Sasol Limited Integrated Report 2021 - Book - Page 25
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Strategically managing our Group top risks
In preserving and creating value we proactively manage risks and capitalise on the opportunities in our operating environment, leveraging input from our stakeholders.
In 2021 we faced various challenges, including the impact of both COVID-19 and macroeconomic volatility on our business. We worked to mitigate these risks and focused on containing costs,
easing pressure on the balance sheet and addressing environmental concerns to reposition the Group for a sustainable future. Changes in our operating context, strategy and operating model
necessitated the revision of our Enterprise Risk Management framework, which aims to enhance our ability to respond to longer-term sustainability risks and bolster our resilience.
Our Enterprise Risk Management process
Managing our Group risk appetite and tolerance
Our process, principles and practices help us deal with uncertainty by minimising any downside potential and capitalising on the
upside potential of those issues that affect our business objectives. Our Enterprise Risk Management (ERM) process focuses on
ensuring the adequacy, appropriateness and effectiveness of our key responses to mitigate potential significant business impacts
and ensure that we deliver on our targets.
We proactively manage risks within set Group risk appetite and tolerance levels.
The ERM process is enabled through our risk management fundamentals which direct all risk management behaviours, actions and
decisions and are implemented in accordance with our values. Integrated into day-to-day decision-making, these fundamentals
provide the foundation of effective risk management.
Sasol’s ERM Framework (Framework) has been independently assessed to confirm alignment with various external frameworks,
including King IVTM, ISO31000 2018 and COSO 2017 ERM. In addition, we take care to institute and document regular reviews
of the Framework so that it remains in accord with best practices for corporate risk management. The Board’s vision for Sasol’s
commitment to risk oversight, ethics and avoiding compliance failures is set out clearly in the Framework and communicated
throughout the organisation.
Our ERM fundamentals
Directing our behaviours,
actions and decisions
1 Accountability
2 Business knowledge
We understand our business
context so that we proactively
identify and analyse relevant
uncertain future events.
Leadership sets the tone and
provides clear direction for effective
risk management by risk owners,
who in turn are held accountable
for managing their risks.
We commit to the tone for risk
management which is set by
the Board and Group Executive
Committee (GEC) in accordance
with our values.
5 Assurance
We review and report on
the effectiveness of our risk
management practices.
We prepare regular assurance
reports to mandated governance
and oversight structures.
We communicate and report
significant risks to external
stakeholders in accordance
with both statutory and
non-statutory requirements.
Applying the ERM
process to identify,
assess, manage,
govern, assure and
report our top risks
and respond to risks
faced in the short,
medium and long
term
4 Risk-based
responsiveness
We respond effectively to uncertain
future events that can materially
influence the achievement of our
strategic and business objectives.
Risk tolerance:
Extent and type of risk we are willing to take in order to
meet our strategic and capital deployment objectives.
Level of uncertainty we are prepared to accept. It identifies the
maximum boundary, beyond which we are unwilling to operate.
In the short- to medium- term we anticipate that we will continue to operate with risk appetite metrics outside tolerance levels.
We are actively managing exposures related to debt covenant breaches and implementing key responses aimed at deleveraging
the balance sheet.
Define risk appetite
and tolerance
Process in managing Group
risk appetite and tolerance
Our risk management process is iterative and applied in a dynamic operating context
Sasol ERM
practice
Risk appetite:
We assess and understand the
potential impact on our top
risks, through materiality lens
and managing the impact on our
defined Group risk appetite and
tolerance levels.
3 Event-based risk
management
We identify and manage uncertain
future events that can materially
influence the achievement of our
strategic and business objectives.
Our key business imperatives, in line
with our strategy, guide and inform
our top risks. We regularly review our
top risks considering our dynamic
operating context. We benchmark
our top risks against global, industry
and peer company risk views.
Refer to ’Our Group top risks‘ on pages 25 – 26 for
more information on the Board-approved responses
to assist with mitigation of risks associated with
breach of risk appetite and tolerance metrics.
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return on invested capital;
earnings growth;
net debt-to-EBITDA; and
gearing.
Monitor application of
risk appetite and tolerance
Review of risk metrics considers the
changes in:
Review risk appetite
and tolerance metrics
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business conditions;
economic environment;
ESG requirements;
strategic priorities and portfolio;
credible risk scenarios; and
competitive conditions.
Governance and oversight of risk management
The Board’s and management’s risk, assurance and reporting responsibilities are informed by our Risk Policy, Board Charter,
governance framework and King IV™ requirements. We enhanced governance, in line with Sasol 2.0 transformation programme,
through reviewing and updating Board and management Committees’ terms of reference with respect to the governance of risk.
Board-level
risk governance
and oversight
Management-level
risk governance
and oversight
We understand our capability to respond
to our top risks by identifying and
regularly reviewing the appropriateness
and efficacy of our key responses.
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Embed principles for
managing risk appetite
and tolerance
Our risk appetite and tolerance metrics:
Sasol Integrated Report 2021
It retains overall accountability for the governance of risk. The Board
Committees are appropriately mandated to assist the Board in giving
effect to its accountability. The Board receives regular assurance on the
significant risk areas facing the Group and plays a pivotal role in ensuring
appropriate responses to the top risks and current heightened risks facing
Sasol. The Board appoints independent advisors, as necessary, to assist
with obtaining assurance on select key responses and management
actions related to the heightened short-to-medium-term financial and
operational risks facing the Group.
The Board delegates responsibility to implement and execute effective
risk management to the Chief Executive Officer (CEO) who in turn delegates
to the GEC.
Executive Vice Presidents (EVPs) as members of the GEC are accountable
for management of risks within their areas of responsibility, with delegated
responsibility and ownership to the businesses and corporate centre.
Board
GROUP
TOP RISKS
Board
Committees
CEO (and the GEC)
GEC
Sub-Committees
EVPs
EVPs and
management
BUSINESS
TOP RISKS