Sasol Integrated Report 2023 - Book - Page 35
INTRODUCTION
ABOUT SASOL
STRATEGIC OVERVIEW
CREATING VALUE
PERFORMANCE
GOVERNANCE AND REWARDS
ADMINISTRATION
OUR RISK MANAGEMENT CONTINUED
Significant uncertainties
Our Group risk themes are further delineated into our top risk focus areas which encapsulate our most significant uncertainties to manage across different timeframes (short, medium and long term).
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FINANCIAL PERFORMANCE RISK
CHEMICALS AND REFINING MARGIN SQUEEZE, CASH FLOW PRESSURE, CUSTOMER RELATIONS
Driving uncertainties:
Driving uncertainties:
• External headwinds eg commodity oil price impacts and crude oil and exchange rate performance:
– weak exchange rate: positive impact on income and negative impact on costs; and
– strong exchange rate: positive for the balance sheet (debt value).
• Higher energy/utilities and feedstock costs
• Chemicals’ margin and refining margin squeeze
• Unavailability of cash flow impacting ability to carry/fund debt and decarbonisation efforts
• Loss of competitiveness mainly driven by the following:
– uncompetitive product prices;
– weak chemicals’ demand;
– insufficient product volumes to meet demand;
– sub optimal inventory levels;
– cost of production and production volumes;
– supply chain customer delivery disruptions; and
– critical feedstock availability.
• Changing market dynamics for liquid fuels market in South Africa
• Longer term carbon intensity of products
• Access to affordable gas feedstock to support business competitiveness
Key responses:
Group financial market risk management policy, processes and frameworks (includes hedging) and
ESG-linked financing framework developed. Group assumptions, budgeting, forecasting and scenario
analysis processes with Sasol 2.0 full potential initiatives. Creating financial headroom by optimising
cash flow including margin improvement and cost containment initiatives – balance sheet
management and protection, including management of financial risk appetite and tolerance metrics.
Management of reputation with key stakeholders (eg lenders, investors, rating agencies).
MANAGING OUR
UNCERTAINTIES
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MARKET RISK
CASH FLOW PRESSURE, NEGATIVE PROFIT MARGINS, MEETING FUNDING AND FINANCING REQUIREMENTS
Key responses:
Maintaining optimal inventory levels. Timely delivery in full to customers including minimising outbound supply
chain interruptions impacts. Security of feedstock supply. Timeous development of new products and applications
through innovation to meet market needs including ESG requirements. Customer service/experience at desired level.
Clean fuels and octane programme. Develop alternative marketing channels and maintaining balancing of products
portfolio and markets. Strategic responses being considered across wholesale, commercial and mobility.
Investigating the feasibility of low-carbon refinery production. Monitor and responding to developments within
the competitor landscape. Exploring alternative gas supply options to secure natural gas at affordable prices.
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PEOPLE RISK
OPERATIONAL PERFORMANCE RISK
PRESSURE TO DELIVER ON THE EMPLOYEE VALUE PROPOSITION
LOW PRODUCTION OUTPUT AND CONSTRAINED CASH FLOW GENERATION IN THE SHORT TERM
Driving uncertainties:
Driving uncertainties:
• Inadequate supply of required skills in the market
• Inability to attract and retain critical skills
• Employee wellbeing and disengagement (negatively impacted
by poor economic performance, global recession exacerbated
by global geopolitical conflicts, balancing competing priorities
with pressure on employees to deliver)
Key responses:
Culture of inclusion and care is driven across all regions,
with tailored communication to address employee concerns
as new issues arise. Our Purpose and Values form the
basis of our Employee Value Proposition and our People
Promise. Integrated talent management framework
that covers all aspects of talent management and focus
on internal and external talent supply. Competitive
remuneration policy, Employee Value Proposition and employer
brand. Sasol employee wellbeing programmes.
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LEGAL AND REGULATORY RISKS
BUSINESS PLANNING CHALLENGES, INCREASED COSTS TO MANAGE,
INVESTMENT RETURNS, CASH FLOW IMPACTS
Driving uncertainties:
• Regulatory pressures and uncertainty
• Changing regulatory landscape (includes carbon tax, localisation
and transformation regulation, South Africa’s gas price, crude oil
pipeline tariffs, new mining regulations, air quality requirements,
incentives for decarbonisation, fuel blending mandates,
South African foreign policy)
Key responses:
Monitor and inform developments in policy, legislative and
regulatory landscape for current and future business activities.
Proactive stakeholder engagement. Deliver on committed
environmental roadmaps and offset programmes.
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• Unstable plant performance (mainly driven by Mining performance, Section-54, utilities
and supply chain disruptions, security over pipelines and critical owned-asset integrity)
• Security and availability of feedstock in the short term (eg coal quality and quantity)
• Operational interruptions mainly driven by equipment integrity, operations, critical spares
and competency
Key responses:
Zero Harm approach with high-severity incident (HSI) management and fatality
elimination programme. Process safety, occupational safety, occupational health,
environmental and product stewardship management, systems and security management.
Safety, health, environment (SHE) risk management and incident management. One Sasol
SHE Excellence Approach: each business to evolve its own SHE governance. Operational
core processes (asset strategies). Short-term planning process and integrated business
planning. Employee engagement and safety programmes. Production claw back
programmes. Destoning initiative, coal briquetting. External coal purchases programme.
Well and pipeline integrity management systems. Asset management programme.
Maintenance protocols and process. Safe design standards. Standard operating
procedures. Critical spares and inventory management. Personnel training, competency
testing and performance management. Group crisis management, emergency response
and contingency planning.
