RAND WATER ANNUAL REPORT 2023

ABOUT RAND WATER

HOW WE MANAGE OUR RISKS The Board of Rand Water and EXCO have committed to a process of risk management that is aligned to the principles of good corporate governance, as supported by the PFMA, Act 1 of 1999 as amended, the National Treasury Regulations, King IV, and International Organisation for Standardisation 31000 (ISO 31000) as amended. The organisation has also adopted an Innovation Driven Risk-Based Strategy, which is imperative to its risk profile. The realisation of the business strategy depends on the organisation’s ability to take calculated risks and opportunities in a way that does not jeopardise the direct interests of its stakeholders; because as Rand Water executes its business strategy, it exposes itself to uncertainty. The proactive and effective management of risk enables us to anticipate and respond to changes in our business environment, as well as to make informed decisions under conditions of uncertainty. A Rand Water Risk Management Framework has been developed to ensure that the risk management process is integrated into the organisation’s overall policies, governance, strategy, planning, management, and reporting processes. All risk management efforts are focused on supporting the organisation’s business objectives. In terms of corporate governance, we also maintain compliance with relevant legislation and meet the expectations of employees, communities, shareholder, and other stakeholders. The implemented risk management processes is expected to continue being embedded into Rand Water’s systems and processes, ensuring that Rand Water’s response to risk remains relevant and continues to build the organisation’s resilience. How Rand Water Identifies Risks and Opportunities Rand Water has established processes and structures directed towards the effective management of potential opportunities and adverse effects within Rand Water’s environment. Rand Water’s mission and vision are an expression of an organisation that seeks future opportunities whilst managing environmental risks to ensure a sustainable supply of water. Effective risk management requires being actively aware that the business environment is continuously changing by conducting an environmental scan of risks and opportunities that are relevant to the business. On an annual basis, we conduct a Corporate Risk Assessment Workshop with the aim of reviewing existing strategic risks and identifying new and emerging strategic risks benchmarked against external sources (such as the Institute of Risk Management South Africa country Risk Report and the World Economic Forum Risk Reports). The annual State of the Nation Address and Minister of Finance’s Annual Budget Speech are also source documents that are used to identify new and emerging risks as part of the environmental scan. All identified risks must be subject to appropriate controls. Further mitigating actions provide an opportunity for the business to enhance its mitigation strategies. The Rand Water Institute has established an Innovation Department tasked with researching and developing new solutions to the organisation’s existing and anticipated challenges. Our Risk Appetite Risk Appetite is the level of risk that Rand Water is prepared to accept in pursuit of its objectives before any action is deemed necessary to reduce the risk. The Board, in collaboration with EXCO, is responsible for determining the risk appetite and setting the risk tolerance levels for the organisation in accordance with the adopted Enterprise Risk Management Strategy. The risk appetite and risk tolerance define how much risk the organisation is prepared to accept. Risk appetite is a general statement that examines the amounts of risk that management deems acceptable, whereas risk tolerances are more specific and define the acceptable level of variation around objectives. This risk appetite is identified within the context of the organisation. In the year under review, the organisation reviewed its risk appetite which was determined to be moderate overall. Risk Appetite statements were determined for the following risk categories: Financial Risk Rand Water has moderate to medium appetite for taking risk impacting financial sustainability. Rand Water optimally plans, operates and maintains its assets to deliver on its mandate and perform against the strategy and will tolerate moderate deviation from performance targets as defined in the Board approved materiality framework.

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