KPMG report: Bushfires put climate change top of miners’ risk fears

Australia’s horror summer bushfires have put climate change at the forefront of risk factors for Australian mining companies.

KPMG said last summer’s bushfires pushed business risks associated with climate change to the top of the thinking of Australian mining executives taking part in its annual survey.

Australia’s horror summer bushfires have put climate change at the forefront of risk factors for Australian mining companies, according to accounting and consulting major KPMG.

KPMG will release its 2021 Australian mining risk outlook on Tuesday. KPMG mining risk partner Caron Sugars said the bushfires, which swept across both sides of the country over summer, pushed business risks associated with climate change to the top of the thinking of Australian mining executives taking part in its annual survey.

The primary research for the KPMG study was conducted in January, as the impacts of the coronavirus pandemic were just beginning to emerge.

But Ms Sugars said that, while subsequent contact with senior mining executives had highlighted the impacts of the pandemic, the Australian sector had been well prepared to cope with its threat from a health and safety perspective — but was now looking more closely at the wider ramifications of similar threats.

“We’ve tested results with our clients and through the workshops we’ve been conducting. Typically not much changes year-on-year, but COVID has seen quite a significant change for us. The risks themselves don’t change, though,” she said.

“COVID was an event, not a risk, and what COVID has done is shine the light on health and safety risks, supply chain risks, liquidity and funding. And it really shows up that interconnectivity and what we’re seeing now is more organisations trying to understand how these risks are interconnected, because they really can’t manage them individually.”

KPMG Australian and global mining leader Trevor Hart told The Australian the risks to supply chains were brought into focus by the pandemic, as major suppliers in China and other manufacturing hubs were initially threatened by pandemic-related shutdowns.

Mr Hart said miners may begin to rethink previous policies of choosing the cheapest possible supply chains, and perhaps tie up more working capital in inventory and spare parts than they had previously done.

“Optionality and flexibility comes at a cost, and so there’s no doubt that in the most stable of environments the push for efficiency is a really safe one. Where the environment becomes less certain you need some options, you need some flexibility, and that inherently is less efficient,” he said.

“I think that companies now understand there’s a cost they will need to incur to really protect the resilience of their business and that’s been borne out through COVID.”

Ms Sugars said the different impact of the coronavirus across mining jurisdictions would also affect thinking about geopolitical risk for miners, given the sector had escaped relatively unscathed in Australia but had been much harder hit in South America.

Climate change and natural disasters topped the list of leading risks facing the industry, according to the survey.