We have deployed a multi-layered risk management system and robust governance framework to proficiently identify, assess, monitor and mitigate risks inherent to global businesses. Aligned with our vision and mission, these mechanism facilitates in effective execution of strategies amidst a volatile external context.
We have a robust risk management framework which is embedded in business-critical activities, functions and processes. It ensures managing rather than eliminating the risk of failure to achieve business objectives and provides reasonable, and not absolute assurance, against material misstatement or loss. Materiality and risk tolerance are key considerations in our decision-making.
This framework is simple and consistent, providing clarity on managing and reporting risks to our Board. Together, our management systems, organisational structures, processes, standards and Code of Conduct and ethics represent the internal control systems that govern how the Group conducts its business and manages associated risks.
We identify risks at the individual business level for both existing operations and ongoing projects through a consistently applied methodology. Business-level review meetings are conducted at least once every quarter to formally discuss risk management. All business divisions maintain their risk matrix every quarter, which is reviewed by the respective management/executive committee, with CEO as the chairman. Additionally, business divisions have their risk registers as per their operational size and the number of SBUs/ locations.
The respective businesses review the risks, changes in their nature, exposure since the last assessment and control measures to decide further action plans. Control measures stated in the risk matrix are also periodically reviewed by the business management teams to verify their effectiveness. These meetings are chaired by the CEOs of the respective businesses and attended by CXOs, senior management and functional heads concerned.
Finally, the risks across the various risk registers are aggregated and evaluated to identify the Group’s principal risks and formulate a response mechanism. This element is an important component of the overall internal control process for which the Board obtains assurance.
The risk officers at each business and the Group level create risks awareness among the senior management and nurture a risk management culture within the businesses. Risk-mitigation plans form an integral part of KRAs/KPIs of process owners. Governance of risk management framework in the businesses is anchored with the leadership teams. The Audit Committee & Risk Management Committee aids the Board in the risk management process by identifying and assessing any changes in risk exposure, reviewing risk-control measures and approving necessary remedial actions. The Committee is supported by the Group Risk Management Committee (GRMC), which helps it evaluate the design and operating effectiveness of the risk mitigation programme and the control systems. The Risk Management Committee meets quarterly to discuss risks and mitigation measures, review the robustness of our framework and map the progress against actions planned for key risks.
The GRMC comprises the Executive Director, Group Chief Financial Officer and Director - Management Assurance. The Group Head - Health, Safety, Environment & Sustainability is invited to attend these meetings. GRMC discusses key events impacting the risk profile, relevant risks and uncertainties, emerging risks and progress against planned actions.
The Board shoulders the ultimate responsibility for managing risks and ensuring the effectiveness of internal control systems. This includes a review of the Audit and Risk Management Committees report report on the risk matrix, significant risks and mitigating actions. Any systemic weaknesses identified by the review are addressed by enhanced procedures to strengthen the relevant controls, which are reviewed regularly.
The responsibility for identifying and managing risks lies with every manager and business leader. Additionally, we have key risk governance and oversight committees in the Group. They are:
The scope of work, authority and resources of the Management Assurance Services (MAS) are regularly reviewed by the Audit Committee. The responsibilities of MAS include recommending improvements in the control environment and reviewing compliance with our philosophy, policies and procedures.
The planning of internal audits is approached from a risk perspective. In preparing the internal audit plan, reference is made to the risk matrix, and inputs are sought from the senior management, business teams and members of the Audit Committee. In addition, we refer to past audit experience, financial analysis and the prevailing economic and business environment.
The Board, with the assistance of the management, conducts periodic and robust assessments of principal risks and uncertainties of the Group, and tests the financial plans associated with each.
Below are the key risks identified for FY 2023-24 with the potential to impact our operations. Their order does not necessarily reflect the likelihood of their occurrence or the relative magnitude of their impact on Vedanta’s businesses. The risk direction of each risk has been reviewed based on events, economic conditions, business environment and regulatory changes during the year.
SUSTAINABILITY RISKS
S1 Continuous focus on world class ESG performance
S2 Augment our Reserves & Resources (R&R) base
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
The resources sector is mandated to adhere to extensive health, safety and environmental (HSE) laws, regulations and standards, alongside keeping up with the evolving requirements and stakeholder expectations. These regulations are projected to intensify over the next decade, with large-scale environmental damage and failure of climate change mitigation and adaptation ranking among the top 10 risks in the World Economic Forum Global Risk Report 2023.
Our global presence exposes us to jurisdictions implementing or planning emission regulations. This may lead to increased fossil fuel costs, levies for exceeding emissions levels, litigations and an increase in administrative expenses for monitoring and reporting. Increasing greenhouse gas (GHG) emission regulations, including the carbon emissions trading mechanisms and tighter emission reduction targets, can raise costs and dampen demand.
S1 Continuous focus on world class ESG performance
S3 Delivering on growth opportunities
Our success in existing operations and future projects hinges on strong support and healthy relationships with local communities. Failure to address local concerns and expectations can strain relations, impacting our reputation and social licence to operate and grow
At Vedanta, we recognise the importance of fostering positive and collaborative relationships with all stakeholders. To mitigate potential risks in this area, we take a multi-pronged approach:
S1 Continuous focus on world class ESG performance
S3 Delivering on growth opportunities
S5 Operational excellence and cost leadership
Mining operations involve the release of waste material which can lead to loss of life, injuries, environmental damage and impact production. This can impact our reputation and have financial implications. A tailings dam failure is deemed a catastrophic risk – a low-frequency but highly severe event – and remains a continuous risk requiring the highest priority.
OPERATIONAL RISKS
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
S5 Operational excellence and cost leadership
Our operations might be subject to several challenges including sourcing raw materials and infrastructure-related aspects and concerns around ash utilisation/evacuation.
We have made significant progress in optimising operations and solidifying our position for the future. Here are some key highlights:
Despite challenges in the London Metal Exchange (LME) prices, the Aluminium business has achieved consistent performance with highest-ever production and improved EBITDA supported by a consistent focus on cost reduction and aggressive pursuit of debottlenecking projects. We will continue this pursuit targeting 1,000 US$/t EBITDA margin and a record‑breaking 3 MTPA production.
The first 1.5 MTPA train of Alumina Refinery expansion at Lanjigarh was commissioned on 31 March 2024 and is in the process of being ramped up to full name-plate capacity. In parallel, efforts are underway to get the second train operationalised by Q2FY25. This two‑stage expansion marks a significant milestone in our journey towards becoming fully self-sufficient for Alumina supply.
Dedicated teams are actively working to operationalise newly‑acquired Bauxite Mine at Sijimali by Q3FY25 with an objective to achieve 100% captive bauxite. This, combined with other existing domestic sources under longterm agreements, significantly bolsters our Bauxite Security and enhances our margins.
Our coal mine at Jamkhani is fully operational and running at full approved capacity. Our teams are also working on the ground to secure all necessary approvals and operationalise the newly‑acquired coal mines at Kurloi, Radhikapur and Ghogharpalli. These endeavours will ensure our achievement of 100% security of low-cost, good quality coal through captive coal mines.
The Company has introduced a [few] captive rakes at our businesses as we endeavour to shift all overland transport from road to rail. This will improve safety, reduce cost and increase security of supply. More rakes will be placed in circuit in coming years.
S2 Augment our Reserves & Resources (R&R) base
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
Our expanding operations and production rates necessitate accelerated exploration and prospecting initiatives to replenish reserves and resources (R&R) faster than depletion. Failure to discover new resources or enhance existing ones could hinder our growth prospects. Besides, estimating ore and oil and gas reserves involves various uncertainties, owing to geological, technical and economic assumptions which are time-bound and subject to change with new information.
S5 Operational excellence and cost leadership
As our reliance on computers and network technology for operational efficiency increases, so does our vulnerability to security breaches. These breaches could result in theft, disclosure or corruption of critical information, a potential misappropriation of funds or disruptions to our business operations. Such cybersecurity breaches pose a threat to our business continuity and integrity.
S1 Continuous focus on world class ESG performance
S2 Augment our Reserves & Resources (R&R) base
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
S5 Operational excellence and cost leadership
Our operations face various circumstances including equipment or infrastructure damage, unexpected geological variations or technical issues, extreme weather conditions and natural disasters. Any of these circumstances, beyond our complete control, threaten operational stability and could adversely affect production and/or costs.
S2 Augment our Reserves & Resources (R&R) base
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
Cairn India holds a 70% participating interest in Rajasthan Block, whose production sharing contract (PSC) was valid till 2020. While it has been granted a 10-year extension under the government’s policy for extending Pre-New Exploration and Licensing Policy (NELP) Exploration Blocks, the terms are less favourable and subject to certain conditions. Any deviation from the anticipated production ramp-up could potentially impact profitability.
COMPLIANCE RISK
S2 Augment our Reserves & Resources (R&R) base
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
We face challenges stemming from legal and regulatory changes in the multiple countries where we operate. This may result in increased operating costs, and restrictions such as higher royalties or taxation rates, export duties, alterations to mining rights/bans and legislation change.
S5 Operational excellence and cost leadership
Our businesses are subject to the tax regime. Any changes in tax structure or any tax-related litigation may impact our profitability.
FINANCIAL RISKS
S4 Optimise capital allocation and maintain a strong balance sheet
S5 Operational excellence and cost leadership
The Group’s product prices and demand are susceptible to volatility/uncertainty, influenced by global economic, environmental, political, legal and social conditions. Additionally, our global operations and transactions in multiple currencies expose us to risks associated with exchange rate fluctuation. Any adverse movement in these aspects may negatively impact our earnings, cash flow and reserves.
S2 2 Augment our Reserves & Resources (R&R) base
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
S5 Operational excellence and cost leadership
Failure to meet the stated objectives of expansion projects may pose challenge in achieving business milestones.
S3 Delivering on growth opportunities
S4 Optimise capital allocation and maintain a strong balance sheet
S5 Operational excellence and cost leadership
Sustained adverse economic downturn and/or suspension of any of our operations can affect revenue and free cash flow generation. This may hinder our ability to meet payment obligations, affecting our credit-worthiness, or make it challenging to raise financing at competitive terms to fund actual or proposed commitments.
