Risk Management

Tata Steel’s Enterprise Risk Management framework identifies, assesses, monitors, and mitigates risks, ensuring business resilience and proactive risk management across the Company.

Financial risk

    Tata Steel aims to double its capacity sustainably in India. With a net debt of `77,550 crore as of March 31, 2024, it seeks to deleverage and fund the growth through internal accruals and raising external capital from banks and capital markets. The transition to sustainable steelmaking in the Netherlands and the UK also requires significant capital investment.

    However, global financial interconnectivity, heightened climate action and sustainability expectations, and stringent ESG standards may impact borrowing costs.

    Geopolitical tensions and the financialisation of commodities might also increase raw material costs and financial market volatility, impacting the cost of capital and exacerbating the impact of INR depreciation against the USD.

Mitigation

  • Balance between growth and deleveraging with a focus on shareholder returns
  • Diversification of capital sources, including government grants, to transition to greener operations
  • Prioritise projects with higher value accretion (ROIC:15%) and short payback periods
  • Reducing working capital through operational excellence and continuous improvement programmes
  • Sustainable cash flow generation
  • Enhance ESG disclosures and adherence to evolving standards
  • Implementation of 'One Treasury' for managing cashflows, currencies and commodity hedging across TSG
Macroeconomic and market risks

    The economic slowdown in China has disrupted global steel trade volumes impacting adversely global and Indian steel prices, affecting the Company’s business in India, the UK, and the Netherlands.

    Fast-paced technological changes and shifting customer preferences may necessitate the adoption of newer grades of steel and advanced materials.

Mitigation

  • Increasing sales of value-added and branded products for sales mix enrichment
  • Driving improvement projects to support additional value
  • Development of a market plan for new facilities
  • Creating a diversified portfolio of product offerings beyond steel
  • Focusing on building strong customer relations across geographies
  • Focusing on green steel offerings, particularly in the Netherlands and the UK
  • Tata Steel, in the Netherlands and the UK, is already focusing on less importsensitive sectors and markets
Regulatory risk

    The global metals and mining industry faces stringent regulations due to geopolitical conditions, trade patterns, tariffs, protectionist policies and increased focus on ESG disclosures. Non-adherence may impact business operations and reputation.

Mitigation

  • A policy of zero tolerance for non-compliance
  • Constant monitoring of the regulatory landscape
  • Robust compliance management systems to ensure awareness and compliance
  • Policy advocacy to promote best practices, ensure a level playing field through safeguard measures, and improve the ease and cost of doing business across geographies
  • Focusing on technology and R&D as a proactive approach towards evolving regulatory requirements
Operations risk

    External factors such as extreme weather conditions and natural disasters and internal factors such as equipment failures, maintenance delays, process safety-related incidents, and ageing assets can potentially disrupt operations, safety, and customer service levels.

Mitigation

  • The i-MEC in Jamshedpur enables realtime asset monitoring and diagnostics, shifting from preventive maintenance to maintenance prevention
  • Robust disaster management plans and standard operating processes are in place
  • The UK operations plan to transition to EAF-based methods
  • In the Netherlands, the Company adopted the Corporate Asset Management Framework (CAMF) for improved insights on the operational assets related to reliability, failure, risk and prioritisation of resources
Safety risk

    Integrated steel plants have hazardous operations, adversely impacting the health and safety of the workforce, which in turn may negatively affect business operations and the Company's reputation across geographies.

Mitigation

  • Tata Steel is committed to zero harm.
  • Adopted various automation and technical solutions to eliminate manmachine interface
  • Runs focused campaigns on various themes to drive safety culture
Community risk

    The communities proximate to Tata Steel’s operating locations, particularly in Europe, have growing expectations. An inability to address expectations may lead to reputation loss, fines imposition, and jeopardise licence to operate and business continuity.

Mitigation

  • Sustained and effective dialogue with communities through formal platforms, hyper-local community engagement, CSR teams and field engagement
  • The Company designs and implements social impact programmes that address core, localised development challenges while being regional and national change models
  • In the UK, the Company is working closely with the Transition Board and national stakeholders to ensure the economic regeneration of South Wales
  • In the Netherlands, Tata Steel is actively pursuing measures through the ‘Roadmap Plus’ investment programme to improve the local environmental performance around dust, noise and odour
Supply chain risk

    As Tata Steel expands in India and transitions to green steelmaking in the UK and the Netherlands, it faces infrastructural stress, geopolitical tensions, and stringent ESG norms impacting supply chain reliability and costs. Government policies also pose risks to the supply chain.

Mitigation

  • Tata Steel works to debottleneck India’s port infrastructure through tie-ups and investment in new infrastructure
  • Invested in private freight train schemes in India: GPWIS (General Purpose Wagon Investment Scheme) and SFTO (Special Freight Train Operator)
  • Long-term contracts and hedging strategies for shipping and bunkers are in place
  • The Company implemented and enforced the Responsible Supply Chain Policy Framework
  • The Company strengthened the tracking and measurement mechanisms for its Scope 3 emissions
Information technology risk

    The Company’s operations significantly rely on IT and digital infrastructure, which makes it vulnerable to cyber-attacks, data risks and technology obsolescence.

    Non-compliance to stringent IT legislations and regulations may lead to the imposition of penalties and an adverse impact on the Company’s reputation.

Mitigation

  • Group-wide adoption of strong IT security policies and procedures ensure the integrity of cyber security interventions
  • Zero Trust architecture for validation at every stage of digital interaction
  • Implemented a data governance framework to ensure that data is well-protected and retained as per regulations
  • Configuration and consumption of Gen AI tech in a secure private environment to prevent risk emanating from AI adoption
  • Continuous technology refresh to eliminate the risk of technology obsolescence
  • Replacement of end-of-life systems
Commodity risk

    Various geopolitical events, weather disruptions and mining issues may lead to high price volatility and supply chain disruptions, reducing reliability and impacting inventory.

    Tata Steel’s operations in the UK and the Netherlands are significantly dependent on raw material imports and, hence, exposed to volatility in raw material prices and availability. All these may lead to higher costs and cash outflows.

Mitigation

  • Group-wide smart hedging using financial instruments
  • Price forecasting tools to understand price movements and reverse auctions for efficient price discovery
  • Indigenisation and localisation to de-risk the supply chain for both direct and indirect commodities
  • Group-wide diversification of coal sourcing to mitigate the risk of geographical concentration
  • Deployment of sustainable procurement policy with key vendors.
  • Additionally, the Tata Steel Group continues to target measures to reduce its energy requirements, e.g. by increasing the self-generation of electricity and efficiency improvements