Dana Gas’ ability to protect and grow shareholder value depends on the successful delivery of the Group’s business objectives. In turn, this depends on the extent to which the Group is effective in identifying, assessing and managing risks across the business.

Risk Management Structure

Overview

Dana Gas strongly believes that effective business risk management is essential to the efficient operation of its assets, projects, central functions and the Group. Dana Gas therefore aims to fully adopt best practice in risk management to protect the Group from business and HSSE risk, maximise opportunity and safeguard shareholder value. Dana Gas recognises that it has a responsibility to manage risks, which in turn will protect its reputation, people, environment, communities and the interests of all its stakeholders.

Dana Gas recognises that risk is an integral and unavoidable component of its business and is characterised by both threat and opportunity. With this, we will better achieve our corporate objectives and vision of becoming the leading private sector natural gas company operating in the Middle East, North Africa and South Asia (MENASA) region. 

Background and Process

In 2009, the Board of Directors mandated that a detailed business risk management review be undertaken across the Group with the key objectives of developing a risk management policy and framework and identifying the key risks facing the Group. This risk assessment review, together with a new Business Risk Management Framework and Risk Management Policy, was completed in December 2009 and approved by the Board of Directors in January 2010. The framework is an integral part of good management practice, reflecting the requirements of the UAE and other international Corporate Governance Codes and is a mandatory internal control across Dana Gas.

The Business Risk Management Framework supports effective establishment of a risk-based internal control framework through consideration of strategic, operational, financial and compliance risks.  The framework covers projects, assets, business units, countries and corporate functions. The framework is designed to facilitate the systematic and continuous identification, analysis, mitigation, monitoring and communication of those risks which could threaten the Group’s ability to deliver its objectives. 

On an annual basis, risk workshops are held to take an aggregated corporate view of the key Group risks facing Dana Gas.  These risks and the proposed mitigations are submitted to the Board on a regular basis and included in the Annual Report and Accounts.

During 2011, the risk management policy and framework will continue to be embedded throughout the organisation.

Risk Management Oversight

The Dana Gas Board has oversight of the Group’s key risks and the risk management framework and receives quarterly reports on the significant risks facing the business.

At the management level, a new Risk Committee has been formed and is composed mainly of the Leadership Team. The terms of reference of the Risk Committee include oversight and monitoring of the significant risks facing the business and review of the proposed mitigation strategies. The Committee is expected to meet on a quarterly basis and the key outputs will be made available to the Board.   

The Dana Gas Leadership Team allocates accountability between its members for the management of key risks across the Group. The management of business unit specific risks remains a line responsibility; however, risks are monitored at a Group level by the Risk Committee, Leadership Team and functional heads.  

Risk Factors and Uncertainties

This section provides a description of the principal risks and uncertainties that could have a material adverse effect on Dana Gas’ strategy, performance, results or reputation. 

The Group continues to define and develop processes for identifying and managing these risks.  Some of the risks listed below may be outside the control of Dana Gas and the Group may also be affected adversely by other risks and uncertainties besides those listed here. 

Strategic 

A number of stakeholders, including shareholders, investors, media, governments, non-governmental organisations and local communities, have legitimate interests in the Group’s business and effective engagement is key to the success of the business and the Group’s reputation.

Political 

The success of Dana Gas depends in part upon understanding and managing the political, economic and market conditions in the many diverse economies around the MENASA region in which it does business.

Exploration and Projects

The Group’s future gas and oil production is, to a significant extent, dependent upon finding, acquiring and developing new reserves and the successful completion of development projects within budgeted costs, time and technical requirements.   

Operations

The Group’s production volumes and revenues are dependent on the continued performance of its operational assets. Business activities conducted by the Group are often conducted with Joint Venture partners; some assets are under the day-to-day management of these partners and may therefore be subject to risks that are outside the control of the Group. 

Health, Safety, Security and Environment  

The production, transmission and distribution of hydrocarbons and associated products present a number of HSSE risks and the inherent potential for accidents or incidents. 

Financial

The Group is exposed to liquidity risk, exchange rate risk, credit risk and commodity price risk.