Risk Management | Sustainable Development | CEMEX
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Sustainable Development

Risk Management

At CEMEX, each of our business units has an Enterprise Risk Management (ERM) process in place. ERM is a structured approach to manage all important risks that could impact the company’s objectives. ERM aims to support top management across the organization in the decision making process, reducing the impact of adverse events and capitalizing on opportunities.

A multitude of risks can affect CEMEX, its assets and employees, as well as our neighbors. Accordingly, we use risk management systems and tools to gather information from a range of sources, analyze the data, identify and assess potential risks, and then respond to them. These processes include an evaluation of environmental, health, and safety risks.

We have several processes that test the robustness of our systems, evaluate compliance across all business units, and encourage continuous improvements. These processes include compliance training for employees, periodic reviews of our policies and procedures, and regular internal audits.

Our operations are subject to a broad range of environmental and health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations impose increasingly stringent environmental protection standards regarding, among other things, air emissions, wastewater discharges, the use and handling of hazardous waste or materials, waste disposal practices, the remediation of environmental damage or contamination and health and safety of employees and contractors. These standards expose us to the risk of substantial environmental, health and safety costs and liabilities, including liabilities associated with divested assets and past activities, even conducted by prior owners or operators and, in some jurisdictions, without regard to fault or the lawfulness of the original activity.

Efforts to address climate change through domestic federal, state and regional laws and regulations, as well as through international agreements and the laws and regulations of other countries, to reduce the emissions of greenhouse gases (GHGs) can create risks and uncertainties for our business. This is because the cement manufacturing process requires the combustion of large amounts of fuel and creates carbon dioxide (CO2) as a byproduct of the calcination process. Such risks could include costs to purchase allowances or credits to meet GHG emission caps, costs required to provide equipment to reduce emissions to comply with GHG limits or required technological standards, or decreased profits or losses arising from decreased demand for goods or higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls.

In addition to the risks identified above arising from actual or potential statutory and regulatory controls, severe weather, rising seas, higher temperatures and other effects that may be attributable to climate change may impact any manufacturing sector in terms of direct costs (e.g., property damage and disruption to operations) and indirect costs (e.g., disruption to customers and suppliers, higher insurance premiums). We do not believe that any such impacts on our operations would significantly differ from those to other sectors and the public at large.

Our operations consume significant amounts of energy and fuel, the cost of which has significantly increased worldwide in recent years. To mitigate high energy and fuel costs and volatility, we have implemented the use of alternative fuels such as tires, biomass, and household waste, which has resulted in less vulnerability to price spikes. We have also implemented technical improvements in several facilities and entered into long-term supply contracts of petcoke and electricity to mitigate price volatility. Despite these measures, our operations would be materially adversely affected in the future if energy and fuel costs increase.

Due to the nature of our business, we have a high degree of integration into the mining and sourcing of the key raw materials required in our production processes. Failure to maintain the land and mining rights in our sites could have a materially adverse effect on the continuity of our operations and potentially increase the cost of some of those raw materials.

Antitrust laws seek to prevent monopolies, collusions, and other anti-competitive behaviors, based on the principle that competition benefits consumers and promotes economic growth. Governments across the world are increasingly active in enforcing antitrust and competition laws, and are cooperating with each other to prevent anti-competitive behavior. Furthermore, local laws are converging on basic antitrust principles and concepts. CEMEX as a global company operating in many different countries is exposed to different civil and/or criminal penalties that can have a significant impact on our profitability.

Under applicable laws in the United States, Europe, and other places where CEMEX does business, it is a crime for CEMEX directly, or through an intermediary, to offer, pay, or promise to pay, a bribe or anything of value to a government official (including employees of state-owned enterprises and officers of public international organizations) for the purpose of obtaining or retaining business. The term “anything of value” includes both monetary and nonmonetary gifts and bribes, and can include favors and other types of consideration. The civil and/or criminal penalties for violating the different local and international anti-bribery laws can be severe.

The main ERM duties are:

  • Identify and clarify threats
  • Provide strategic intelligence
  • Ensure top management discussions
  • Coordinate mitigation strategies
  • Fostering a risk aware culture

The ERM function at CEMEX is structured into global, regional and local levels, and is composed of a network of more than 50 risk management professionals across the company.

An enterprise risk agenda is developed semi-annually considering a combination of a bottom-up and a top down approach. Internal and external risks are identified and classified according to a specific taxonomy that considers all types of risks that could impact the company, including but not limited to:

  • Strategic risks
  • Economic, political and social risks
  • Operational risks
  • Compliance risks
  • Financial and reporting risks

All business units are individually responsible for identifying all potential risks and creating their own risk agenda. The ERM process employs different tools and methodologies to gather information from a range of sources, analyzes data, identifies, assesses and develop strategies to mitigate potential risks.

As part of the risk management process, risk owners who have the authority to mitigate the risk and ERM representatives, continuously monitor key risk indicators that could impact the development of main risks. In case a change in the risk level is identified, the Risk Management Committee is informed to take the necessary actions.