The dramatic changes that have impacted the mining sector over the past several years, including high commodity prices, high demand for power and processing equipment, falling industrial demand for raw material, limited access to capital and the re-evaluation of corporate strategies, means that companies are placing more of an emphasis on the need for effective risk management. The good news, however, is that most mining companies are ahead of the game.
Those in the industry are inherently willing to take big risks for big gains and are proactively seeking advice to do so safely, but important investment decisions are being made in an environment that is often unstable with returns that are increasingly uncertain. This uncertainty can be viewed as both a threat and an opportunity, however, so it is important to put an effective risk management strategy in place in order to ensure success.
RSA Insurance suggests that developing strong partnerships with insurance brokers and carriers can strengthen preparedness, and offers the following tips for managing risk:
- Review the political landscape thoroughly before beginning a mining operation, as problems in this realm can halt an operation at any development stage.
- Typical threats to supply chains include poor access to replacement equipment in remote areas, transportation barriers and difficulty accessing qualified labourers, so a review of these risks is non-negotiable in order to properly monitor project profitability.
- Conversations between companies, brokers and insurers should always include an in-depth understanding of what products are being offered and what coverage is available.
- Brokers can ease the transition of assuming risk as companies move from one stage of development to another. They do so by tailoring programs to specific business missions, and by bridging the gap between technical risks and the big picture.
- Long term broker relationships can guide a mining company through risk control over the course of projects spanning decades. Expert advice at the right time from a trusted broker or carrier quickly translates into informed risk management decisions.
- Tangible expertise is invaluable, and brokers and insurers provide a wealth of knowledge gained from prior experiences that can help mining companies minimize exposure.
As the mining industry becomes more globalized, working with an international insurance partner will help ensure risks are managed effectively and appropriately for various jurisdictions.
*Michael Marino is Assistant Vice President, Energy at RSA Insurance. RSA is an established global insurer with employees in over 30 countries and compliant operations in more than 150 countries.