Risk management

Underpinned by our values, we proactively manage risk to enable the achievement of our strategic objectives and to maintain a positive reputation among our stakeholders. Risk management is inextricably linked to our strategy, is an essential element of sound corporate governance and a crucial enabler to exploit opportunities. Not only do we deal with the uncertainty in the business environment by minimising the downside, we also seek to capitalise on the upside potential to achieve our strategic objectives.

Our approach to risk management

Our risk policy strengthens the link between strategy, risk and key decision-making processes that are required for effective risk management. In 2017 we evolved our risk management approach to ensure flexibility and relevance to Sasol’s business needs in a changing operating environment, by implementing the Enterprise Risk Management (ERM) Framework.

The ERM Framework enables effective risk management with measurable results ensuring continuous feedback to meet stakeholder requirements. We sustainably manage our risks by applying our ERM Framework, which is anchored in the five risk management fundamentals, namely: accountability, business knowledge, event-based risk management, risk-based responsiveness and risk assurance.

Our ERM Framework has improved our internal risk capabilities. It enables us to have line of sight of our full risk landscape through the utilisation of our risk categorisation tool named our risk breakdown structure. The risk breakdown structure has six categories namely: Financial, Operational, Market, People, Legal and Regulatory and Geopolitical and Corporate Affairs. We have adopted the bow-tie methodology to assist us in better analysing the risks we face.

The ERM Framework includes our risk management process, which is aligned with Sasol’s operations excellence model (Plan, Do, Review, Improve) to efficiently manage and govern risk and enhance the monitoring of risk.

Governance of risk management



Risk tolerance and risk appetite

We understand and proactively manage risks within set risk appetite and risk tolerance levels, in order to optimise business returns. We define risk appetite as the amount and type of risk that we are willing to take in order to meet our strategic objectives. It is inextricably linked with expected returns. We define risk tolerance as the amount of uncertainty that we are prepared to accept and cope with. It identifies the maximum boundary, beyond which we are unwilling to operate.



Mitigating our top risks

Our top risks include:


The risk “watch list” replaces our previous emerging risks. It contains risk areas not specifically covered in the revised group top risks and is constantly evolving. Jointly the top risks and “watch list” represent a comprehensive coverage of risks themes that could potentially impact Sasol.

The WATCH LIST THEMES INCLUDE:

  • Asset inflation;
  • Major public health crisis and global pandemics;
  • Global security incidents;
  • Disruptive/new technologies; and
  • Energy mix.



  Risk and Rationale    Key Responses/Mitigation  STRATEGIC OBJECTIVES 
Risk of macro-economic factors impacting our ability to sustain the business, manage our liquidity requirements and execute our growth strategy   
  • Actively managing the Group funding plan to ensure continued liquidity.
  • Implemented hedging strategy to limit downside risk to macro environment.
  • Continue to drive savings initiatives and new improvement initiatives.
  • On-going engagement with ratings agencies to improve their understanding of Sasol’s business.
  • Management of risk appetite and tolerance metrics.
 
Risk of our ability to remain competitive in the markets in which we operate and have growth aspirations   
  • The implementation of BPEP to sustainably ensure more effective, efficient and competitive response to changing global marketplace dynamics and intensifying of our RP.
  • Update and implement sales and marketing strategies, including the development of new outlets and plans to grow new differentiated applications and to enhance logistics.
  • Technology/application insight as the market entry strategy and maintaining a balanced portfolio.
Risk of not consistently achieving competitive capital project performance   
  • Robust integrated project management teams manage our capital projects. These teams combine our expertise with that of partner companies that have project management and deep local experience.
  • Contracting strategy developed for capital projects to assist in mitigating potential cost and schedule risks.
  • Implemented various actions to strengthen the LCCP internal control environment.
Risk of non-compliance to laws, regulations and non-adherence to good governance practices   
  • Multi-disciplinary compliance programmes and identifying changes in the regulatory landscape, coupled with systems and processes to ensure compliance with applicable laws and other legal requirements.
  • Tone at the top set through appropriate policies and procedures and annual compliance training and certification. 
 
Risk of ineffective human capital management   
  • Various campaigns to drive attraction and retention of critical skills and targeted programmes to increase gender representation and inclusivity.
  • Annual negotiations strive for multi-year agreements and a clear and well defined collective bargaining framework in combination with supporting procedures. 
Risk of a major safety, health or environmental undesirable event or liability occurring   
  • Our zero harm philosophy and One Sasol SHE Excellence approach that standardises initiatives to enhance safety performance.
  • On-going emphasis of the importance of continuous risk awareness and the importance of life-saving behaviours, with strict performance targets on safety, health and environment.
  • Continued focus on process safety management and the interaction with various global networks, regular internal and external audits and the implementation of process safety roadmaps
Risk of the impact of environmental challenges on the sustainability of our business model   
  • Prioritise and enable compliance with applicable legal requirements.
  • Implement committed environmental roadmaps and offsets.
  • Continued engagements with government departments on policy issues and challenges.
  • Proactive and appropriate disclosure of challenges faced. 
Risk of major unplanned production interruptions impacting our integrated value chain   
  • Continued implementation and embedding of our operations’ standard framework and renewal and utilities expansion programmes.
  • Continued focus on achieving energy efficiency targets and the implementation of site water use efficiency measures.
  • Procurement of property damage, business interruption and liability insurance at acceptable levels. 
 
Risk of not delivering on strategic growth objectives   
  • Capital allocation principles are applied to ensure optimal shareholder growth, taking balance sheet and funding risks into consideration.
  • Proactive allowance for development funds and active portfolio management.
 
10  Risk of not building and sustaining trust-based relationship with our stakeholders   
  • Implementation of the B-BBEE strategy to achieve level 4 contributor status by 2020 including the tracking and monitoring of delivery against key stakeholder commitment and local content requirements
  • Regular engagement of key stakeholders by the Joint CEOs and engagements with government and regulators, media, NGOs and communities as defined in the systematic positioning plan
11  Risk of undesirable geo-political and social events in countries in which we operate   
  • Continuous monitoring of developments and geopolitical events.
  • Response strategies implemented where required.
12  Risk of inadequate information security management of next generation cyber threats   
  • Group IM Information Security planning and monitoring of critical information security controls.
  • Global information security awareness campaigns and training and staying abreast of security technology requirements.
  • Regular governance review by the Board's committees
 

Reporting legend

Integrated Report
Annual Financial Statements
Sustainability Reporting
Form 20-F