24.2 BUSINESS RISKS
24.2.1 Operational risks
Access to grain
There is a risk of the group not being able to maintain access to, or increase volumes of grain within its geographic
base and that the concomitant impact on its grain income stream can be as follows:
• Downscaled planting – The occurrence of downscaled planting impacts the group at various levels. Models
were developed and are being managed to reduce the impact of significant downscaled planting, if applicable.
• Drought – Climate change poses significant risks for the group and the sale of products could be affected
significantly. Models have been developed and financial instruments are being used to manage and reduce
the potential impact of drought.
• Competitive alternative storage structures – Alternative storage structures are addressed by innovative
market transactions and by maintaining good relationships with producers. Differences between product
offerings are also being addressed in the market. Logistics solutions and funding of grain buyers are additional
risk reduction measures. Various capital expenditure programmes have also been followed during the
year to increase competitiveness.
• Improper management of transformation and land reform could have a significant impact on production.
The group works in conjunction with all government departments concerned in seeking and implementing
viable options, taking the B-BBEE policy into account.
Human capital – Scarcity and retention of talent
One of the cornerstones of good performance is access to, and retention of excellent personnel. South Africa
is currently involved in a talent war due to various reasons. Furthermore, the group has a relatively young
talent profile which brings about difficulty to retain talent because of mobility. In addition hereto is the fact that
the group is predominantly situated in rural areas and many young people relocate to the larger metropoles
where there are more career opportunities. In order to mitigate this risk, and as part of a comprehensive
strategy in respect of the retention of talent, appropriate remuneration and incentive schemes have been
implemented and ample opportunities for growth through training and practical exposure have been provided.
Succession planning and identification of talent also receive the necessary attention.
Operational risk
Operational risks relate to events that are not caused by human error and form part of the normal operations
of the business. Such events would include operational breakdowns at critical times, unforeseen lead times
on stock orders and lack of business enablers.
Theft and fraud
The current economic conditions give rise to increased possibilities of fraudulent activity. The diversified nature
of the group’s activities also increases the possibilities of theft or fraud. This is further increased by the
complexity of certain activities which require special control measures. A refocus of business processes, a
culture programme, redesign of appointment practices and the upgrading of physical control measures
are some of the management actions implemented to mitigate the risk to an acceptable level. The code of
conduct is embedded into the risk culture of the company, which contributes to the mitigation of this risk.
Also refer to the Risk Report in Senwes’ Integrated Report for a more comprehensive outlook on risks related
to the group.
24.2.2 Legal risks
Non-compliance with contractual obligations
The group contracts with both producer and buyer, which poses a risk when prevailing conditions create circumstances
of inability or the temptation not to comply with contractual obligations. These conditions could
arise due to drought or significant price movements. Proper evaluation and accreditation of clients as well as
the monitoring of the flow of the harvest play important roles in addressing this risk. Limiting contract volumes
per counter-party further reduces the risk. Market trends which may lead to non-compliance with contracts
are monitored closely and strategies to hedge this risk on the Safex market are used when deemed necessary.
These instruments are included with the values indicated in note 20.
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SENWESBEL ANNUAL FINANCIAL STATEMENTS 2020 Senwesbel Limited Reg no: 1996/017629/06