FerroGlobe Resources Group — Risk Analysis & Mitigation
A structured risk register and the mitigation measures covering market and price, operational, commodity, country, financial, regulatory and execution risks.
Section 12 · Business Plan
Risk Analysis & Mitigation
A structured risk register and the mitigation measures covering market and price, operational, commodity, country, financial, regulatory and execution risks.
12.1 Risk Management Framework
FGRG’s enterprise risk management (ERM) framework is aligned with ISO
31000 principles and structured around five risk categories: strategic,
financial, operational, regulatory and ESG. Each identified risk is
rated on probability (1–5) and impact (1–5), with the resulting risk
score driving mitigation prioritisation. Risk reporting is provided to
the Board’s Audit & Risk Committee bi-monthly and reviewed at every
Board meeting. Major risks have named owners and explicit mitigation
plans with milestones.
12.2 Risk Heatmap
12.3 Detailed Risk Register & Mitigations
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| Steel price volatility | Possible | Major | Back-to-back trading; LME hedging; indexed offtake contracts; inventory limits |
| FX volatility (ZAR/USD) | Likely | Major | 90% hedge ratio policy; multi-currency natural hedges; USD-denominated trading book |
| Energy supply (load-shedding) | Likely | Severe | On-site solar (50 MWp Y3 → 200 MWp Y7); diesel back-up; demand-response participation; wheeled energy contracts |
| Counterparty credit | Unlikely | Major | Credit insurance (Coface, Atradius); LCs/SBLCs; concentration limits; daily exposure monitoring |
| Regulatory / tariff | Possible | Moderate | Active engagement with DTIC, ITAC; diversification across multiple offtake markets; legal and policy advisory retained |
| Carbon-tax / CBAM exposure | Possible | Moderate | Low-carbon EAF production from inception; renewable energy; Scope 1–3 reporting; CBAM-compliance pathway |
| Capex cost overrun | Unlikely | Major | Lump-sum turnkey EPC contracts where possible; 10% contingency; experienced owners’ team; staged commissioning |
| Logistics disruption | Possible | Moderate | Multi-corridor strategy (Maputo, Beira, Dar, Walvis Bay); optionality on rail/road; inventory buffer |
| Country / political | Unlikely | Severe | Investment in MIGA / political-risk insurance for material assets; diversification across countries; local partnerships |
| Talent acquisition | Possible | Minor | Competitive comp; equity participation; training programmes; expat-attraction strategy for senior roles |
| Cybersecurity | Unlikely | Moderate | ISO 27001 from Year 2; managed SOC; regular penetration testing; cyber insurance |
| Climate physical risk | Unlikely | Moderate | Site selection criteria include climate exposure; insurance; business continuity planning |
12.4 Key Risk Deep-Dives
Steel price cyclicality
The steel industry is cyclical, with prices historically swinging by
30–50% peak-to-trough. FGRG’s principal mitigations are (i) the
back-to-back trading model, which structurally limits open-position
exposure; (ii) margin diversification — by Year 4, processing and
logistics contribute 35% of EBITDA, reducing dependency on
trading-margin spread; and (iii) inventory discipline, with maximum
inventory days set at 60 for finished steel and 45 for raw
materials.
ZAR/USD volatility
Most trading flows are USD-denominated, while a portion of operating
costs (SA staff, local logistics, services) and SA-domestic revenues are
in ZAR. The Company maintains a 90% hedge ratio on net ZAR exposure
through forward contracts (1–6 months) supplemented by FX options for
tail risk. The base case assumes a ZAR/USD trading band of 17.5–22.0;
sensitivity analysis (Section 16) tests beyond this range.
Energy supply
Energy supply remains the single most acute operational risk in South
Africa. Load-shedding has materially affected manufacturing performance
over the past several years. FGRG mitigates through (i) early investment
in on-site solar (50 MWp by Year 3, 200 MWp by Year 7); (ii)
wheeled-energy agreements with established IPPs; (iii) diesel back-up
generation for critical loads; (iv) demand-response participation; and
(v) energy-trading desk capability for arbitrage.
Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of FerroGlobe Resources Group (Pty) Ltd.