Navigating Risks, Forging Excellence

Embedding a Prudent Risk Management Framework

We understand that our operations are susceptible to both internal as well as external risks. To ensure long-term value creation and address threats, we have implemented a comprehensive Enterprise Risk Management (ERM) framework.

Our ability to identify, manage and monitor risks allows us to efficiently devise risk mitigation measures that are designed to ensure our progress in a dynamic business environment. We regularly review our ERM framework to align with the evolving risk landscape and make use of real-time information to effectively deal with threats.

Identification and Mitigation of Key Risks

Competitive Risk

We are susceptible to the risk of losing competitiveness due to factors such as increasing competition from private players, technological advancements, and changing consumer preferences. These challenges threaten our market share, profitability and ability to adapt to evolving industry dynamics, necessitating strategic initiatives to maintain our competitive edge.

Mitigation Strategy

  • Enhance operational efficiency, innovation, and customer-centricity.
  • Invest in research and development, technology upgrades, and process optimisation.
  • Emphasize strategic partnerships, collaborations, and alliances.
  • Continuously adapt to changing market demands and customer preferences.
  • Maintain a competitive edge and offer superior products and services.

Material issues addressed and capitals impacted

Material issues addressed

Market volatility

Economic performance

Capitals impacted

Financial capital

Manufactured capital

Macroeconomic Risk

Being a major player in the energy sector, we face various macroeconomic risks that can impact our operational and financial performance. One of the significant macroeconomic risks is the volatility in global crude oil prices. Economic factors such as geopolitical tensions, supply-demand dynamics, and global economic conditions can lead to price volatility, posing challenges for our financial stability and planning.

Mitigation Strategy

  • Focus on robust operational performance and efficiency to offset risks.
  • Diversified crude oil sources to mitigate supply uncertainties.
  • Implementation of process innovations to achieve cost savings and enhance resilience.
  • Dedicated team and channel partners to ensure uninterrupted energy supply.
  • The operations team takes the necessary steps to reduce fuel and energy consumption, as well as monitor other expenditures, in order to improve margins and profitability.

Material issues addressed and capitals impacted

Material issues addressed

Product stewardship

Customer satisfaction and brand loyalty

Capitals impacted

Financial capital

Manufactured capital

Currency Exchange Risk

As we are engaged in international trade and procurement of crude oil and petroleum products, we are exposed to currency exchange rate fluctuations. Changes in exchange rates can impact the cost of imports and exports, affecting our profitability. In addition, a significant part of our borrowing is also in foreign exchange and any depreciation of the rupee results in additional rupee outgo.

Mitigation Strategy

  • The finance team continuously monitors the macro and micro-economic environment to identify potential risks that may impact the business.
  • Fluctuations in exchange and interest rates are regularly assessed, and appropriate hedging is implemented according to approved policies.
  • Continuous cost control measures are implemented to ensure consistent growth in profitability, even in challenging market conditions.
  • Utilisation of low-cost domestic and foreign currency borrowings for financial stability.

Material issues addressed and capitals impacted

Material issues addressed

Market volatility

Economic performance

Capitals impacted

Financial capital

Climate Change Risk

We face environmental risks such as air and water pollution due to our large-scale refining and petrochemical operations, which require stringent measures for emission control and waste management. Additionally, we are vulnerable to the impacts of climate change, including potential disruptions to our supply chain and infrastructure due to extreme weather events.

Mitigation Strategy

  • Achieved full BS-VI compliance in petrol and diesel, contributing to a greener and cleaner environment.
  • Committed to sustainable development as an active partner of the United Nations’ Global Compact Programme.
  • Set a target to achieve Net-Zero operational emissions by 2046, in line with India’s Net-Zero commitment by 2070 as part of the Panchamrit Goals announced at the COP-26 Summit.
  • Pursuing a robust green agenda, focusing on pathways such as green hydrogen, biofuels, renewables, ecosystem restoration, and Carbon Capture Utilisation and Storage (CCUS) to mitigate emissions.

Material issues addressed and capitals impacted

Material issues addressed

Climate change mitigation

Managing environmental impact

Product stewardship

Capitals impacted

Financial capital

Natural capital

Social and relationship capital

Talent Risk

We encounter human resource risks such as talent attraction and retention, skill gaps in emerging technologies, and succession planning for key positions. These risks can hinder organisational growth, disrupt operations, and affect long-term sustainability if not effectively managed.

Mitigation Strategy

  • Compliance with health and safety regulations and implementation of rigorous safety protocols.
  • Adequate training to minimise the risk of workplace accidents and ensure employee well-being.
  • Emphasis on employee development and training programmes to enhance skills, knowledge, and capabilities.
  • Investment in employee growth and career advancement to mitigate the risk of skill obsolescence.
  • Foster a culture of continuous learning to reduce talent risk.

Material issues addressed and capitals impacted

Material issues addressed

Health and safety

Employee practices

Labour rights and retention

Capitals impacted

Financial capital

Human capital

Information Security Risk

Our operations face the potential risk of information security breaches, including cyber threats and digital vulnerabilities, which could compromise the confidentiality, integrity, and availability of critical data and systems.

Mitigation Strategy

  • Implementation of a defence in-depth cyber security architecture.
  • Adoption of a strong and robust Data Privacy Policy.
  • ISO 27001:2013 certification for all data centres
  • Commitment to protect sensitive data of internal processes, customers, partners, and employees.

Material issues addressed and capitals impacted

Material issues addressed

Customer satisfaction and brand loyalty

Security practices

Capitals impacted

Financial capital

Intellectual capital

Value Creation

Approach

We prioritise the interests of our nation and society as a whole, ensuring that our value creation model is built on principles of sustainable growth and positive societal impact. We recognise the immense significance of our work, as it impacts the lives of millions of people not only in India but also across the globe.

As a prominent energy industry leader, we have developed a robust and sustainable business model that adheres to the globally recognised framework and guidelines. This model embodies the crucial elements that drive our value creation process and enables us to effectively meet the energy demands of our stakeholders. The strategic interplay of various inputs and outcomes within our business model empowers us to provide a wide range of energy solutions and services, ensuring the satisfaction of our customers and the sustainable growth of our organisation. By carefully managing the interconnected factors and risks across our operations, we continue to drive value and contribute to the energy needs of our nation and beyond.

© Indian Oil Corporation Limited | Integrated Annual Report 2022-23