OPERATIONAL EVENTS

Risks associated with operational events in connection with our activities globally, resulting in significant adverse impacts on our people, communities, the environment or our business.

We engage in activities that have the potential to cause harm to our people and assets, and/or communities and the environment, including serious injuries, illness and fatalities, loss of infrastructure, amenities and livelihood and damage to sites of cultural significance. An operational event at our operated or non-operated assets or through our value chain could also cause damage or disruptions to our assets and operations, impact our financial performance, result in litigation or class actions and cause long-term damage to our licence to operate and reputation. The potential physical impacts of climate change could increase the likelihood and/or severity of risks associated with operational events. Impacts of operational events may also be amplified if we fail to respond in a way that is consistent with our corporate values and stakeholder expectations.

Examples of potential threats

·   An offshore well blow out, including at one of our assets in the US Gulf of Mexico, Australia, Trinidad and Tobago or Algeria, or at one of our appraisal and exploration options in Mexico, Trinidad and Tobago, Western and Central Gulf of Mexico or Australia.

·   Failure of a water or tailings storage facility, such as the tragic failure of the Fundão dam at Samarco in 2015 or a failure at one of our facilities in Australia, Chile, Colombia, Peru, the United States, Canada or Brazil.

·     Unplanned fire events or explosions (on the surface and underground).

·   Geotechnical stability events (such as an unexpected and large fall of ground at our underground or open pit mines, or potential interaction between our mining activities and community infrastructure or natural systems), including at our underground mines in Australia, the United States and Canada.

·   Air, land (road and rail) and marine transportation events (such as aircraft crashes or vessel collisions, groundings or hydrocarbon release) that occur while transporting people, supplies or products to exploration, operation or customer locations, which include remote and environmentally sensitive areas in Australia, South America, Asia and the United States.

·    Critical infrastructure or hazardous materials containment failures, other occupational or process safety events, or workplace exposures.

·    Operational events experienced by third parties, which may result in unavailability of shared critical infrastructure (such as railway lines or ports) or transportation routes (such as the Port Hedland channel in Western Australia). 

Examples of potential opportunities

·   Our focus on safety and the welfare of our people, communities and the environment may increase workforce and other stakeholder confidence, enhancing our ability to attract and retain talent and access (or lower the cost of) capital.

·   Collaborating with industry peers and relevant organisations on minimum standards (such as the Global Industry Standard on Tailings Management and Large Open Pit Project guidelines on open-pit mining design and management) supports improvements to wider industry management of operational risks and may also identify opportunities to improve our own practices.

Key management actions

·    Planning, designing, constructing, operating, maintaining and monitoring surface and underground mines, water and tailings storage facilities, wells and other infrastructure and equipment in a manner designed to maintain structural integrity, prevent incidents and protect our people, assets, communities, the environment and other stakeholders.

· Specifying minimum requirements and technical specifications, such as for transportation (including high-occupancy vehicles, aircraft and their operators), and compliance with operating specifications, industry codes and other relevant standards, including BHP's mandatory minimum performance requirements.

·    Defining key accountable roles, such as a dam owner (an internal BHP individual who is accountable for maintaining effective governance and integrity of each tailings storage facility), and providing training and qualifications for our people.

·    Inspections, reviews, audits and other assurance activities, such as independent dam safety reviews and geotechnical review boards.

·   Maintaining evacuation routes, supporting equipment, continuity plans and crisis and emergency response plans.

·   Incorporating future climate projections into operational event risks through ongoing assessment of potential physical climate change risks.

ACCESSING KEY MARKETS

Risks associated with market concentration and our ability to sell and deliver products into existing and future key markets, impacting our economic efficiency.

We rely on the sale and delivery of the commodities we produce to customers around the world. Changes to laws, international trade arrangements, contractual terms or other requirements and/or geopolitical developments could result in physical, logistical or other disruptions to our operations in, or the sale or delivery of our commodities to, key markets. These disruptions could affect sales volumes or prices obtained for our products, adversely impacting our financial performance, results of operations and growth prospects.

Examples of potential threats

·  Government actions, including economic sanctions, tariffs or other trade restrictions, imposed by or on countries where we operate or into which we sell or deliver our products may prevent BHP from trading or make it more difficult for BHP to trade in key markets. For example, China has imposed import restrictions and tariffs on some Australian exports, including energy and metallurgical coal. The imposition of further tariffs or other restrictions on any of our other products could adversely affect our financial performance.  

·  Physical disruptions to the delivery of our products to customers in key markets including due to the disruption of shipping routes, closure or blockage of ports or land logistics (road or rail) or military conflict. In some cases, physical disruptions may be driven or intensified by weather, climate variability or climate change. 

·  Legal or regulatory changes (such as royalties or taxes, port or import restrictions or customs requirements, shipping/maritime regulatory changes, restrictions on movements or imposition of quarantines, or changing environmental restrictions or regulations, including measures with respect to carbon-intensive imports) and commercial changes (such as changes to the standards and requirements of customers) may adversely impact our ability to sell or deliver, or realise full market value for, our products.

·  Failure to maintain strong relationships with customers, or changes to customer demands for our products (such as vertical integration), may reduce our market share or adversely impact our financial performance. 

·  Increasing geopolitical tensions may adversely affect our strategic and business planning decisions and/or increase the time it takes us to manage our access to key markets, particularly if we fail to detect or anticipate deviations in the geopolitical environment in a timely manner.

Examples of potential opportunities

·  Monitoring macroeconomic, geopolitical and policy developments and trends may reveal new markets or identify opportunities to strengthen secondary markets for existing products.

·   Leveraging the opportunity to create value by developing strategic partnerships and strong, mutually beneficial relationships with our customers.

·    Building a deep understanding of the geopolitical risks faced by BHP and their potential impacts on our business could enhance our strategy, business planning and response, providing a potential competitive advantage.

·  Identifying the potential for weather, climate variability or climate change to disrupt delivery of products and implementing management measures may increase the resilience of our operations and supply chain.

·    Signal monitoring and building relationships with and understanding the perspectives of influential stakeholders may improve our ability to understand, respond to and manage any impacts from policy changes (such as trade policies).

Key management actions

·   Monitoring and assessing our ability to access key markets, and maintaining sales plans, product placement and business resilience strategies and relationships with relevant stakeholders (such as the Chinese, United States and Australian Governments, and our customers in China and elsewhere).

·   Maintaining response plans for various scenarios (including physical disruptions of logistics) to mitigate disruptions to our ability to access key markets.

·   Monitoring geopolitical and macroeconomic developments and trends, including through signal monitoring and our enterprise-level watch list of emerging themes, to provide an early indication of events that could impact our ability to access key markets.

·   Identifying weather and/or climate-related vulnerabilities and implementing controls to mitigate disruptions to our ability to physically access key markets.

·    Diversification of our asset and commodity portfolio, such as our ongoing investment in potash through the Jansen Potash Project, to reduce exposure to market concentration risks.

OPTIMISING PORTFOLIO RETURNS AND MANAGING COMMODITY PRICE MOVEMENTS

Risks associated with our ability to position our asset portfolio to generate returns and value for shareholders (including securing growth options in future facing commodities) and to manage adverse impacts of short- and long-term movements in commodity prices.

We take decisions and actions in pursuit of our strategy to optimise our asset portfolio and to secure and create growth options in future facing commodities (such as copper, nickel and potash). A strategy that does not support BHP's objectives and/or ill-timed execution of our strategy (including as a result of not having sector-leading capabilities) or other circumstances, may lead to a loss of value that impacts our ability to deliver returns to shareholders and fund our investment and expansion opportunities. It may also result in our asset portfolio being less resilient to fluctuations in commodity prices, which are determined by or linked to prices in world markets. In the short term, this may reduce our cash flow, ability to access capital and our dividends. A failure to optimise our asset portfolio for structural movements in commodity prices over the long term may result in asset impairments and could adversely affect the results of our operations, our financial performance, and returns to investors.

Examples of potential threats

·    Failure to optimise our portfolio through effective and efficient acquisitions, exploration, large project delivery, mergers, divestments or expansion of existing assets.

·    Failure to identify potential changes in commodity attractiveness and missed entry or commodity exit opportunities, resulting in decreased return on capital spend for, or overpayment to acquire or invest in, new assets or projects, stranded assets or reduced divestment proceeds.

·    Failure to achieve expected commercial objectives from assets or investments, such as cost savings, sales revenues or operational performance (including as a result of inaccurate commodity price assumptions or resources and reserves estimates), may result in returns that are lower than anticipated and loss of value (such as that experienced with US shale).

·  Renegotiation or nullification of permits, increased royalties, or expropriation or nationalisation of our assets, or other legal, regulatory, political, judicial or fiscal or monetary policy instability may adversely impact our ability to achieve expected commercial objectives from assets or investments, access reserves, develop, maintain or operate our assets, or otherwise optimise our portfolio. 

·   Inability to predict long-term trends in the supply, demand and price of commodities and optimise our asset portfolio accordingly may restrict our ability to generate long-term returns from the portfolio.

·    Commodity prices have historically been and may continue to be subject to significant volatility, including due to global economic and geopolitical factors, industrial activity, commodity supply and demand (including inventory levels), technological change, product substitution, tariffs and exchange rate fluctuations. Our usual policy and practice is to sell our products at prevailing market prices and as such fluctuations in commodity prices may affect our financial performance. For example, a US$1 per tonne decline in the average iron ore price and US$1 per barrel decline in the average oil price would have an estimated impact on FY2021 profit after taxation of US$163 million and US$24 million, respectively. Long-term price volatility or sustained low prices may adversely impact our financial performance as we do not generally have the ability to offset costs through price increases.

Examples of potential opportunities

·    Acquisition of new resources in future facing commodities may strengthen our portfolio and protect and grow value over the long term.

·   Ability to predict long-term commodity demand, supply and price trends may lead to BHP being able to identify and acquire new future facing commodities and assets ahead of our competitors or exit from declining commodities in a timely manner, strengthening our portfolio and leading to long-term portfolio returns.

·  BHP may be perceived as a welcome and valued or preferred partner for the development of new resource opportunities, enabling us to secure new assets or exploration opportunities to create long-term optionality in the portfolio.

Key management actions

·    Strategies, processes and frameworks to grow and protect our portfolio and to assist in delivering ongoing returns to shareholders include:

o  our exploration and business development programs, which focus on replenishing our resource base and enhancing our portfolio (including creating and securing more options in future facing commodities)

o our long-term strategic outlook and ongoing strategic processes to assess our competitive advantage and enable the identification of threats to or opportunities for our portfolio through forecasting and scenario modelling

o monitoring signals to interpret external events and trends, and designing commodity strategies and price protocols that are reviewed by management and the Board

o our Capital Allocation Framework, corporate planning processes, investment approval processes and annual reviews (including resilience testing) of portfolio valuations

o our balance sheet and liquidity framework, which is designed to maintain a robust balance sheet with sufficient liquidity and access to diverse sources of funding

·  Pursuing a considered approach to new country entry, including development of capability to operate in higher-risk jurisdictions, in order to support portfolio opportunities in new jurisdictions.

·  Further developing BHP's social value proposition to position BHP as a preferred partner for the development of resource opportunities in line with the expectations of local communities, host governments and other global stakeholders.

·   Managing commodity price exposure through the diversity of commodities, markets, geographies and currencies provided by our portfolio, as well as our financial risk management practices in relation to our commercial activities.

SIGNIFICANT SOCIAL OR ENVIRONMENTAL IMPACTS

Risks associated with significant impacts of our operations on and contributions to communities and environments throughout the life cycle of our assets and across our value chain.

The long-term viability of our business is closely connected to the wellbeing of the communities and environments where we have a presence. At any stage of the asset life cycle, our activities and operations may have or be seen to have significant adverse impacts on communities and environments. In these circumstances, we may fail to meet the evolving expectations of our stakeholders (including investors, governments, employees, suppliers, customers and community members) whose support is needed to realise our strategy and purpose. This could lead to loss of stakeholder support or regulatory approvals, increased taxes and regulation, enforcement action, litigation or class actions, or otherwise impact our licence to operate and adversely affect our reputation, ability to attract and retain talent, operational continuity and financial performance.

Examples of potential threats

·    Engaging in or being associated with activities (including through our non-operated joint ventures and value chain) that have or are perceived to have individual or cumulative adverse impacts on the environment, biodiversity and land management, water access and management, human rights or cultural heritage.

·    Failing to meet stakeholder expectations in connection with our legal and regulatory obligations, relationships with Indigenous peoples, community wellbeing and the way we invest in communities.

·    Political, regulatory and judicial developments (such as constitutional reform in Chile that could result in adjustments to water and other resource rights, or the Dasgupta Review in the United Kingdom that could result in government actions that impact the management of biodiversity and ecosystems) or changing stakeholder expectations could result in more stringent operating requirements on our business. For example, changes to regulations or stakeholder expectations may delay the timing or increase costs associated with closure and rehabilitation of assets, or expose BHP to unanticipated environmental or other legacy liabilities.

·    Failing to identify and manage potential physical climate change risks to communities, biodiversity and ecosystems. For example, changes to species habitat or distribution as a result of sustained higher temperatures could result in land access restrictions or litigation, or limit our access to new opportunities.

Examples of potential opportunities

·    Our support for responsible stewardship of natural resources may enhance the resilience of environments and communities to potential threats (including the potential physical impacts of climate change).

·    Strong social performance, including sustainable mining and a focus on the wellbeing of communities, could generate competitive advantage in the jurisdictions where we operate.

·    Our global social value strategy may improve stakeholder relations, build community trust and increase investor confidence and demand for our commodities.

·    Greater clarity, transparency and standards associated with regulatory regimes that support and protect communities and the environment may increase requirements across our sector, generating competitive advantage for companies that have already invested in social performance.

Key management actions

·    Our Requirements for Community and Our Requirements for Environment and Climate Change standards provide requirements and practices that are designed to strengthen our social, human rights and environmental performance. Our Human Rights Policy Statement, Water Stewardship Position Statement, Climate Change Position Statement and Indigenous Peoples Policy Statement set out our commitments and approach to these matters.

·    Engaging in regular, open and honest dialogue with stakeholders to better understand their expectations, concerns and interests, and undertaking research to better understand stakeholder perceptions.

· Building social value into our decision-making process, along with financial considerations.

·    Building stakeholder trust and contributing to environmental and community resilience, including through collaborating on shared challenges (such as climate change and water stewardship), enhanced external reporting of our operated assets' potential impacts on biodiversity and maximising the value of social investments through our social investment strategy.

·   Conducting regular research and impact assessments for operated assets to better understand the social, environmental, human rights and economic context. This supports us to identify and analyse stakeholder, community and human rights impacts, including modern slavery risks and emerging issues. We also complete due diligence screening on suppliers through our Ethical Supply Chain and Transparency program.

·    Integrating closure into our planning, decision-making and other activities through the life cycle of our operated assets, as set out in our mandatory minimum performance requirements for closure.

LOW-CARBON TRANSITION

Risks associated with the transition to a low-carbon economy.

Transition risks arise from policy, regulatory, legal, technological, market and other societal responses to the challenges posed by climate change and the transition to a low-carbon economy. As a world-leading resources company, BHP is exposed to a range of transition risks that could affect the execution of our strategy or our operational efficiency, asset values and growth options, resulting in a material adverse impact on our financial performance, share price or reputation, including litigation. The complex and pervasive nature of climate change means transition risks are interconnected with and may amplify our other principal risks. Additionally, the inherent uncertainty of potential societal responses to climate change may create a systemic risk to the global economy. 

Examples of potential threats

·   Introduction or improvement of low-carbon technologies or changes in customer preference for products that support the transition to a low-carbon economy may decrease demand for some of our products (which may be abrupt or unanticipated), increase our costs or decrease the availability of key inputs to production. For example:

o  'Green steel' technologies may reduce demand for our metallurgical coal or iron ore, or electric vehicle penetration may reduce demand for our petroleum products.

o  Implementing low-carbon processes or new investments to respond to market demand for products that support a low-carbon economy (such as potential capital spend at our Jansen Potash Project to deliver fertiliser products or at our Nickel West asset to supply the battery market) may increase operating or development costs.

·   Failure to address investor concerns on the potential impact of climate change on and from BHP's portfolio and operations may result in reduced investor confidence and/or investor actions seeking to influence BHP's climate strategy.

·   Social concerns around climate change may result in investors divesting our securities, pressure on BHP to divest or close remaining fossil fuel assets and on financial institutions not to provide financing for our fossil fuel assets, or otherwise adversely impact our ability to optimise our portfolio.

·   Perceived or actual misalignment of the resources industry's or BHP's climate actions (goals, targets and performance) with societal and investor expectations, or a failure to deliver our climate actions, may result in damage to our reputation, climate-related litigation (including class actions) or give rise to other adverse regulatory, legal or market responses.

·   Changes in laws, regulations, policies, obligations, government actions, and our ability to anticipate and respond to such changes (which may be abrupt or unanticipated), including emission targets, restrictive licencing, carbon taxes, border adjustments or the addition or removal of subsidies, may give rise to adverse regulatory, legal or market responses.

Examples of potential opportunities

·   Our copper, nickel, iron ore and metallurgical coal provide essential building blocks for renewable power generation and electric vehicles, and can play an important part in the transition to a low-carbon economy.

·   Our potash fertiliser options can promote more efficient and more profitable agriculture and alleviate the increased competition for arable land.

·   Increased collaboration with customers and original equipment manufacturers, such as BHP's partnerships with each of China Baowu, JFE and HBIS for research and development of steel decarbonisation pathways, can provide opportunities for development of new products and markets.

Key management actions

·   Establishing public views and commitments on, and mandatory minimum performance requirements for managing, climate change threats and opportunities, which are set out in our Climate Change Position Statement, our Climate Change Report 2020, our Climate Transition Action Plan 2021 and the Our Requirements for Environment and Climate Change standard.

·   Using climate-related scenarios, themes and signposts (such as monitoring policy, regulatory, legal, technological, market and other societal developments) to evaluate the resilience of our portfolio and inform our strategy.

·   Considering transition risks (including carbon prices) when making capital expenditure decisions or allocating capital through our Capital Allocation Framework, supporting the prioritisation of capital and investment approval processes.

·   Seeking to mitigate our exposure to risks arising from policy and regulation in our operating jurisdictions and markets by reducing our operational emissions and taking a product stewardship approach to emissions in our value chain.

·   Advocating for the introduction of an effective, long-term policy framework that can deliver a measured transition to a low-carbon economy.

ADOPTING TECHNOLOGIES AND MAINTAINING DIGITAL SECURITY

Risks associated with adopting and implementing new technologies, and maintaining the effectiveness of our existing digital landscape (including cyber defences) across our value chain.

Our business and operational processes across our value chain are dependent on the effective application of technology, which we use as a lever to deliver on our current and future operational, financial and social objectives. This exposes BHP to risks originating from adopting or implementing new technologies, or failing to take appropriate action to position BHP for the digital future, which may impact the capabilities we require, the effectiveness and efficiency of our operations and our ability to compete effectively. We may also fail to maintain the effectiveness of our existing and future digital landscape, including cyber defences, exposing us to technology availability, reliability and cybersecurity risks. These could lead to operational events, commercial disruption (such as an inability to process or ship our products), corruption or loss of system data, a misappropriation or loss of funds, unintended disclosure of commercial or personal information, enforcement action or litigation. An inability to adequately implement new technology, or any sustained disruption to our existing technology, may also adversely affect our licence to operate, reputation, results of operations and financial performance. As we continue to leverage technology to improve productivity and safety, we expect the importance of safe, secure and reliable technology to our business will continue to grow.

Examples of potential threats

·    Failure to achieve efficiencies through our investment in technologies, or to keep pace with advancements in technology, resulting in an inability to access systems or digital infrastructure required to support our operations or customers' and other stakeholders' evolving expectations. For example, delays, costs and failures to achieve efficiencies arising from difficulties in integrating new technologies with existing technologies, or from failures of new technology to perform as expected.

·    Failing to identify, access and secure necessary infrastructure and key inputs (including electricity, internet bandwidth, data, software, licences or other rights in intellectual property, hardware and talent) to support new technology innovations and advanced technologies may adversely affect our ability to operate or adopt those technologies. This includes artificial intelligence and machine learning, process automation, robotics, data analytics, cloud computing, smart devices and remote working. For example, adopting new technology to reduce emissions through the use of alternative energy sources may require new infrastructure (such as at our mines and ports), and effective implementation of new digital technologies will be heavily dependent on access to relevant data.

·    Failure or outage of our existing or future information and operating technology systems.

·    Cyber events or attacks (including ransomware, state-sponsored and other cyberattacks) on our existing or future information and operating technology systems, including on third-party partners and suppliers (such as our cloud service providers). For example, a cyberattack on our autonomous systems for haulage and drilling may reduce operational productivity and/or adversely impact safety.

Examples of potential opportunities

·    Application of digital solutions across our operations and value chain may unlock greater productivity and safety performance. For example, using predictive analytics to enable operations to identify asset condition and efficiencies may improve safety, production and equipment availability, and reduce maintenance and other costs.

·    Technology solutions to reduce emissions may support BHP and our suppliers and customers in achieving climate action targets. For example, BHP is collaborating with other miners and suppliers to develop new technology to electrify haul trucks.

·    Developing and applying artificial intelligence in mine planning, remote operation and advanced robotic technologies may identify or provide access to previously unknown or inaccessible deposits and development of end-to-end autonomous mining systems.

·    Using digital simulations and predictive trend modelling may enable us to optimise the deployment of new technologies, such as automation and electrification, support early identification of process variances and faults, and support the marketing of our products to customers.

Key management actions

·    Our assets, functions and projects are responsible for managing localised or project-specific exposure to technology risks. Enterprise-level risks that are specific to technology, such as those that pose a greater threat to our wider business and strategic opportunities, are generally managed by our global Technology team and other relevant stakeholders to support delivery of our technology strategy.

·    We collaborate with industry and research partners to develop technological solutions.

·    Our Technology Risk Committee oversees the management and improvement of technology risks and controls, and supports the embedment of a sustainable risk culture in our Technology team.

·    We employ a number of measures designed to protect against, detect and respond to cyber events or attacks, including BHP's mandatory minimum performance requirements for technology and cybersecurity, cybersecurity performance requirements for suppliers, cybersecurity strategy and resilience programs, an enterprise security framework and cybersecurity standards, cybersecurity awareness plans and training, security assessments and monitoring, restricted physical access to hardware and crisis management plans.

ETHICAL MISCONDUCT

Risks associated with actual or alleged deviation from societal or business expectations of ethical behaviour (including breaches of laws or regulations) and wider or cumulative organisational cultural failings, resulting in significant reputational impacts.

The conduct of BHP or our people or third-party partners could result in an actual or alleged deviation from expectations of ethical behaviour or breaches of laws and regulations. This may include fraud, corruption, anti-competitive behaviour, money laundering, breaching trade or financial sanctions, market manipulation, privacy breaches, ethical misconduct and wider organisational cultural failings. A failure to act ethically or legally may result in negative publicity (including on social media), investigations, public inquiries, regulatory enforcement action (including fines), litigation or other civil or criminal proceedings, or increased regulation. It could also threaten the validity of our tenements or permits, or adversely impact our reputation, results of operations, financial performance or share price. Impacts may be amplified if our senior leaders fail to uphold BHP's values or address actual or alleged misconduct in a way that is consistent with societal and stakeholder expectations, and our workplace culture may also be eroded, adversely affecting our ability to attract and retain talent. Ethical misconduct risks and impacts are heightened by the complex and continuously evolving legal and regulatory frameworks that apply to the jurisdictions where we operate and potentially conflicting obligations under different national laws.

Examples of potential threats

·   Failing to prevent breaches of international standards, laws, regulations or other legal, regulatory, ethical, environmental, governance or compliance obligations, such as external misstatements, inaccurate financial or operational reporting or a breach of our continuous disclosure obligations.

·   Corruption (particularly in high-risk or less economically developed jurisdictions), market conduct or anti-competitive behaviour, including in relation to our joint venture operations.

·   Failing to comply with trade or financial sanctions (which are subject to rapid change and may potentially result in conflicting obligations), health, safety and environmental laws and regulations, native title and other land right or tax or royalty obligations.

·   Failing to protect our people from harm (including to mental and physical health) due to the misconduct of others that takes place in connection with their work, such as discrimination or sexual harassment and assault.

Examples of potential opportunities

·   Our capability to manage ethical misconduct risks may expand portfolio growth options by providing greater assurance that we can operate legally and ethically in high-risk jurisdictions.

·   Managing ethical risks in line with societal and stakeholder expectations may distinguish BHP from competitors and enhance our ability to raise capital, attract and retain talent, obtain permits, partner with external organisations or suppliers, or market our products to customers.

Key management actions

·    Setting the 'tone from the top' through Our Charter, which is central to our business and describes our purpose, values and how we measure success.

·    Implementing internal policies, standards, systems and processes for governance and compliance to support an appropriate culture at BHP, including:

o Our Code of Conduct and BHP's mandatory minimum performance requirements for business conduct, market disclosure and other matters

o training on Our Code of Conduct and in relation to anti-corruption, market conduct and competition

o ring fencing protocols to separate potentially competitive businesses within BHP

o governance and compliance processes, including classification of sensitive transactions, as well as accounting, procurement and other internal controls, and tailored monitoring of control effectiveness

o oversight and engagement with high-risk areas by our Ethics and Compliance function, Internal Audit and Advisory team and the Disclosure Committee

o review and endorsement by our Ethics and Compliance function of the highest-risk transactions, such as gifts and hospitality, engagement of third parties, community donations and sponsorships above defined thresholds

o automated counterparty and transaction screening against lists of entities subject to trade sanctions

o our EthicsPoint anonymous reporting service, supported by an ethics and investigations framework and central investigations team

·    Continuing to enforce Our Code of Conduct via appropriate investigations and responses including disciplinary action, in addition to deployment of appropriate safety controls to prevent harm.

INADEQUATE BUSINESS RESILIENCE

Risks associated with unanticipated or unforeseeable adverse events and a failure of planning and preparedness to respond to, manage and recover from adverse events (including potential physical impacts of climate change).

In addition to the threats described in our other risk factors, our business could experience unanticipated, unforeseeable or other adverse events (internal or external) that could harm our people, disrupt our operations or value chain, or damage our assets or corporate offices, including our non-operated assets over which BHP has less control. A failure to identify or understand exposure, adequately prepare for these events (including maintaining business continuity plans) or build wider organisational resilience may inhibit our (or our third-party partners') ability to respond and recover in an effective and efficient manner. This could cause material adverse impacts on our business, such as reduced ability to access resources, markets and the operational or other inputs required by our business, reduced production or sales of commodities, or increased regulation, which could adversely impact our financial performance, share price or reputation, and could lead to litigation or class actions.

Examples of potential threats

·    Geopolitical, global economic, regional or local developments or adverse events, such as social unrest, strikes, work stoppages, labour disruptions, social activism, terrorism, bomb threats, economic slowdown, acts of war or other significant disruptions in areas where we operate or have interests (for example, in FY2020, stoppages associated with social unrest in Chile impacted copper production at Escondida).

·    Natural events, including earthquakes, tsunamis, hurricanes, cyclones, fires, solar flares and pandemics (for example, earthquakes may affect the Andes region in South America where we undertake exploration activities and have operated and non-operated assets).

·    Potential physical impacts of climate change, such as acute risks that are event-driven (including increased severity of extreme weather events) and chronic risks resulting from longer-term changes in climate patterns. Hazards and impacts may include changes in precipitation patterns, water shortages, rising sea levels, increased storm intensity, prolonged extreme temperatures and increased drought, fire and tidal flooding.

·    Failure by suppliers, contractors or joint venture partners to perform existing contracts or obligations (including due to insolvency), such as construction of large projects or supply of key inputs to our business (for example, consumables for our mining equipment).   

·    Failure of our risk management or other processes (including controls) to prepare for or manage any of the risks discussed in this 'Risk factors' section may inhibit our (or our third party partners') ability to manage any resulting adverse events and may disrupt our operations or adversely impact our financial performance or reputation.

Examples of potential opportunities

·    Risk identification and management supports proactive, focused and prioritised deployment of resources to reduce exposure to adverse events. It may be used to inform priorities and strategies across BHP, supporting a proportionate and cost-effective response, which could provide a competitive advantage at a regional or global level.

·    Building wider organisational resilience may help us to mitigate the impacts of unforeseeable adverse events. For example, processes may be redesigned to enhance resilience to adverse events, such as pandemics.

·    Adapting to climate change across our operations and value chain could position BHP as a supplier of choice and provide competitive advantage (for example, by fulfilling our commitment to security of supply). Support for climate vulnerable communities and ecosystems may also improve our social value proposition.

Key management actions

·    Implementing Group-wide controls to enhance business resilience, including BHP's mandatory minimum performance requirements for security, crisis and emergency management and business continuity plans.

·    Monitoring our current state of readiness (preparedness, redundancy and resilience), including through scenario analysis, to respond to and recover from adverse events to support organisational capability in our operations, functions and senior management to effectively and efficiently respond to events should they materialise.

·    Monitoring the external environment, including political and economic factors through signal monitoring, our geopolitical monitoring and public policy frameworks and our enterprise-level watch list of emerging themes, to support early identification of policy changes or adverse events for which we may need to increase preparedness.

·    Identifying security threats that could directly or indirectly impact our operations and people in countries of interest to BHP. For example, a review of BHP's global security program was undertaken in FY2021 to better understand our security position and identify potential improvements.

·    Implementing our Climate Change Adaptation Strategy, including requiring operated assets and functions to identify and progressively assess potential physical climate change risks (including to our value chain) and build climate change adaptation into their plans, activities and investments.