Risk Management

At Tata Steel, we have deployed a structured and uniform Enterprise Risk Management framework to proactively identify, assess, monitor and mitigate risks across the Company. This framework is essential in driving business resilience in a VUCA (Volatile, Uncertain, Complex, Ambiguous) world.

Safeguarding our future growth

1 Financial Risks

Tata Steel has ₹84,893 crore of debt as of
March 31, 2023 and aspires to nearly double its capacity in India, to 40 MnTPA by 2030. The plan is to deleverage further and pace the growth in line with internal accruals. However, high cost of borrowing due to tightening of policy rate cycle coupled with geopolitical and energy crisis in Europe may impact our capex and deleveraging plans. The company is exposed to currency volatility. In addition, the evolving climate change regulations and disclosure standards could reduce access to capital and increase the cost of funding.

Mitigation Strategies

  • Balance between growth and deleveraging
  • Focus on driving operating efficiency and cash generation
  • Robust capital allocation strategy
  • Improvement in ESG disclosures
  • Development of a sustainable financing framework
  • Forex hedging to manage currency volatility

2 Macroeconomic and Market Risks

The prolonged inflationary pressures and dynamic macro-economic scenario may have an adverse impact on global steel demand. Changing customer preferences are triggered by adoption of newer grades of steel and sustainable steel products.

Mitigation Strategies

  • Redistribution of sales mix, at the geography/segment level, to balance demand supply requirements
  • Focus on Value-Added Products (VAP) to drive differentiation
  • Diversified portfolio of product offerings beyond steel

3 Regulatory Risks

The regulatory landscape in the metals & mining industry is becoming stringent owing to factors such as geopolitical conditions, changing trade patterns, enhanced focus on Environment Social Governance (ESG) aspects. Non-adherence to such stringent regulatory ecosystem may impact business operations and reputation.

Mitigation Strategies

  • Focus on Research & Development for technology transformations as a proactive approach towards regulatory compliances
  • Investment in capacity building and training of resources for creating awareness on emerging regulations and applicable compliances

4 Operational Risks

Rising uncertainty in extreme weather conditions, natural disasters, equipment failures create disruptions to manufacturing processes. Also, Tata Steel UK has specific issues of ageing assets. This may have the potential to impact he Company’s operations, safety, and customer service levels.

Mitigation Strategies

  • Setting up of Asset Management Development Centre (AMDC) for enabling predictive analytics to identify potential failures and operational downtime
  • Robust disaster plan and standard operating processes
  • Prioritisation of capital expenditure in Tata Steel UK for high-risk assets nearing end-of-life
  • Evaluation of all scenarios about the future configuration of the TSUK business

5 Safety Risks

Steel industry is inherently prone to hazards affecting workmen's health and safety which may adversely impact business continuity and reputation.

Mitigation Strategies

  • Committed to zero harm by strengthening safety management and governance mechanism to bring safety-focussed culture
  • Adoption of various robotic and technical solutions to eliminate man-machine interface
  • Set up of Practical Safety Training Centre for improving risk perception among workforces

6 Community Risks

There are growing expectations of the communities proximate to our operating locations. Moreover, there is pressure of local communities due to concerns over emissions from our coal-based facilities in Europe. Inability to address expectations may lead to loss of reputation, fines and license to operate/business continuity.

Mitigation Strategies

  • Multiple structured forums for dialogue with communities
  • Commitment towards addressing societal challenges through Corporate Social Responsibility initiatives
  • Tata Steel Nederland BV is actively pursuing measures through ‘Roadmap Plus’ programme to reduce emissions and address concerns of communities at IJmuiden

7 Commodity Risks

Geopolitical developments, changes in market dynamics and volatility in raw material prices may pose risks to availability of raw materials, that may lead to higher costs/cash outflows and working capital.

Mitigation Strategies

  • Changing prices of coal and iron ore generally reflect through adjustments in steel prices
  • Implementation of group-wide commodity hedging using financial instruments
  • Diversified coal sourcing to ensure reliability of supplies and mitigate geographical concentration risk

8 Supply Chain Risks

The supply chain network is adversely impacted by evolving geopolitics-related disruptions. Also, emerging ESG norms may have an adverse impact on supply chain performance. Dependence on common logistics infrastructure resources like ports and railways, poses capacity and availability constraints.

Mitigation Strategies

  • Long-term contracts, strong hedging strategy for shipping and bunkers
  • Implementation and enforcement of Responsible Supply Chain Policy Framework
  • In India, we have long-term partnership agreements with Dhamra and Paradip ports and are developing our own port – Subarnarekha. Our focus is on improving rake availability by investing in private freight train schemes of Indian Railways

9 Information Security Risks

The Company’s increased reliance on digital technologies brings exposure to cyber-attacks that may affect business operations.

Non-compliance to stringent IT legislations and regulations may lead to imposition of penalties and adverse impact on the Company's reputation.

Mitigation Strategies

  • Adoption of strong IT security measures
  • Zero Trust Architecture for validation at every stage of digital interaction
  • Implementation of policies and procedures to ensure integrity of cyber security interventions