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Managing risks with readiness
At Nuvoco, effectively managing risks in our operations is critical to our corporate governance and core to implementing our strategies. We use a comprehensive risk management system that takes a proactive and coordinated approach to managing risks at every level and we are confident in its effectiveness.
To ensure effective risk management, we have a robust governance structure. The Risk Management Committee (“RMC”), led by the Board of Directors and including the Managing Director, oversees the organisation’s risk management processes. Senior management and Risk Owner periodically reviews the Risk Management Framework.
RISK GOVERNANCE STRUCTURE
Senior Management and Risk Owner are accountable for enterprise risk management within their respective areas of oversight and is responsible for implementing risk management procedures in compliance with our established protocols. As part of this process, each business unit or functional leader selects a Risk Champion who takes ownership of the risk management process at a functional level.
Risk management framework
Our Enterprise Risk Management framework is designed to make the organisation more resilient and dynamic. It encompasses a comprehensive process from risk identification to mitigation, action planning, and review. We conduct periodic reviews and present a summary to our RMC.
Our risk management process is continuous and covers planning, early identification and analysis of risks, implementation of corrective actions, continuous monitoring and re-assessment, as well as communication, documentation, and coordination. By operating on this framework, we aim to minimise identifiable risks.
In our Risk Management Framework, we consider multiple aspects of our operations, such as production and mining, while focusing on key ESG performance parameters, including community initiatives, employee health and safety, and environmental stewardship. The framework also addresses environmental vulnerabilities, such as climate change and water use.
Our framework enables us to identify both short and long-term risks, including emerging ones. Short-term risks encompass technological, operational, and business risks, while long-term risks cover business model risks, strategic risks, and reputational risks. We maintain risk register incorporating the risks faced by the Company, business unit, department and plants.
All identified risks are evaluated based on their severity and likelihood. Our risk reporting tool classifies consequences as insignificant, significant, material, major, or catastrophic, while likelihood is categorised as rare, unlikely, possible, likely, or almost certain.
We plot a Risk Heat Map based on these classifications and establish relevant mitigation strategies for each risk, considering both short-term and long-term impacts on our organisation. Our governance and business strategies are developed with these risks in mind, and the identified risks are plotted in a matrix using the aforementioned parameters.
At Nuvoco, we are committed to proactively managing these key risks and continuously enhancing our risk management practices to ensure the long-term success and sustainability of our operations.
Raw Material and fuel price fluctuations
Fluctuations in demand, supply, sales, and geographical factors impact our product prices and profit margins. Price volatility of fuel, raw materials, and packaging supplies also poses a potential threat to profitability. Shortages of critical inputs may result in increased raw material prices, further impacting margins.
Mitigation strategy
To enhance environmental sustainability and mitigate raw material costs, we are strategically expanding plant capacity to utilise various waste materials, such as agricultural waste, RDF, plastic waste, municipal waste, biomass, tyre chips, and hazardous waste, as alternative fuels. We also adopt cost-effective raw materials that meet quality standards. Additionally, Nuvoco is dedicated to identifying new, cost-effective raw materials that meet its quality standards. Nuvoco is also coming up with railway siding at Jajpur Cement Plant which will ensure smooth movement of Clinker and Cement and result in reduction in freight cost.
Linkage to material topics
- Risk and crisis management
- Customer-centricity
Technology risk
In the cement and manufacturing industry, technology plays an important role in product development, optimisation of operations, health and safety as well as customer experience via various apps and platforms. Failing to adopt or upgrade in a timely manner could have cost, quality, and safety implications
Mitigation strategy
We have made significant investments in advanced facilities and technical developments to enhance operational efficiency. Our research and development capabilities support all product lines.
Our Construction Development and Innovation Centre serves as a customer interface, offering customised solutions for the building materials sector and, we prioritise local innovation, technology maintenance and tech adoption.
Linkage to material topics
- Data Security & Privacy
- Customer Centricity
- Sustainable Product Innovation
- Occupational Health and Safety
Changing economy and industry dynamics
Our cement consumption may be affected by economic downturn and sluggish infrastructure sector growth. Capacity expansion plans may face implementation delays, cost overruns, and supply chain disruptions due to unforeseen expenses and demand volatility.
Mitigation strategy
Our focus on high-quality and innovative products and services helps to navigate market volatility through customer loyalty and growth in brand value.
In order to mitigate potential adverse impacts of currency fluctuations and other operational issues, we prioritise timely completion of projects. This helps us to utilise opportunity and optimise the cost.
Maintaining operational efficiency as well as healthy working cash flows coupled with judicious financial management helps us to protect our margins.
Linkage to material topics
- Customer Centricity
- Sustainable Product Innovation
- Labour Management
Rising competition
In a fiercely competitive industry such as ours, failure to leverage emerging opportunities and build strong brand connect and network could lead to loss of market share. Challenges like unionisation, shortage of skilled workers, and rising labour costs may weaken the competitive advantage.
Mitigation strategy
To stay competitive, we focus on providing excellent customer service, running operations efficiently, and staying up-to-date on industry trends. Our dedication to quality, innovation, and trust has helped us offer a diverse range of high-quality and innovative products, many of which are leaders in their respective markets.
Linkage to material topics
- Customer Centricity
- Sustainable Product Innovation
- Employee engagement and well-being
- Labour Management
Changes in regulatory environment
Compliance is key to business continuity. Non-compliance could result in higher legal costs, reputational damage, and reduced profitability. The regulatory landscape is dynamic, requiring us to stay updated on the latest requirements.
Mitigation strategy
We prioritise complying with all legal and regulatory obligations to our business operations. We strive for a low carbon footprint and actively pursue fuel flexibility and alternative fuel initiatives for kiln operations. Our handling of hazardous materials strictly follows Standard Operating Procedures (“SOPs”) and adheres to government standards.
Linkage to material topics
- Business ethics & Compliances
