Mining Industry Faces Unprecedented Threat Landscape, More Dynamic Risk Management Needed, Says Willis
Report Highlights Key Challenges
Facing the Global Mining Industry in the Year Ahead
London, UK, February 5, 2013 – Resource nationalism, poor infrastructure that impedes development and supply chain disruptions
are some of the biggest risks facing the mining sector in the year ahead, according to
this year’s Mining Market Review, from global insurance broker Willis Group Holdings (NYSE: WSH).
Global economic uncertainty combined with political upheaval has generated a volatile environment in which demand for metals,
natural resources and commodities has ebbed and flowed considerably, according to the report. Despite these challenges,
insurers in the mining sector have been tightening their pricing, capacity and coverage following a period
of poor underwriting results.
Willis called on insurers to be more flexible and innovative in continuing to provide solutions that take
into account these rapidly changing circumstances, while urging mining companies to review their risks more frequently
and more dynamically.
Other risks cited by the report include; dramatically rising costs, the challenges posed by emerging markets, skills
shortages, and the threat of losing a social licence to operate.
Commenting on the key challenges facing the mining sector, Andrew Wheeler, Willis’ Mining practice Leader, said: “Resource
nationalism and business interruption as a consequence of strikes probably represented two of the biggest risks
facing mining companies in 2012 and this trend is set to continue for 2013. For example
, in July last year the Bolivian government announced the nationalisation of a silver and indium
mine, Mallku Khota operated by a Canadian firm, the third major nationalisation project within four months.”
He added: “One way in which foreign investors may mitigate the risk of resource nationalism is building
relations with the host state by adopting a sound corporate social responsibility strategy, such as healthcare
initiatives, building schools and other community projects.”
Mining companies are also facing more and more challenges in winning a ‘social licence to operate’, warned
Wheeler. Many jurisdictions are changing their attitudes towards mining projects, making it more complicated and expensive
to secure and retain a licence to operate. It is increasingly easy for local people to
oppose mining projects and to force the cancellation of rights already gained. This trend is expected
to escalate through 2013 and beyond.
The report also highlighted some of the challenges of operating in emerging markets, such as Africa and
China, which include; political instability, poor liquidity, inadequate regulation, substandard financial reporting and large currency fluctuations.
Certain emerging economies can be a natural haven for crime, corruption, extortion and the fomentation of terrorism,
warned the report. Furthermore, the location of many of these economies, combined with their lack of
infrastructural and service resilience, make them particularly vulnerable to natural disasters. A good understanding of potential
or current exposures as well as the appropriate risk mitigation measures is essential to success in
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and
delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations,
public entities and institutions around the world. Willis has more than 400 offices in nearly 120
countries, with a global team of approximately 17,000 employees serving clients in virtually every part of
the world. Additional information on Willis may be found at www.willis.com.