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Strategic Report Governance at BHP Remuneration Report Directors’ Report Financial Statements Additional information Shareholder information

1.5.2 Managing performance and risk

Corporate planning Risk management
Our corporate planning process is designed to deliver long-term, Identifying and managing risk and opportunity are central
sustainable shareholder value. to achieving our corporate purpose of creating long-term
The Board sets the long-term strategy for BHP, considering shareholder value.
all our opportunities for the creation of long-term shareholder We embed risk management in our critical business activities,
value. The long-term strategy is developed by integrating portfolio, functions, processes and systems through the following
commodity and asset-level outlooks and is underpinned by our mechanisms:
strategic objectives. • Risk assessments – we regularly assess known, new and
Our corporate planning process is an annual process that emerging risks.
is fundamental to creating alignment across the organisation; • Risk controls – we put controls in place over material risks,
it guides the development of plans, targets and budgets to and periodically assess the effectiveness of those controls.
help us decide where to deploy our capital and resources. • Risk materiality and tolerability evaluation – we assess the
The process starts with planning to maximise opportunities materiality of a risk based on the degree of financial and
for the long-term creation of shareholder value by understanding non-financial impacts, including health, safety, environmental,
our strategic options, then focuses on medium and short-term community, reputational and legal impacts. We assess the
plans to deliver against these objectives. tolerability of a risk based on a combination of residual risk
Plans are assessed at the Group level to balance the goal and control effectiveness.
of maximising the value of our individual assets with the goal We apply established processes when entering or commencing
of creating value and mitigating investment risks at the portfolio new activities in high-risk countries. These include risk assessments
level. We evaluate the range of investment opportunities and and supporting risk management plans to ensure potential
aim to optimise the portfolio based on our assessment of risk reputational, legal, business conduct and corruption-related
and returns. We then develop a long-term capital plan and exposures are managed and legislative compliance is maintained.
guidance for the Group.
Assessment and monitoring For information on our principal risks, refer to section 1.8.3.
For information on our risk management governance, refer
We review our strategy against a constantly changing external to sections 2.13.1 and 2.14.
environment, to capture and manage emerging risks and
opportunities and cascade them through our planning processes.
Long-term scenario planning is used to evaluate our portfolio
of assets and to help us identify new opportunities and test the
robustness of our strategy over a range of possible outcomes.
We also use signals tracking to monitor near-term trends and
events that may give an early indication of threats and opportunities
identified from evaluating the long-term scenarios. Signals also
support actions to position BHP to mitigate or benefit from these
threats and opportunities, while helping to inform major portfolio
investment decisions.

BHP Directors and
Management visit
to Campo Herrera,
a Wayúu community
near Cerrejón.

BHP CEO Andrew Mackenzie
and Jairo Fuentes, Leader
of the Tamaquito Wayúu
community at Cerrejón.

18 BHP Annual Report 2017