opportunities to improve our own risk management practices
• routine reviews of and revisions to management plans and manuals For more information on our approach to risks associated with tailings
(for example, to test and update for alignment with operating storage facilities, see section 1.7.10.
specifications and industry dam codes)

FY2020 insights
The Group’s exposure to asset integrity and tailings storage facilities risks is expected to remain relatively stable. While the COVID-19 pandemic has
not had significant impacts during FY2020 on asset integrity and tailings storage facilities risks, management of risk at each of our operated onshore
and offshore assets will continue to be reviewed to ensure we maintain an effective control environment for the duration of the COVID-19 pandemic
and safely transition to post-COVID-19 operating conditions when it is appropriate to do so.

32 BHP Annual Report 2020