Risk management and key strategic risks

Petmin is committed to effective risk management in all aspects of its business, including operations, investments, projects and financial management. The Petmin strategy is informed by the company’s maturing approach to risk. The risk management policy for the Petmin Group was approved and signed off by the Board of Directors in July 2010. Petmin’s approach to risk management is aligned with the global risk management standard, ISO 31 000:2009 and the definition of risk as recorded therein, namely the “effect of uncertainty on objectives”. The fundamental objective of risk management is to establish an integrated and effective risk management culture where all risks are regularly identified, in line with accepted change management practices, analysed and managed in order to achieve an optimal risk/reward profile for stakeholders. This process is reflected in the diagram below:

ISO 31000:2009, Risk management – Principles and Guidelines, Geneva: International Standards Organisation, 2009.

The objectives of our approach to risk management are to:

	follow a structured approach to risk management at all levels and for all activities in the organisation;
	embed this structured approach into all our critical business processes enabling us to identify all risks facing the company in a holistic and enterprise wide fashion and to manage these on a consistent, proactive basis;
	learn from both our successes and failures and to actively manage material risks by implementing the necessary controls to prevent the recurrence of certain incidents. In this way Petmin will strive for operational excellence through a process of organisational learning and growth; and
	practice good corporate governance through the regular measurement, reporting and communication of our risk management performance.

The risk management process entails:

	establishing the context by determining key objectives, key stakeholders and all internal and external factors that could have an impact on achievement of objectives
	identifying risks by considering their respective causes, the consequence should these materialise and the likelihood of these risks actually materialising
	analysing risks by considering their impact on the objectives. Objectives could be strategic objectives, operational objectives or the objectives of an investment opportunity;
	evaluating the risk by applying the approved Petmin risk rating methodology considering severity and likelihood parameters in the process; and
	treating the risk by considering the best possible way to respond to a risk issue.

The outcomes of our stated approach to risk management will be:

	greater stakeholder confidence in the management team in their pursuance of the corporate objectives;
	effective management of all risks facing the organisation, whether these relate to tangible assets, include plant and equipment or intangible assets including amongst others our employees, our communities, customers and our intellectual property; and
	taking informed decisions on investment and expansion opportunities globally to the benefit of all stakeholders.

Material risks are recorded in a risk register which is updated continually whenever a change occurs which could impact on a specific risk issue or event. There is a clear link between each risk and the Company’s strategic objectives and these are reflected in the various organisational level risk registers. Risk owners and control owners are clearly identified and the risk management process is monitored in terms of a risk management plan as approved by the executive team.

The Petmin Audit and Risk Committee (ARC) assists the Board in carrying out its responsibility for the governance of risk. The ARC meets at least four times per year and a detailed risk report is submitted for consideration whereafter the Board is updated on the continued effectiveness of the risk management process. During the reporting period, ARC implemented a process whereby technical experts report on material technical operational risks areas and directly respond to concerns that members of the ARC may have.

Material risks in the Company’s risk profile relate to the following: