Mining Companies Missing Premiums Due To Poor Risk Communication



    Investors seek companies openly communicating about risk management -
    Ernst & Young report

    TORONTO, March 6 /CNW/ - Mining companies could achieve share price
premiums by better communicating risk management practices to major investors,
according to the new report Attitudes to Risk in the Global Mining Sector,
released by Ernst & Young.
    The study reveals only half of the companies surveyed have a specific
policy on communicating risk, and what is being done to manage risk, to major
investors and other stakeholders. Attitudes to Risk surveyed most of the top
40 global mining houses, including Canadian mining firms, and follows an Ernst
& Young study of more than 400 corporate leaders on their attitudes to risk
and a survey of more than 130 major investors.
    "Mining companies need to intensify their efforts on communicating to
investors their risk appetite, their chief risks and what they're doing to
manage them," said Ernst & Young's Canadian mining leader Ian Slater. "There
is a market premium for companies who demonstrate successful risk management,
so mining companies need to ensure that they're accurately articulating the
specific risks they face - and how they manage these risks - to investors."
    The lack of communication with investors is especially alarming in the
face of an earlier Ernst & Young report showing investors apply a penalty if
they think risk management is insufficient - 61% of investors surveyed avoided
companies for this reason and 48% had divested. Attitudes to Risk reports that
investors want to engage with companies on the subject of risk; they want more
information and more dialogue.
    "Investors don't like surprises - no one expects mining companies to
eradicate risk, but investors want to be aware of the full range of risks
which are inherent in their investments," said Mr. Slater. "Transparency is
key."

    
    Key findings include the following:
    -   61% of respondents said the level of risk had increased;
    -   Nearly twice as many companies in the mining sector (71%) - compared
        to the general corporate sector (37%) - said their company's attitude
        was to embrace risk;
    -   CEOs, CFOs and the wider Board now have greater accountability,
        involvement and focus on risk; however, there are fewer Chief Risk
        Officers (CROs) in mining companies compared to the general corporate
        sector as these roles are incorporated in the roles of business unit
        managers;
    -   Mining companies have more comprehensive risk coverage with a broader
        range of risk categories included in their formal risk assessments
        compared to the general corporate sector;
    -   55% of mining companies reported that not all their key risks were
        being actively managed, including 18% that reported their
        environmental risks were undermanaged;
    -   Embedding risk management throughout the organization - creating a
        risk culture - was seen by mining companies as the key challenge in
        the next three to five years;
    -   Nearly a third of mining companies - compared to just 10% in the
        general corporate sector - believed investment in risk management
        would increase 40% or more in the next three years.
    

    About Ernst & Young

    Ernst & Young, a global leader in professional services, is committed to
restoring the public's trust in professional services firms and in the quality
of financial reporting. Its 114,000 people in 140 countries pursue the highest
levels of integrity, quality and professionalism in providing a range of
sophisticated services centred on our core competencies of auditing,
accounting, tax and transactions. Further information about Ernst & Young and
its approach to a variety of business issues can be found at
ey.com/perspectives. Ernst & Young refers to the global organization of member
firms of Ernst & Young Global Limited, each of which is a separate legal
entity. Ernst & Young Global Limited does not provide services to clients.





For further information:

For further information: Nichola Petts, Media Relations, Ernst & Young,
(416) 941-1813, nichola.petts@ca.ey.com


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