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AUDIT, COMPLIANCE & RISK MANAGEMENT COMMITTEE REPORT Likelihood of risk event Almost certain Likely Possible Unlikely Rare Catastrophic Financial risk Reputational risk >25% of gross income Negative publicity lasting more than six months; high customer defections; irreparable shareprice decline; major investor divestments. Major 15%-25% of gross income Negative publicity lasting more than three months; some customer defections; large decline in share price; instances of investor divestments. with remedial action plans agreed and implementation of controls closely monitored to ensure that operational risk exposures do not exceed the organisation’s risk appetite and are managed within tolerable levels. The assessment process takes into consideration the probability of occurrence (see table) and the impact of risks identified. The potential impact is adjudged from a financial and non-financial loss perspective as shown in the tables. This risk measurement approach is used when evaluating the inherent and residual risk rating of each risk identified. Controls agreed for risk mitigation are required to ensure that the residual risk rating of identified risks fall within the risk appetite of Dangote Cement Plc. From the risk assessments conducted during the year, the Group’s exposure to operational risks was adjudged a Medium Risk, as the implementation of remedial actions required to effectively manage some inefficiencies with fleet management, information technology, logistics, spare parts and raw materials procurement are still on-going. These initiatives will improve operations and reduce risks in 2017. 104 Annual Report 2016 Frequency of occurrence Occurs once a month Occurs once every 3-6 months Occurs at least once a year Occurs every two years Occurs every three years Quantifying the level of impact Moderate 5%-15% of gross income Negative publicity lasting a month; some customer defections; moderate decline in share price; few or no investor divestments. Minor 1%-5% of gross income Little or no negative publicity; no loss of customers; little or no effect on share price or investor appetite. Insignificant <1% of gross income No impact on reputation, share price or customers. Key Risk Indicator (KRI) monitoring is also deployed in managing the Group’s exposure to operational risks. As detailed on the next page, KRIs are quantitative parameters defined to provide trends which serve as useful insights and timely leading signals of prevalent and emerging operational risk exposures as it relates to the business activities of the Group. Thresholds for monitoring acceptable risk levels are agreed with Management and the Board Audit, Compliance and Risk Management Committee for timely risk identification. This year, the Group enhanced KRI monitoring with the introduction of strategic KRIs derived from the strategic initiatives considered as critical to the achievement of set business objectives for 2016. Identified risk trends and mitigation action are reviewed by Executive Management on a monthly basis and by the Board Audit Risk and Compliance Committee on a quarterly basis to ensure identified operational risk exposures are controlled within DCP’s risk appetite. Opportunity areas In managing the Group’s risk exposures, new business opportunities are identified in some cases.

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