We believe that effective risk identification and management is vital for business to be resilient and grow sustainably. We periodically assess the risks that the Company faces in its business operations and invest in minimising the same through concerted initiatives.The risk-related information outlined in this section is not exhaustive and is for information purposes only. The section lists forward–looking statements that may involve risks and uncertainties. Our actual results, including business operational performance, could differ materially on account of risks and uncertainties not currently envisaged, or due to risks that we currently believe are not material. Readers are also advised to exercise their own judgement in assessing the risks associated with the Company.
Risk Category
1
Sustainability
2
Strategic
3
Operational
4
Financial
5
Regulatory and Policy
6
Reputational
Our approach to risk management
TCL’s Risk Management Framework has matured over the past several years. The framework identifies, prioritises, manages, monitors and reports both, the key risks as well as the emerging risks - that can impact the achievement of the organisation’s objectives.
The Company’s Risk Management Framework is founded on sound organisation design principles, and is enabled by an effective review mechanism. Risk management at Tata Chemicals forms an integral part of the Management’s focus.
TCL has adopted an integrated ERM framework, which has been implemented across the organisation. We adhere to ISO 31000, and to the Committee of Sponsoring Organisations (COSO) Enterprise Risk Management Framework.
Highlights of Enterprise Risk Management for FY 2022-23
As we manage our business in a VUCA (Volatile, Uncertain, Complex and Ambiguous) environment, Enterprise Risk Management (ERM) enables us to identify and manage our risks by implementing risk mitigation plans and allocating the necessary resources. It also helps us focus on becoming resilient through uncertain business and geopolitical environments.
The Company operates in a dynamic environment which not only provides opportunities but also exposes the business to various risks:
Geopolitical uncertainties (US-China relationship) and security risk (Russia Ukraine conflict)
Volatile growth dynamics and market cycles
Increased sensitivity
Expectations related to climate change
Imperatives of energy transition
Recession impacting demand and price
To proactively identify and manage our key risks for achieving our strategic objectives, we have put in place a well-defined ERM framework. Its key highlights are:
Risk management is embedded in the day-to-day operations of each entity, and operational managers are expected to anticipate and react rapidly when circumstances change
Apart from Risk Management Committee (RMC) and Senior Management providing inputs on risks, continuous scanning of external environment is done by the risk management team to identify new risks, which are validated by the senior management and RMC
The best global practices on risk management are deployed with the help of third party consultant (Big 4)
Business Continuity Plan (BCP) for TCL India’s major plant has been completed and got certified under assessment for ISO 22301:2019
Development of BCPs at TCL India’s other plants and corporate functions is complete
Tata Chemicals’ key risks and mitigation strategies
Regular monitoring of sustainability risks against sustainability targets of all business units
Board-level quarterly review of Sustainability Roadmap and Environmental Compliance Status
Focussed implementation of the solutions identified to reduce carbon emissions and carbon capture across the manufacturing facilities
Working closely with supply chain partners to reduce the carbon footprint of the entire value chain
Dedicated investment to appropriately balance environmental targets and long term, sustainable business growth
Signatory to Responsible Care as well as CORE certified
EPR (Extended Producer Responsibility) compliance on plastic waste, as per EPR action plan
Optimise water consumption across plants and implement water harvesting projects
Focus on sustainable green chemistries
Recession risk
Recession fuelled by rising interest rates, impacting demand and price.
Linkage to Capital
Financial Capital
Impact (2) X Probability (2)
Oversight
Audit Committee
Risk Management Committee
Mitigation plans
Maintaining cost focus: variable & fixed costs, across all entities
Cash – deleveraging and maximising cash unless required for capacity expansion
Product mix: expanding product offerings
Supply chain: flexibility in supplying from different locations
Tie-up with customers, volume and price contracts
Digitalisation risk
Embracing digitalisation as a key lever of business growth
Linkage to Capital
Intellectual Capital
Impact (2) X Probability (2)
Oversight
Audit Committee
Risk Management Committee
Mitigation plans
IT strategy and IT roadmap are reviewed and updated on a regular basis as per evolving business needs and industry trends
Enterprise Reference Architecture is used for decision-making in IT and solution designing in digital, to drive synergies and harmonization
Special focussed track is created to improve data quality and awareness across the functions of the organisation; Data Governance Council and Data Office are established to review and improve data maturity status
To assess and improve the digital maturity of the organisation, ‘Digital Execution Scorecard’ model (framework of a leading global consulting firm which benchmarks the scores across industry verticals) is adopted
Various digital initiatives are undertaken to improve operational productivity, enhance customer & user experiences, collaborate with business partners, and better meet the requirements of safety, health, environment and sustainability
Implementation of key digital initiatives by way of first doing a digital value assessment (DVA); this helps to zero down on the best use cases which will maximise business value; benefits of the value assessment include variability reduction, efficiency improvement, yield improvement, downtime reduction and cost reduction; choice of approach and technologies to be used (such as analytic models, IIoT or RPA) is also governed by the DVA results
Initiatives are reviewed weekly, monthly and quarterly at multiple levels of organisational hierarchy as part of the governance process; progress on digital initiatives is monitored and reported to the Management regularly
Post implementation, success metrics, such as degree of adoption, improvement in the target KPIs etc., are tracked on a periodic basis to monitor the benefits realized
Skills and resource requirements are regularly reviewed, and efforts are made to select the right candidates or business partners to support the digital initiatives, especially in the prevailing business environment where there is dearth of digital skillsets
Talent risk
Challenges of attracting and retaining talent in remote manufacturing locations (New Risk)
Linkage to Capital
Human Capital
Impact (2) X Probability (2)
Opportunities arising from risks
Opportunity to collaborate with universities and build brand value
Develop future-ready skills/ competencies
Provide avenues / opportunity for career growth
Oversight
Nomination & Remuneration Committee
Risk Management Committee
Mitigation plans
Enabling better infrastructure at remote locations
Enrichment of skills & competencies through formal education support programme
Enriching job through job rotation/ exposure and participation in CFT
Avenues for cross-functional deputations / growth through internal job postings
Career rotation & movements across business units / geographies
Cyber risk
Loss of data & compromised operations resulting from cyber attacks
Linkage to Capital
Manufactured Capital
Impact (3) X Probability (2)
Oversight
Audit Committee
Risk Management Committee
Mitigation plans
Round-the-clock monitoring and planned improvement of security posture, while preventing, detecting, analysing, and responding to cybersecurity issues
Conducting periodic Vulnerability Assessment and Penetration Testing (VAPT) for critical infrastructure assets and applications, to proactively identify and remediate potential vulnerabilities to enhance security posture
Solutions implemented to continuously detect and mitigate cyber threats in real-time on end-point devices and preventing unauthorised privileged access to critical resources
Identifying threats and managing the network devices and perimeter for reducing cybersecurity risks to the organization
Implementation of Multi-Factor Authentication (MFA) and Virtual Private Network (VPN) based security solutions to enable safe access to the organisation’s resources
Implementation of policies, processes and solutions designed to prevent the loss, misuse, or unauthorised access of sensitive information
Conducting regular security awareness campaigns and training programmes for employees and building a culture sensitive to cyber security issues within the Company
Conducting internal and third party security assessments to identify and mitigate security gaps/risks to the Company, and defining strategies to further strengthen security posture
Subscribed to cyber insurance policy at corporate level
Periodic review of cyber security risks by the Risk Management Committee of the Board
IT policies have been updated based on ISO & ITIL standards
Complying with government and industry security standards, regulations and audit requirements
High energy costs risk & supply chain constraints risk
High energy costs (high prices of energy sources like oil, natural gas, coal will impact variable costs) & supply chain constraints (higher freight costs and longer delivery cycles)
Linkage to Capital
Natural Capital
Manufactured Capital
Opportunities arising from risks
Diversify the supply sources for each critical raw material
Diversify the energy sourcing in addition to current sources, to improve sourcing flexibility
Explore/maximise the use of alternate energy sources, e.g. anthracite coal fines, coke breeze, biomass briquettes etc., in power and cement plants to reduce dependency on fossil fuels
Cover optimal stock volumes and closed contracts to ensure stability and flexibility
Continue with commodity hedging / advance fixing of prices at all locations
Supply chain constraints
Shift the import material flow at Mithapur to bigger vessels, i.e. Panamax / Cape vessels, for thermal coal, in order to optimise freight cost and to reduce the number of vessels required
Enter into annual COA (Contract of Affreightment) for predictable and steady requirements
Maintain adequate inventory levels to avoid supply chain disruptions
International debt risk
Managing international debt & tightening interest rates
Linkage to Capital
Financial Capital
Impact (2) X Probability (2)
Oversight
Audit Committee
Risk Management Committee
Mitigation plans Managing debt
Regular review of the Company’s debt profile
Re-alignment of the quantum, repayment, pre-payment and need for refinance, in line with overall long-term business plans / strategy of the Company
Maximise free cash flows to repay debt
Unfunded pension risk
Unfunded pension liabilities of overseas subsidiaries (UK Natrium Holdings)
Linkage to Capital
Financial Capital
Impact (2) X Probability (3)
Oversight
Audit Committee
Risk Management Committee
Mitigation plans
The pension schemes are closed to further accruals (in the UK)
Utilising hedging and investment strategies, as appropriate, to manage economic risks including inflation
Policy changes which could impact the Company’s operations at large
Monitoring of compliances through an
e-enabled compliance management
framework which is used in periodic
reporting and reviews at leadership
forums; senior leaders’ active participation
in various committees and sub
committees formed by various bodies to
ensure adequate early knowledge and
policy advocacy
Ongoing dialogue, liaison meetings
and conversations with regulatory
Mitigation plans
authorities and attendance at seminars,
memberships of government and
industry bodies, specifically those that
take industry voice (thereby Company's
voice) to the ministries who finally issue
regulations/notifications
Proactive meetings and dialogues with
industry and ministry to put forward
views of the Company for consideration
in formulating the rules and regulations
Providing inputs in policy formulation
and devising the policies beneficial
for the industry and the country
at large; understanding upcoming
policy changes with an endeavour to
mitigate emerging risks
Keeping track of the draft
notifications and proposals, both
from the government and/or industry
recommendations, as well as risks that
may arise by way of a structured process
Safety risk
Ensuring containment of safety hazards (behaviour, workplace, process & product)
Key safety risks are included in the Enterprise Risk Register with risk owners for implementing the mitigation plans; safety risks are reviewed periodically by the Risk Management Group of Senior Leadership and the Risk Management Committee
Key risks associated with safety which can lead to emergencies and business continuity issues are addressed through Emergency Preparedness Plan; on-site and off-site emergency plans are in place in case of failure to localise containment of hazards
Achieve Zero Harm by following world class standards of SHE management systems, responsible care initiatives, good maintenance practices, enhancement strategies for the environment, and prevention of pollution
Table top drill exercise for emergency preparedness
Member of Nicer globe initiative for addressing transportation-related hazards
Various safety improvement initiatives, covering behavioural safety, structural safety, mine safety and process safety & risk management (PSRM), management of hazardous chemicals, workplace environment improvement, preventive maintenance, and aspects are continuously evaluated for effectiveness
Mitigation plans for key risks are addressed through Annual Business Plan with proper planning and allocation of resources; risks arising out of old infrastructure and assets are addressed systematically through long-term Strategic Plan for Asset Management
Hazards are identified using techniques such as Job Safety Analysis (JSA), Hazard and Operability Study (HAZOP), Hazard Identification and Risk Analysis (HIRA), What-if Analysis, Failure Mode Effect Analysis, etc., and addressed by following hierarchy of risk control; E-enabled portal ‘MDO’ is implemented across the operations to capture near-misses and unsafe conditions
Migrated to ISO tankers with the GPS system for transporting bromine and chlorine as well as for product safety and transportation of hazardous chemicals
Recession risk
Digitalisation risk
Talent risk
Cyber risk
High energy costs risk & supply chain constraints risk
International debt risk
Safety risk
