Managing Mining Risk in a Rapidly Transforming World

The mining industry holds a pivotal role in shaping a sustainable future by supplying the essential minerals needed for renewable energy technologies and the energy transition. By embracing innovation and sustainable practices, mining can become a catalyst for progress, balancing environmental stewardship with economic growth. However, it also means that the operators in the mining sector face a tough balancing act with the ever-increasing demand for raw materials against the limitations of finite resources, while navigating interlinked challenges such as geopolitical risk, commodity price fluctuations, inflation, human capital risks, cyber risks, climate change and societal and regulatory pressure for greener solutions.

Aon’s Global Mining Practice Leader, Paul Pryor, unpacks Aon’s latest report - Connected Perspectives: Better Decisions on Risk Capital and Human Capital for Mining Organisations  - highlighting the key challenges facing the mining sector, as well as the opportunities and measures to manage the increased volatility and risk. Aon is the headline partner to Invest Africa’s 12^th Annual Mining Series alongside Mining Indaba 2025, taking place from 3-5 February in Cape Town. 

Major challenges facing the mining sector

1. Volatility in Commodity Pricing: While the sector is well- versed in navigating fluctuations in commodity pricing, intensifying global headwinds have increased volatility. The dramatic decline in certain energy transition materials in 2023 highlights just how drastically the commodity price pendulum can swing in the face of weak demand and ample supply. While companies that mine multiple commodities have been better positioned to spread this risk, price uncertainty has been challenging for single commodity companies.
2. The Impact of Inflation: Inflationary pressures have seen equipment, labour and energy costs soar, while supply chain challenges within the industry have also contributed to escalating costs. Social inflation has also become a disruptor that is increasing risks for the mining industry, largely attributed to more aggressive legal tactics and a shift in societal attitudes.
3. Evolving Human Capital Risks: With increased requirements for digital skills and evolving employee demands, the mining industry is navigating a significant human capital challenge. Acute shortages across the sector threaten both day-to-day operational stability and long-term profitability and growth. Rapid technical advancements in mining drive the need for digital skills which are in huge demand across every industry sector, making talent attraction and retention challenging and highly competitive.
4. Geopolitical Tremors and a Tightening Regulatory Environment: Flashpoints like the Russia-Ukraine conflict have disrupted supply chains, exposed vulnerabilities and complicated the risk management challenge. The industry must think more strategically about how future geopolitical disruptions might impact operations and consider credible risk transfer mechanisms to mitigate these risks. Critical mineral supply is becoming an increasingly geopolitical issue on the path toward clean energy.
5. The Dual Challenge of Climate Change: Mining businesses are particularly vulnerable to the physical impacts of climate change. However, as a contributor to greenhouse gas emissions, energy consumption and natural resource usage, the industry has close ties to the global climate challenge. As a result, stakeholders are demanding robust environmental, social and governance (ESG) strategies.
6. Cyber Risk Oversight: Despite the widespread and evolving risks that cyber threats present to all industries, the mining sector is lagging in defence against these threats, with complacency that could heighten vulnerabilities to this risk. As the industry becomes increasingly digitalised and more dependent on automation, businesses increase their exposure to cyber threats.

What are the Opportunities to Transform the Mining Industry?

1. Leverage Mining as a Catalyst for Progress: Mining organisations can lead the charge toward sustainability by adopting eco-friendly practices, investing in renewable energy and supporting conservation efforts. By prioritising sustainability, these companies reduce their environmental impact, enhance their reputation, strengthen investor confidence and attract value-driven employees.
2. Harness the Power of Digitalisation: Technological advancements, such as artificial intelligence (AI) and automation, are revolutionising mining processes. Digital tools can also streamline supply chain logistics, predict equipment failures and support workforce development, creating a competitive edge for forward-thinking organisations.
3. Unlocking the Value of Recycling: The circular economy presents significant opportunities for the mining sector. By investing in recycling technologies, businesses can extract value from waste, reduce reliance on new extractions and support environmental goals.
4. Embracing Growth through Strategic Investments: As the world shifts toward decarbonisation, demand for critical metals like copper is soaring. This creates an ideal environment for mergers, acquisitions and investments in clean energy and renewable technologies. Forward-looking mining companies can diversify their portfolios, align with sustainability goals and unlock new growth opportunities while capitalising on investor appetite for environmentally responsible practices.
5. Strengthening Communities and Workforce Engagement: Investments in community projects, fair labour practices and workforce training enable mining companies to create lasting social value. By fostering inclusive and supportive workplaces, businesses can attract top talent and empower employees to contribute to meaningful sustainability initiatives.

Addressing Challenges with Strategic Solutions

While challenges such as fluctuating commodity prices, labour shortages and geopolitical risks persist, mining organisations can overcome these hurdles by adopting innovative strategies including:

• Holistic Risk Management: Integrating risk management across all aspects of the business ensures resilience against interconnected risks, from natural disasters to regulatory changes.
• Sustainable Talent Strategies: Reskilling employees, fostering diversity and creating inclusive environments help address labour shortages while building a motivated, future-ready workforce.
• Balance New and Legacy Technologies: Supporting the adoption of new technology with the management of legacy systems is a strategic necessity on the path to decarbonisation. Carefully assessing and evaluating the risks and opportunities of new and legacy technologies helps organisations ensure a smoother transition that delivers operational continuity, cost-efficiency and compliance. Specialist insurance and risk management solutions allow mining businesses to better manage these challenges and support both risk and human capital needs.
• Pursue Mergers, Acquisitions and Divestments to Align with the Energy Transition: Opportunities are growing for companies to acquire renewable energy or clean technology companies or divest assets and operations no longer aligned with sustainability goals. However, to maximise chances of deal success and optimise return on investment, it is more important than ever that organisations leverage M&A tools and transaction support to secure risks across multiple business disciplines.
• Strengthen Cyber Resilience: As digitalisation advances, enhancing cybersecurity measures is essential to protect operations from evolving threats.
• Better Understand the Value of IP Assets: Managing intellectual property (IP) is key to protecting a mining company’s intangible assets, innovations and competitive position. Assess and quantify IP value to better align IP strategy with business strategy, more effectively manage IP risk and attract potential new sources of growth capital.
• Transparency and Governance: By proactively addressing environmental, social and governance (ESG) concerns, companies can build trust with stakeholders and safeguard against reputational risks.
• Leverage Risk Quantification: With data-led insights, leaders can identify and quantify specific risks to make better risk mitigation, retention and transfer decisions.
• Consider Captive Utilisation: Captives give organisations greater control over risk transfer, particularly to address hard-to-insure exposures.

“To thrive in an increasingly unpredictable and complex landscape, mining industry leaders must shift from a

reactive to a proactive approach to risk management. By embracing digital transformation, prioritising

sustainability and building more robust risk mitigations, organisations can gain the agility needed to respond to

a rapidly changing world. By embracing technology, fostering collaboration and committing to sustainability, mining organisations can balance growth with environmental and social responsibility,” concludes Paul.

To download the full report, go to: https://www.aon.com/en/insights/reports/better-decisions-on-risk-capital-and-human-capital-for-mining-organizations