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About Us OUR APPROACH TO RISK MANAGEMENT making across the business, we consider the potential impacts that diverse risks might have on our operations, our culture of safety, our finances, our reputation and ultimately our valuation. An effective structure has been established to support the continuity of business in Dangote Cement in this global era of increased market volatility, unexpected disruptions to operations and risks that have the potential to perturb every area of the Group’s business. As an entrepreneurial company, we appreciate the importance of identifying and understanding the numerous types of risks to which we are exposed. This has enabled us to develop robust strategies to manage these risk exposures to levels within our risk appetite, but without losing sight of the intrinsic opportunities inherent in risks we face in pursuit of our strategic goals. Hence our perception of risk is not to avoid it but to embrace, understand and manage it in order to become a more successful company. The 2016 financial year was particularly daunting for us as a company as the Nigerian and other African economies slowed down. Depressed oil prices, pipeline disruptions and the scarcity of foreign exchange (FX) led to a contraction in Nigeria’s GDP. Many Sub-Saharan African Countries, including the ones in which Dangote Cement has operations, have been hit by multiple shocks including a sharp decline in commodity prices, tighter financing conditions and a severe drought in southern and eastern Africa. Despite these challenges, Dangote Cement has utilised sound risk management strategies to guide and safeguard its investments across Africa. The scarcity of FX was a key concern for the Group, as it posed a threat to its operations as a result of import-dependent resources. However, our analytical and reporting processes had envisaged many of the potential threats to our business operations and these were managed proactively through sound risk management solutions including currency hedging strategies. The resurgence of attacks on gas pipelines by militants in the South-South Region of Nigeria was another major challenge faced by the Group. These attacks disrupted gas supplies to our cement plants in Nigeria, spurring the need for alternative fuel. This serious risk to the business had been proactively managed since 2014 as it was considered a plausible scenario, allowing us the opportunity to put in place a strategy to guarantee the fuel security of our Nigerian cement plants ahead of time, giving us a considerable competitive advantage. Because of this, we have aggressively pursued a strategy to diversify energy sources through the mining and use of coal to power our cement plants in Nigeria. The disruption to gas pipelines in 2016, along with the devaluation of the Naira, both led to an increase in the cost of gas and this inevitably led to an increase in production costs. Although the diversification of our fuel sources was necessary to mitigate the risk posed by unsteady supplies of gas, it has also had the effect of lowering costs by elimination of LPFO as a fuel. Risk governance At Dangote Cement, risk management is conducted at the highest level. Our Board’s Audit, Compliance and Risk Management Committee (BACRMC), chaired by Ernest Ebi, takes overall responsibility for managing risk and sets out our overall risk management objectives at Board level. These are implemented at strategic and operational levels by a team headed by the Group Chief Risk Officer. Our risk governance structure is established to entrench a sound risk management culture in the organisation. This structure enables a thorough oversight of and responsibility for the effective management of risk across the Group. The Board of Directors, through the Board Audit, Compliance and Risk Management Committee is responsible for defining our risk profile and ensuring effective risk management. The Committee is responsible for the formulation and implementation of the Group’s risk policies, organisation and governance of risk management, oversight of the execution of risk management including identification, analysis and risk mitigation, within the scope of the risk appetite approved by the Board. Annual Report 2016 35

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