Mining companies should consider whistleblower policy a top priority in 2013, as shareholders are increasingly influenced by the presence of cost control measures, according to report from financial advisory firm, Ernst & Young.
“High returns in recent years have attracted a different breed of investor with a different risk appetite to the mining and metals sector,” says Bruce Sprague, Ernst & Young’s Canadian Mining and Metals leader.
New investors are sensitive to short-term changes and are less focused on the long-term, largely production-based, return potential. Instead, investors with their eye on shorter-term gains are doing their due diligence, and basing investment decisions on what risk mitigation and cost control measures a company and its projects have in place.
“Shareholders aren’t willing to take as many risk in the year ahead,” says Sprague.
“They’re putting pressure on companies to deliver projects more efficiently and reduce capital spend on new projects and investments—a much more conservative approach.”
While the industry has been production focused for “most of the past decade”, companies now are looking internally in order to trim cost and improve competitiveness. One of the best ways to do this is through a whistleblower hotline, which gives employees and contractors a confidential method to report fraud, embezzlement or other misappropriation.
Many mining companies have already instituted whistleblower policy, largely to great success. But, with the influx of investors who cite cost control as a driving force of their investment strategy, we can expect some companies to reap the benefits, and the others to get on board.