On November 7, 2024, at the annual Governance Professionals of Canada (GPC) Canadian Governance awards ceremony, we are extremely proud that our client Algoma Steel Inc. won the prestigious award for Strategy and Risk Management.1. The other finalists were Interact, the credit banking company and Tarion, the home warranty company. Directors Global Risk Consulting was engaged by Algoma in 2019 to help Algoma build and implement a world class risk framework and develop a risk culture. After 5 years of hard work by the Executive Team, Risk Management staff, and with support from the Algoma board and with guidance from Directors Global, Algoma is now an example for other Canadian companies on how to manage risk. How did Algoma do it?

This overview is a capsulized summary of the judges’ comments in presenting the award to Algoma. 2.  Directors Global has added a few observations and comments.

Algoma’s overall approach to risk management and their ERM practices have become a tool in managing strategic and operational risks, and in developing a risk culture.

Under the leadership of CFO Rajat Marwah, and Manager, Enterprise Risk Piyush Shukla, Algoma Steel has done a remarkable job managing its many risks. This is likely a contributing factor to Algoma’s stock price being currently at a record high point. In being considered for the Strategy and Risk Management award, Algoma’s submission to GPC detailed their risk practices in two areas: 1) how Algoma has successfully project managed the many risks in building their current billion dollar EAF (near completion Electric Arc Furnace) steelmaking operation; and 2) Algoma’s overall approach to risk management and their ERM practices have become a tool in managing strategic and operational risks, and in developing a risk culture.

The judges were no doubt impressed with the sustainability features of the EAF operation- it will reduce Algoma‘s GHG’s (greenhouse gas emissions) by 70%, contributing significantly to Canada‘s Paris climate change agreement goals, and to Ontario’s 2030 carbon mission targets.

The $Billion EAF operation will reduce Algoma‘s GHG’s (greenhouse gas emissions) by 70%

Here are some key steps recognized by the GPC, taken by Algoma in managing the many risks inherent in building the $billion Electric Arc Furnace (EAF) project:

1. Preliminary project risk assessment – the team identified risks across budgeting, supply chain, engineering, and procurement. Risks were prioritized based on their potential impact and likelihood.
2. Deep dive workshops/executive committee sessions – Algoma implemented proactive risk mitigation measures to enhance decision-making, reduce potential disruptions, and ensure a successful transformation to green steel.
3. Qualitative/quantitative analysis – needed to identify risks in areas such as regulatory compliance, technology, environmental concerns and supply chain disruptions. Through contingency planning, Algoma addresses these risks minimizing impacts on timelines and operations.
4. Seamless cross functional collaboration – to pull the program together, managing risks, collectively, including new, emerging risks, the executive team dealt with risk issues real time, with a 360° view of the EAF project, enhancing transparency, and decision-making.
5. Continuous Improvement -Algoma‘s risk framework identifies efficiency, operate opportunities, improving decision-making, regarding budget and resource allocation.
6. On-Going benefits – as the project progresses safely, achievements include cross-departmental communication, and enhanced ability to identify and mitigate risks, formal escalation process for emerging threats.
7. Stakeholder confidence– through transparency, and regular updates, the framework has strengthened stakeholder confidence demonstrating Algoma’s commitment to responsible and sustainable practices.

Building a Risk Framework? Contact Directors Global

Beyond the EAF project, enterprise risk management practices have been embedded into Algoma‘s business and strategic operations. One example which has benefited the organization significantly is in the area of high value contract reviews. Since implementation, these risk review protocols have reduced potential disputes, delays, and unexpected costs. A key element of the Algoma framework is the use of key risk indicators (KRI’s)-measurable metrics to provide early warnings when risk thresholds are met or exceeded enabling accelerated responses for occurrences and threats.

Finally, the framework at Algoma emphasizes strong governance with clear accountability, transparency, reporting, and communication channels between Algoma’s board and management. This risk program foster’s long-term resilience and positions Algoma to advance its vision of producing steel, benefiting local and other communities, the environment, and laying a foundation for ongoing green transformation.

Footnotes:
1. Governance Professionals of Canada-Award Winners. https://www.gpcanada.org/Public/Public/News/GPC-announce-the-winners-for-the-2024.aspx

2. Governance Professionals of Canada- Judges Summary- https://www.flipsnack.com/gpcanada/2024-gpc-eg-awards-judges-report/full-view.html