PotashCorp Risk Management Ranking Methodology
Risk Management Methodology
Risks within PotashCorp's business are integrated and affect each other. By understanding the inherent and residual risks within the risk categories, and the relationships among them, we can design and implement risk mitigation activities that enable us to execute our strategies and meet our business goals within acceptable risk.
Matrix for Rankings Risks
We assign risks identified in our global environment to six categories: markets/business, distribution, operational, financial and information technology, regulatory and integrity/empowerment.
Once an inherent risk is identified, we assess it against our risk ranking matrix as if no mitigation measures had been taken. We use the matrix to weigh the severity and likelihood of such a potential event, and establish relative risk levels from A through E to guide the nature and extent of our mitigation activities.
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Extreme: Initiate risk mitigation activities immediately to reduce risk. If such activities cannot sufficiently reduce risk level, consider discontinuation of the applicable business operation to avoid the risk. |
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Major: Initiate risk mitigation activities at next available opportunity to reduce risk. If such activities cannot sufficiently reduce risk level, board approval is required to confirm acceptance of this major risk level. |
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Acceptable: Level of risk is acceptable within tolerances of the Risk Management Policy. Additional risk mitigation activities may be considered if benefits significantly exceed cost. |
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Low: Monitor risk according to Risk Management Policy requirements, but no additional activities required. |
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Negligible: Consider discontinuing any related risk mitigation activities in order to direct resources to higher-value activities, providing such discontinuance does not adversely affect any other risk areas. |
We can lower risk by reducing the likelihood of the initiating event occurring or by reducing the significance of the consequence if it does occur.
After we apply mitigation and control measures to an identified inherent risk, we are left with residual risk. We strive to ensure that we are fully aware of all potential inherent risks that could adversely affect PotashCorp, and to choose appropriately the levels of residual risk we accept.
