August 2008

Risky business

The what, why, when and how of social risk assessment

By M. Whellams

Tournigan representatives took a group of its stakeholders on a hike to the drilling sites to explain their plans.

There’s no question that mining can be a risky business — for the miners themselves, the people living in close proximity to the operations and those investing in mining activities. Operational risks can cause injuries to workers; spills and tailings dam breaks can wreak havoc on the local environment and the lives of those who inhabit it, and delays in production can increase operating costs.

Fortunately, mining companies have made significant strides over the years to better identify and manage health, safety, environmental and financial risks. However, until recently, the industry has not paid as close attention to some of the less obvious social risks to mining companies and their operations.

Conducting a thorough social risk assessment (SRA) prior to and during exploration can assist companies to identify key issues associated with operating in a particular area. Furthermore, SRA can also allow company stakeholders to develop a strategy to mitigate such risks or avoid them altogether.

What is a social risk assessment?

Most Canadian mining companies conduct what is known as a social impact assessment (SIA) as part of the formal planning and approval processes for their mining operations. The purpose of the SIA is to identify how the company’s project could affect the social, economic and cultural conditions in the area of operation.

In contrast to an SIA, the purpose of an SRA is to identify and analyze how the local social, economic and cultural conditions in the area of operation may affect the project — in particular, the company’s risk profile. Depending on the region of operation, an SRI may include a review of the country’s human rights record and any legacy issues associated with mining, an evaluation of the political climate and conflict situation, and, most importantly, an analysis of the project’s stakeholders and their interests and concerns.

Why now?

As Canadian mining companies seek access to new jurisdictions around the world, they are gradually encroaching on environmentally and socially sensitive areas, such as critical wildlife habitats, biodiversity hotspots and indigenous communities. Many of these areas also have other existing challenges including poverty, conflict, political instability and a history of human rights violations.

Consequently, mining companies are increasingly being confronted with serious social challenges, including strong opposition from local and international NGOs, conflicting world views and complex cultural divides.

While companies often perform adequate due diligence to identify financial and operating risks, many social threats are often overlooked. These can lead to significant roadblocks, such as permit delays and even the rejection of mining licenses.

Conducting an SRA is a proactive way of engaging stakeholders upfront to gain a better understanding of their concerns and to identify how the socio-economic and political context might affect the company’s operations. Information gathered in the SRA can then be used by the company to inform the development of its operational, environmental, community investment, stakeholder engagement and communications plans.

Joe Ringwald, vice president of sustainable development at Tournigan Energy, described the benefits of conducting an SRA at its exploration site in Slovakia: “At first the company paid little attention to in-country social risk, largely out of a lack of knowledge of corporate social risk and social license. The SRA helped identify the importance of social risk and community engagement. This led to assigning budget and personnel to deal with the issues.”

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