Quantifying and Managing Environmental Financial Risk from Mining Operations

Organization: The Australasian Institute of Mining and Metallurgy
Pages: 4
Publication Date: Jan 1, 1994
This paper concerns a pragmatic approach to a problem that is common to many operations in the mining industry: how, over the short-term, to grasp the extent and distribution of long-term financial risk from environmental causes and reduce these risks strategically, in order to maintain stability and flexibility in the operations. Surprisingly, many companies operate without an environmental master plan or tools that can help managers measure and reduce financial risks. Such companies may be subject to unknown unacceptable financial risks from environmental causes. While many companies have some kind of internal system of environmental standards, it is often the case that such systems have uneven or limited effect, and offer no opportunities for visualising, measuring or managing aggregate financial risks from environmental causes. `Aggregate risks' are defined here as the calculated total expected financial costs to a company, or a subdivision of a company, from environmental causes at nominated operations over a defined time period. Aggregate risks take into account the type and magnitude of an environmental problem set, the likelihood of occurrence, and the time frame during which the problems will develop or solutions are required. For the large corporation, the 'amount of' aggregate environmental risk is a statistic that can be managed, along with other financial parameters, at the corporate level to improve the stability and predictability of operations, and protect the interests of shareholders. This paper concerns development of a management framework and a tool for the large corporation that responds to the need for managing aggregate environmental financial risks. The logical framework proposed to overcome the need for strategic vision is the Environmental Master Plan, and this is described in the next section. The analytical tool proposed to measure aggregate risks and provide relevant data and insights to managers, is called an Environmental Risk Management Information System, and its mechanics are described in a subsequent section.
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