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Risk Perception

The exploration  of natural resources implies risks, which require a proper risk management approach. For investors it is crucial to identify and appraise the risk profile of an exploration company. The risk mapping chart below illustrates the different elements to consider.

We have chosen to group all these risks into four main categories of potential impacts:

  • Project:  comprising the following sub-domains:
    • Location
    • Skills
    • Geology
    • Mineralogy
  • Corporate Governance comprising the following sub-domains:
    • Management
    • Funding capacity and ability
    • Risk Management
    • Marketing ability
  •  
  • External sphere comprising the following sub-domains:
    • Permitting
    • Community
    • SHE (security,health,environment)
    • Sustainable Development
  • Value  comprising the following sub-domains:
    • Valuation
    • Maturity
    • Uncertainties level
    • Growth potential

 

  

The risk perception is rated as followed:     Rating : Low =1     Very High = 5
 
Formula :
  Probability * Impact * Difficulty to detect (1:easy to 3:difficult) = Risk Value

 

 

Risk Impact                  1= Insignificant    2=Minor    3=Moderate   4=Major    5= Critical

 

Risk Probability        1=Rare    2=Unlikely     3= Possible     4=Likely     5=Almost Certain

 

Difficulty to detect    1=Easy    2=Attention required     3=Difficult without specific investigation

 


Risk levels
 



EXTREME RISK               x>=20      
 
Immediate action required 
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HIGH RISK                    12< x < 20   
Detailed research and management planning required at senior level; risk plan required
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SIGNIFICANT RISK       8< x <=12     
Senior management attention needed; risk plan required
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MODERATE RISK         3< x <= 8
Management responsibility must be specified; monitoring plan required
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LOW RISK   <= 3 (4)*
Manage by routine procedures; risk plan or monitoring plan not required.   
       * zone to appreciate: minor risk impact and unlikely probability
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RISK MAPPING APPROACH