Jastrzębska Spółka Węglowa S.A.Enterprise Risk Management System
In line with "Good practices for WSE-listed companies," JSW's Management Board and Supervisory Board place emphasis on the completeness and reliability of information pertaining to the effectiveness of enterprise risk management, having in consequence introduced an enterprise risk management system.
In pursuing its vision and business objectives, JSW Group must rationally capitalise on opportunities and smartly and effectively manage risk. Understanding the risks that JSW Group faces makes it possible to make the optimal strategic decisions and thus make a better use of resources. A comprehensive approach to risk management is consistent with our growth strategy, continuous operational improvement and rules for sustainable and responsible business. Risk management supports JSW Group in building a resilient corporate structure. To ensure a sustainable growth in value over the long term, the management makes every effort to understand where the opportunities and threats are. It is important to have credible and complete information on risks and to know how to handle them.
The aim of enterprise risk management is identifying potential events and risks that may have an impact on the organisation, maintaining risks within the set boundaries and rationally implementing business objectives. This is a continuous process, subject to modifications in response to a changing economic environment, changes in the Company's operations and changes concerning the impact of specific risks on the Company's business objectives. Enterprise risk management encompasses activities at the level of JSW, JSW Group and business processes.
JSW Group uses systems such as ERM in order to strengthen its management system and increase transparency in risk management. These benefits enhance risk management performance and reduce the cost of risk and the cost of capital. The Risk Management System is based on the following documents approved by the Management Board of JSW S.A.: JSW Group's enterprise risk management policy and procedure for enterprise risk management. It meets the highest ERM standards and constitutes a comprehensive description of a formalised enterprise risk management system.
Introducing consistent risk management standards at JSW Group is aimed at:
- maintaining risk within set boundaries and rationally implementing business objectives,
- ensuring the security of operations of JSW S.A. and JSW Group companies,
- establishing a consistent approach to identifying, evaluating and analysing risks and implementing responses to material risks,
- ensuring the creation and protection of value for shareholders,
- implementing early-warning tools for threats and alerts for opportunities,
- supporting business objectives and ensuring strong support for decision-making at all organisational levels, aimed at maximising earnings within an acceptable level of risk,
- building an organisation that is aware of the risks it takes and strives for continuous improvement.
Risk management is an integral element of our organisational culture (the organisation's operational style).
An ERM Proxy appointed within JSW S.A.'s organisational structure is in charge of the enterprise risk management system's proper operation and performance of tasks. As part of the set targets and tasks, the Proxy together with risk owners collects information on risks, analyses the existing risk control mechanisms and prepares recommendations for current risk response plans. A Risk Owner (RO) manages the key risk factors assigned to him/her within the ERM system. RO is responsible for submitting information on new identified risks when performing his/her duties to a Proxy or a similar RO.
JSW's key managers are responsible for risk management across all of the Company's areas: operational, strategic, financial, commercial, legal and regulatory.
Risk owners include: Management Board, directors, leaders, representatives or other persons in charge of their respective processes or functional areas.
By cyclical reporting to the Company's organs, the ERM system generates the following benefits:
- The Supervisory Board receives in-depth information on material risks, their meaning to the Company and information on on-going activities aimed at preventing or reducing risk,
- Management Board decisions are made on the basis of solid information, with full awareness of the associated risk and the ability to control it to ensure good results,
- for the Owners and stakeholders, risk management minimises uncertainty related to achieving the organisation's objectives and improves the ability to respond to crisis situations,
- having an effective enterprise risk management system assures the Management Board, Supervisory Board, Audit Committee and Stakeholders that all material risks are known, understood and controlled in a systematic and structured manner.
The following material risks with impact on JSW Group's operations were identified after analysis:
Production continuity and management of incidents
Production restrictions and management of mining machine and equipment park
Work-related accidents and other hazards
Environmental protection regulations
Mining damages on the surface
Breaches of personal protection data rules
Risk associated with global recession
Swings in demand and supply on JSW S.A.'s key product markets
Risk associated with reductions of production capacities for blast-furnace pig iron in Europe
Changes in technologies for acquiring steel, having impact on demand for coke
Currency risk - changes in PLN exchange rate vs EUR and USD
The identified material risks have strong potential impact and effective control mechanisms but there is a need for monitoring and periodically verifying the effectiveness of the existing control and risk response mechanisms.
Gaining an understanding of risk levels constitutes an important component of planning processes at JSW S.A. The Management Board emphasises that risk management is a continuous process and is exercised at all significant organisational structures within the Company and the Group. The Company's dynamically changing legal and economic environment necessitates a process for reviewing and updating the risk register, including risk definitions and descriptions, verification of the risk owner list, enhancing support for risk owners and gradual improvements in the ERM system, including IT tools.
In order to effectively respond to threats such as natural disasters or other events with catastrophic consequences, the Management Board of JSW S.A. has adopted a document entitled “Policy for Managing Business Continuity at JSW S.A.” The main purpose of introducing this Policy is to ensure a consistent and systemic approach to evaluating critical situations, preparing for them and maintaining the ability to respond to them and to recover. Managing business continuity makes it possible to evaluate potential threats, implement appropriate preventive measures or prepare in a way that optimally minimises the effects of such incidents/unwelcome events taking place.
Last update 04.05.2020