Sasol Integrated Report 2018

RISK MANAGEMENT We are committed to effective risk management in pursuit of our strategic and business objectives, with the ultimate aim of growing shareholder value sustainably. Risk management is an integral part of our value-based strategy, our governance and day-to-day operations. Not only do we aim to deal with the uncertainty in the business environment by minimising the downside, we also seek to capitalise on the upside potential to achieve our strategic objectives. Our risk management process In 2017 we introduced the Sasol Enterprise Risk Management (ERM) Framework which sets the foundation for our businesses to effectively manage their risks in a standardised and systematic manner. We also introduced our new risk management process, which is aligned with Sasol’s operations excellence model (Plan, Do, Review, Improve) and aimed at efficiently managing and governing risk while enhancing the monitoring of risk. We employ this process in executing our strategy and business objectives as well as the day-to-day operational activities in order to meet stakeholder expectations. In 2018, we continued with our efforts to ensure stronger integration between strategy and risk within a dynamic strategic context, and a changing business footprint. We continue to focus our efforts on enhancing our ability to effectively manage significant risk areas for the Group, including reputation risk, financial risk, improved investment decision making, environmental sustainability and day-to-day risks. Risk tolerance and risk appetite We understand and proactively manage risks within set risk appetite and risk tolerance levels, in order to optimise business returns. We define risk appetite as the amount and type of risk that we are willing to take in order to meet our strategic objectives. It is inextricably linked with expected returns. We define risk tolerance as the amount of uncertainty that we are prepared to accept and cope with. It identifies the maximum boundary, beyond which we are unwilling to operate. Define risk appetite Monitor application Embed principles Review metrics Risk appetite management process Our financial risk appetite metrics: • Return on invested capital • Earnings growth • Net debt-to-EBITDA • Gearing Review of risk appetite metrics considers the following: • Changes in business conditions • Changes to the economic environment • Evolving group and strategic principles and portfolio changes • Changing competitive conditions Output: Improvement of action plans Process: Analyse and determine improvement focus Output: Risk profile. Response and controls per prioritised risk event Process: Identify the risk. Understand the risk Output: Assurance on effectiveness of risk management Process: Govern and assure Output: Effective management of the risk Process: Manage and monitor the risk 1 PLAN 2 DO 4 IMPROVE 3 REVIEW Process applied in a dynamic and changing business context Sasol Integrated Report 2018 40