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Risk Management

Risk is the effect of uncertainty on organizational objectives, manifested in many ways and potentially impacting all dimensions of the business. Business risk management focuses on the relevant potential risks that, if any, could impact people, communities, the environment, operational continuity, reputation and the achievement of the company's overall business objectives.

Vale has an integrated Risk Management Governance flow, based on the concept of Lines of Defense, which represents how periodic reviews are performed. The objective is to ensure the alignment between strategic decisions, performance, definition and monitoring of risk tolerance limits approved by the Company's Board of Directors, upon recommendation of the Executive Vice Presidencies.

Risk management governance in our company is evolving to strengthen the safety of people and operations.

Lines of Defense

Risk Governance

A very relevant step for our governance was to open the Risk Executive Committee in six executives committees with different scopes of activity, one of them entirely dedicated to geotechnical risk management.

We also fortified our defense line model with the new Safety and Operational Excellence Executive Vice Presidency, which has a work plan in place.

In our dam assessments and management, we are implementing a very high level of rigor, with the most conservative methods.

Color photo of Vale employees following a process carried out by machinery in the right place, outdoors.

1st Line of Defense

Composed of the executors of the Company's operational and business processes, being responsible for registering the risks identified in the entire chain of the operating model; for managing risks; for implementing the risk management controls and their respective action plans.

It is formed by the owners of the risks, that is, those directly responsible for keeping the risks within the tolerance limits defined at Vale; by the owners of controls, responsible for the implementation of prevention and mitigation controls, which are assigned to them by the owner of the risks; and by the executors of the processes in the operational, commercial, project, support and administrative areas.


Risk owners primarily responsible

  • Operate and maintain the integrity and reliability of assets, developing and implementing the performance of assets, both in operations, projects, support and administrative activities.
  • Immediately stop the operation of the asset(s) in the case of critical deviation(s) or in cases of total unavailability of the critical control elements that move the risk to the risk priority “Mandatory Risk Level Reduction” level;
  • Proactively implement and execute any mitigation or elimination actions that they deems necessary, whether for the transfer, sharing or rejection of risks of the “Mandatory Risk Level Reduction” level;
  • Manage risks directly, identifying, assessing, treating, preventing and monitoring risks in an integrated manner;
  • Continuously assess the applicability of the risk themes of the Integrated Risk Map to the activities and geographies under their responsability;
  • Monitor risk compliance in order to comply with external regulations, internal policies and standards;
  • In the event of risks that present threats of materialization, the risk owner must immediately and proactively adopt the preventive and mitigating actions that they deem appropriate, without the need to obtain prior authorizations;
  • Subsequently, if any support or ratification by levels higher than that observed in practice is necessary, the request must be sent to the corresponding body or position, according to the response governance established in the Strategy and Governance in Response to Risks Tables;
  • Establish and implement Crisis Management protocols and Business Continuity plans for the risks under their responsibility, classified as of Very Critical and Critical severity; 
  • For risks, whenever applicable, with Very Critical and Critical impacts, simulated tests should be carried out in order to verify the efficiency and effectiveness of the Crisis Management protocols. The periodicity of the simulations must be defined by the 1st line of defense according to the criticality, observing local rules and specificities of the legislation and, according to internal normative documents, always following the most restrictive period;
  • Meet the guidelines, technical and minimum management standards defined by the 2nd Line of Defense;
  • Periodically monitor the risk management indicators in order to manage the effectiveness of the controls and plans associated with the risks under their responsability;
  • Evaluate corrective action plans, proposals for continuous improvement of controls and/or implementation of new controls suggested by control owners, aiming at the continuous improvement of risk management.

Control owners primarily responsible

  • Manage the prevention and mitigation controls assigned to them, always ensuring the accuracy and timeliness of the information and security of the process, in accordance with the applicable legislation, internal policies and standards, and seek the correction of the controls, in case of detection of any deficiency;
  • Perform or review the control tests, respecting the frequency defined in the control;
  • Inform the risk owner in case of deficiencies found in control verification tests, which may have an impact on risk prevention or mitigation, especially in the case of critical controls.

2nd Line of Defense (Enterprise Risk Management (ERM)) - Integrated Business Risk Management)


Main responsibilities

  • Develop and implement policies, methodologies, processes and infrastructure for integrated risk management;
  • Support the work of the 1st Line of Defense, providing training and methodological instrumentation in the Business Risk Management model;
  • Support and promote the exchange of knowledge and information, in order to disseminate the culture of management and risk prevention in the organization;
  • Support and monitor compliance with the business risk governance model;
  • Support external disclosure of official information regarding business risk management;
  • Consolidate the deliberations of the Business Risk Executive Committees for submission to the Executive Vice Presidencies, as well as monitor the conclusion of the recommendations, and the 2nd Specialist Defense Line are responsible for evaluating their technical effectiveness, when applicable.

The management of operational risk, which is the responsibility of the Executive Vice Presidency of Safety and Operational Excellence, corresponds to the performance as 2nd Specialist Defense Line on potential risks with impacts on the People dimension, and also on the potential geotechnical risks.


Check the responsibilities of the Executive Vice Presidency of Safety and Operational Excellence

  • Act as a technical axis in the definition of standards and standards for the management of Occupational Safety, industrial and geotechnics processes;
  • Act as a regulator and inspector in the management process of critical assets;
  • Maintain the integrated management system that ensures uniformity in the application of standards and good operational management practices.
  • Monitor and present the risks of operational processes with a level of Critical severity, in the forums indicated by the Operational Excellence and Risk Committee.

In addition to the responsibilities described above, the areas of the Executive Vice Presidency of Safety and Operational Excellence have all the responsibilities assigned to the 2nd Specialist Defense Lines.

In addition to the Executive Vice Presidency of Safety and Operational Excellence, which is the 2nd Line of Defense for Operational Risks, there are areas such as the Environment, Corporate Integrity, Social and Human Rights, not exhaustively, which should also act as the 2nd Specialist Line of Defense of the respective potential risks. All these ones have the following attributions:

Define methodologies, minimum technical, technological and management standards, risk and asset reliability indicators to be mandatorily adopted by the 1st Line of Defense;
Define methodology and technical criteria for the selection of critical control elements;
Perform independent checks (evaluation of effectiveness) of critical controls, related to relevant potential risks, performed by the 1st Line of Defense. In the exercise of their duties, if any deviation in the existing controls and barriers for risks with very high and high criticality is identified, it has the power to define immediate actions to be implemented by the 1st Line of Defense. In this case, they are able to take the decision to stop the operation of the assets, when applicable;
Act as support to the 1st Line of Defense, through the assessment of the concepts adopted, checking if the risks have mapped controls and if the barriers implemented are the best in each situation related to relevant potential risks;
Support in the identification of risks, the need to implement additional controls and non-conformities of existing controls and issue recommendations, provide technical support in the implementation of the model and standards for the management and prevention of risks and assets;
Evaluate the application of standards and indicators by the operational, commercial, project, support and administrative areas (1st Line of Defense), with independence and transparency;
List potential relevant risks in the specific Executive Committees, in case preventive action deliberations are required that require additional support.

The definition of which areas of the organization will act as the 2nd Specialist Defense Line is delegated to Vale's Executive Vice Presidencies.

3rd Line of Defense

The 3rd line of defense is made up of Internal Audit and the Whistleblower Channel, which are part of the Compliance Department, which also manages the Corporate Integrity area (2nd line of defense Specialist). The Compliance Department is totally independent from management, as it is an area that reports to Vale's Board of Directors and is supervised by the Audit Committee, which was installed in March 2020, with the election of its members and approval of its internal regulations. After the statutory reform of April 30, 2020, its composition and attributions started to be regulated in Vale's Bylaws, in order to comply with the rules of the Audit Committee regulated by CVM and the Novo Mercado Regulation, as well as the rules of Audit Committee applicable to Brazilian companies with ADRs listed on the American market).

The Internal Audit and the Whistleblower Channel carry out, subject to their respective areas of expertise, evaluations, inspections, through the execution of control tests and investigation of complaints, providing exempt assurance, including on the effectiveness of risk management and prevention, internal controls and compliance.

Responsibilities:

Internal Audit

  • Independent assessment of risk management, processes and internal controls, and compliance with internal laws and regulations, according to the annual work plan approved by the Board of Directors;
  • Consulting and advisory services provided that they are intended to add value and improve the governance, risk management and control processes, without the internal auditor assuming responsibility inherent to the duties of the process owners and the 1st and 2nd Lines of Defense;
  • Communication to responsible managers and competent governance bodies about exposure to significant risks and deficiencies in control.

Whistleblower Channel

  • Availability of a communication channel on violations of the Code of Conduct, which guarantees the anonymity of the whistleblower, ensuring control of the complaints received and their respective investigation;
  • Verification of all complaints received, preparing reports used to justify the consequences measures, among other adjustments in the company's internal processes and controls;
  • Systematic accountability on the progress of the complaints channel, its results and information, to the main governance bodies of the company, including the Conduct and Integrity Committee, the Audit Committee and the Board of Directors.

Risk management organizational structure



Organizational Chart of the General Meeting Organizational Chart of the General Meeting

Key risks are periodically monitored, as well as the effectiveness of their key prevention/mitigation controls and the implementation of their treatment strategies. As such, Vale seeks to have a clear view of its main risks, acting on them in a systematic manner through the adoption of protection or mitigation measures.

To this end, the Company has an operational structure to check and monitor the policy and internal controls, with the Board of Directors being the body responsible for approving the Vale risk policies.

The Board of Directors is supported by advisory committees that, in general, are responsible for monitoring the scope of action and the effectiveness of the risk management of the business by the Board of Executive Officers, aligned with the guidelines set out by Vale's Board of Directors. Permanently, they are: the Financial Committee, Sustainability Committee, Operational Excellence Committee and Risks, People, Compensation and Governance Committee, the Audit Committee, Nomination Committee and Innovation Committee.

In order to fully understand the responsibilities of our Lines of Defense, click here and access our Policy.

Long-term Emerging Risks

The Integrated Risk Map is a non-exhaustive instrument that contains a set of potential risk topics approved by the Board of Directors, upon recommendation of the Executive Committee, which needs to be evaluated and monitored in all Vale’s units.

Epidemics and Pandemics​

Risk Priority: High

Collective manifestation of a disease that quickly spreads, by direct or indirect contagion, until reaching a large number of people in a given territory (e.g. COVID-19, Ebola, Avian Influenza)​

Root cause​

Presence of viruses, bacteria and protozoa, carried by vectors or not, and that spread quickly reaching a large number of people, aggravated by the absence of control and mitigation measures and sanitary / public health deficiency.​

Impact​

Results:

  • Death as outcome (increase in incidents, public and private health system overload);​
  • Possibility of chronic, permanent and disabling sequelae arising from SARS-COV-2 infection, especially in severe cases;​
  • Sanitary disruption of the operation (deterioration in relations with supervisory agencies);​
  • Increase in medical absenteeism;​​
  • Increased spending on supplementary health;​​
  • Loss of productivity;​​​
  • Partial or total disruption of activities​.

Prevention / Mitigation​

In controlling of an infectious disease epidemic, it is important that cases are reported to the public health agency so that measures can be taken to prevent the spread of the disease to other locations.

  1. Strategies that can be adopted to contain an epidemic or pandemic are:
    • Self-assessment of signs and symptoms related to the disease;​​
    • Sanitary education;​​
    • Use of mechanical protection barriers (masks and physical distancing);​​
    • Identification and tracking of contacts; ​​
    • Segregation of groups at increased risk of greater potential for a death outcome (pregnant and immunosuppressed);​
    • Deployment of remote work where possible and appropriate;​
    • Restriction of domestic and international travels;​
    • Creation of an epidemiological barrier with the request for a complete vaccination certificate, as essential condition for access to the operations for own employees and third parties.​
  2. Humanitarian support actions in countries where Vale operates (community support):
    • Donation of medical supplies (e.g. diagnostic tests, health PPE);​
    • Installation and maintenance of temporary field hospitals in the most affected regions;​
    • Implementation of remote laboratories for molecular diagnosis of infectious diseases.

Comments​

The distinctive character of epidemics lies in their collective and singular manifestation: collective as a phenomenon that affects groups of individuals causing changes in the "way of life” and singular as a unique occurrence in the unit of time and space.​

Based on information discussed at the World Economic Forum , Infectious Diseases (ID) and survival crisis lead the rank of predicted risks, ahead of other threats such as cybersecurity flaws. Infectious Diseases will represent a critical threat to the world for years to come. As an example, we can mention the COVID-19 Pandemic, which continues to cause devastation with a growing increase in the number of lives lost and impacting very strongly world economies.

Taking into account the emergence of new strains of SARS-COV-2, mainly the Omicron variant, with its infectious capacity 3-4 times greater than its predecessor, but with less offensive power (80% lower), it will directly reflect on the overcrowding of primary health care units, impacting on the lack of medical supplies, in addition to causing, according to the current literature, a possible impact of up to 20% on medical absenteeism for companies.​

Cyber Risks​

Risk Priority: High

Vale's businesses are heavily dependent on technological systems for the operations. In this way, cyber events or attacks can have a significant impact on the business. The cyber risk management discipline deals with situations where the availability, integrity and confidentiality of information and operational technology systems can be compromised.

Root cause​

The growth of cyber threat scenarios has been spread in the world and in 2020 the amount of ransomware attacks has grown significantly. The ever-evolving risks come from a variety of actors in this context, such as “nation-state”, cyber criminals, hacktivists and “insiders”, each with different motivations.

​It is noted that these cyber criminals have applied more aggressive techniques and continue - and sometimes increase - their activities in times of crisis as in the case of the COVID-19 pandemic.

Impact​

  • Business disruption, generating financial loss or damage to security;​​
  • Loss of intellectual property;
  • Negative impact on the company's market value, credit rating and reputation;​​
  • Lawsuits and fines, including criminal offences.

Prevention / Mitigation​

Diverse measures are taken to manage this risk in order to protect, detect and respond to cyber events, including information security policies and standards, security protection technologies, threat detection and monitoring, as well as periodic cyber incident simulations to test response and recovery plans.​

We have been sustained our investments in order to continually evolve our cyber defenses within the risk tolerance levels for enterprise systems layers.​

As for the layers of industrial systems and operational technologies, we significantly increased investments in order to improve the efficiency of cybersecurity controls in a way that is compatible with the threats aggravation in this area.

​​​We constantly maintain initiatives to strengthen the information security awareness culture in the organization. Encouraging vigilance among the employees and associates, we run a recurring training program covering topics such as email phishing, information classification, and other information security best practices.

Comments​

We experience threats to the security of our technology systems, but none of them impacted our business in 2021.

Exposure to cyber risks is expected to increase due to our increasing dependence on technology as well as the increasing sophistication and frequency of cyber attacks.

Our cyber risk management committee assists the executive committee to continually oversee the progress of the Information Security program, as well as the effectiveness of our cyber security controls framework. Additionally, the audit committee and other advisory committees assist the board of directors to ensure that the internal controls are robust and sufficient to manage the information security in the company within the limits of tolerance for cyber risk.

Climate Change​

Risk Priority: High

Increased sense of urgency to address challenges that threaten not just the mining sector, but the entire society. Low carbon mining is one of our priorities for the coming years.

Root cause​

Physical events are considered chronic, such as the increase in the average temperature of the atmosphere, droughts, fires, strong winds, atmospheric discharges, sea level rise and changes in rainfall patterns and/or acute problems, such as extreme weather and maritime conditions.

​​​Transition events are related to changes in public policies to restrict emissions, climate-related litigation, demand changes for products and services, and the replacement of products due to new technologies and processes.

Impact​

  • Interruption of operational activities, generating financial loss or damage to safety; ​​
  • Cost increase for infrastructure adaptation;​
  • Cost increase due to carbon taxing;​
  • Revenue increase/decrease due to demand changes for low carbon products; ​
  • Negative impact on the company's market value, credit rating and reputation; ​
  • Impact on the company's image.

Prevention / Mitigation​

The main tools used in face of these challenges are:

  • Recover and protect 500 thousand hectares of forests by 2030;​
  • Replacement of diesel with electrical energy in mining and transport activities, including trucks and trains;​
  • Global self-sufficiency in electrical energy through renewable sources by 2030;​
  • Energy Efficiency Program;​​
  • Use of Autonomous Trucks;​
  • Powershift Program (100% electric yard locomotive);​
  • Partnerships with major mining companies in the world market – The Charge On Challenge (complete electrification of surface mining vehicles - https://chargeoninnovation.com/);​
  • Target of reducing emissions by 33% for scopes 1 and 2 by 2030, and neutrality by 2050;​
  • Incentive to the development of low carbon projects;​
  • Emissions monitoring for the scopes 1, 2 and 3 with standardized metrics.

Comments​

In 2020, the company carried out a resilience analysis of its portfolio to climate change scenarios, based on the National Energy Agency (AIE) scenarios. In the challenging context of decarbonization, our commodities will be at the forefront of the challenges and opportunities presented by the climate crisis.

​Also in 2020, it was developed the Vale Climate Forecast, a methodology that promotes the physical resilience of our operations to climate changes. The methodology makes it possible to identify potential operational and financial impacts due to climate variables, such as changes in rainfall patterns and temperature variation for all the company's operations.

Russia-Ukraine War​

Risk Priority: Very High

Escalation of the conflict could lead to disruption of international trade flows, extreme pricing, high volatility in the markets, with particular impact on the energy sector, increased regulatory and contractual uncertainty, and geopolitical tensions around the world.

Root cause​

Geopolitical tension between Russia and Ukraine, a NATO partner, has been increasing in recent years. And in Feb/22, Russia started a military operation inside Ukraine, leading to several negative impacts - direct and indirect - on several countries and affecting the world economy.

Impact​

Outcomes:

  • Escalation of economic sanctions, including export banning, disconnection of the swift in Russia, reserves freezing, among others;​
  • Possible global recession;​​
  • Increase of inflationary pressure on prices and costs;​
  • Reduction in international trade;​​
  • Supply chain disruptions;​
  • Possible increase in cyber attacks.

Prevention / Mitigation​

Several measures have been adopted by Vale in recent years and others have been reinforced by the conflict, among them are:

  1. Creation and strengthening of the sanctions department:
    • Sanctions policy for group companies;​
    • Daily monitoring of the sanction status;​​​
    • Compliance Program;​​​
    • Sanctions clauses in contracts;​
    • Training and constant monitoring;​​
    • Development of more automated control solutions and due diligence.
  2. ​Monitoring of market risks, especially freight, bunker and diesel, important components of the cost of the sold products.
  3. Actions being taken to mitigate the effects of the conflict.:​
    • Monitoring of counterparties around the world, especially in Europe, which may be affected by lack of raw materials, sanctions or other crisis outcomes;​
    • Adjustments in our logistics chain.
  4. Intensification of cyber risk controls.

Comments​

Vale created a multidisciplinary committee, before the conflict beginning, to assess the possible impacts on the company, as well as possible prevention or mitigation actions.​​

The impact of the conflict on commodity markets is expected to be severe, since Russia is a major producer of several raw materials, such as 40% of the gas consumed by Europe, as well as an important oil supplier to the continent. This scenario may lead to the temporary paralyzation of operations of some stakeholders.​

​The medium-term impacts, such as a possible increase in other geopolitical tensions, are still uncertain. Asia is currently our main consumer market and any impact on its economy could have consequences for the company's results.

Epidemics and Pandemics​

Risk Priority: High

Collective manifestation of a disease that quickly spreads, by direct or indirect contagion, until reaching a large number of people in a given territory (e.g. COVID-19, Ebola, Avian Influenza)​

Root cause​

Presence of viruses, bacteria and protozoa, carried by vectors or not, and that spread quickly reaching a large number of people, aggravated by the absence of control and mitigation measures and sanitary / public health deficiency.​

Impact​

Results:

  • Death as outcome (increase in incidents, public and private health system overload);​
  • Possibility of chronic, permanent and disabling sequelae arising from SARS-COV-2 infection, especially in severe cases;​
  • Sanitary disruption of the operation (deterioration in relations with supervisory agencies);​
  • Increase in medical absenteeism;​​
  • Increased spending on supplementary health;​​
  • Loss of productivity;​​​
  • Partial or total disruption of activities​

Prevention / Mitigation​

In controlling of an infectious disease epidemic, it is important that cases are reported to the public health agency so that measures can be taken to prevent the spread of the disease to other locations.

  1. Strategies that can be adopted to contain an epidemic or pandemic are:
    • Self-assessment of signs and symptoms related to the disease;​​
    • Sanitary education;​​
    • Use of mechanical protection barriers (masks and physical distancing);​​
    • Identification and tracking of contacts; ​​
    • Segregation of groups at increased risk of greater potential for a death outcome (pregnant and immunosuppressed);​
    • Deployment of remote work where possible and appropriate;​
    • Restriction of domestic and international travels;​
    • Creation of an epidemiological barrier with the request for a complete vaccination certificate, as essential condition for access to the operations for own employees and third parties.​
  2. Humanitarian support actions in countries where Vale operates (community support):
    • Donation of medical supplies (e.g. diagnostic tests, health PPE);​
    • Installation and maintenance of temporary field hospitals in the most affected regions;​
    • Implementation of remote laboratories for molecular diagnosis of infectious diseases.

Comments​

The distinctive character of epidemics lies in their collective and singular manifestation: collective as a phenomenon that affects groups of individuals causing changes in the "way of life” and singular as a unique occurrence in the unit of time and space.

​Based on information discussed at the World Economic Forum , Infectious Diseases (ID) and survival crisis lead the rank of predicted risks, ahead of other threats such as cybersecurity flaws. Infectious Diseases will represent a critical threat to the world for years to come. As an example, we can mention the COVID-19 Pandemic, which continues to cause devastation with a growing increase in the number of lives lost and impacting very strongly world economies.

Taking into account the emergence of new strains of SARS-COV-2, mainly the Omicron variant, with its infectious capacity 3-4 times greater than its predecessor, but with less offensive power (80% lower), it will directly reflect on the overcrowding of primary health care units, impacting on the lack of medical supplies, in addition to causing, according to the current literature, a possible impact of up to 20% on medical absenteeism for companies.​

Cyber Risks​

Risk Priority: High

Vale's businesses are heavily dependent on technological systems for the operations. In this way, cyber events or attacks can have a significant impact on the business. The cyber risk management discipline deals with situations where the availability, integrity and confidentiality of information and operational technology systems can be compromised.

Root cause​

The growth of cyber threat scenarios has been spread in the world and in 2020 the amount of ransomware attacks has grown significantly. The ever-evolving risks come from a variety of actors in this context, such as “nation-state”, cyber criminals, hacktivists and “insiders”, each with different motivations.​

It is noted that these cyber criminals have applied more aggressive techniques and continue - and sometimes increase - their activities in times of crisis as in the case of the COVID-19 pandemic.

Impact​

  • Business disruption, generating financial loss or damage to security;​​
  • Loss of intellectual property,​​​
  • Negative impact on the company's market value, credit rating and reputation;​​
  • Lawsuits and fines, including criminal offences.

Prevention / Mitigation​

Diverse measures are taken to manage this risk in order to protect, detect and respond to cyber events, including information security policies and standards, security protection technologies, threat detection and monitoring, as well as periodic cyber incident simulations to test response and recovery plans.​

We have been sustained our investments in order to continually evolve our cyber defenses within the risk tolerance levels for enterprise systems layers.​

As for the layers of industrial systems and operational technologies, we significantly increased investments in order to improve the efficiency of cybersecurity controls in a way that is compatible with the threats aggravation in this area.

​​​We constantly maintain initiatives to strengthen the information security awareness culture in the organization. Encouraging vigilance among the employees and associates, we run a recurring training program covering topics such as email phishing, information classification, and other information security best practices.

Comments​

We experience threats to the security of our technology systems, but none of them impacted our business in 2021.

Exposure to cyber risks is expected to increase due to our increasing dependence on technology as well as the increasing sophistication and frequency of cyber attacks.

Our cyber risk management committee assists the executive committee to continually oversee the progress of the Information Security program, as well as the effectiveness of our cyber security controls framework. Additionally, the audit committee and other advisory committees assist the board of directors to ensure that the internal controls are robust and sufficient to manage the information security in the company within the limits of tolerance for cyber risk.

Climate Change​

Risk Priority: High

Increased sense of urgency to address challenges that threaten not just the mining sector, but the entire society. Low carbon mining is one of our priorities for the coming years.

Root cause​

Physical events are considered chronic, such as the increase in the average temperature of the atmosphere, droughts, fires, strong winds, atmospheric discharges, sea level rise and changes in rainfall patterns and/or acute problems, such as extreme weather and maritime conditions.

​​​Transition events are related to changes in public policies to restrict emissions, climate-related litigation, demand changes for products and services, and the replacement of products due to new technologies and processes.

Impact​

  • Interruption of operational activities, generating financial loss or damage to safety; ​​
  • Cost increase for infrastructure adaptation;​
  • Cost increase due to carbon taxing;​
  • Revenue increase/decrease due to demand changes for low carbon products; ​
  • Negative impact on the company's market value, credit rating and reputation; ​
  • Impact on the company's image;

Prevention / Mitigation​

The main tools used in face of these challenges are:

  • Recover and protect 500 thousand hectares of forests by 2030;​
  • Replacement of diesel with electrical energy in mining and transport activities, including trucks and trains;​
  • Global self-sufficiency in electrical energy through renewable sources by 2030;​
  • Energy Efficiency Program;​​
  • Use of Autonomous Trucks;​
  • Powershift Program (100% electric yard locomotive);​
  • Partnerships with major mining companies in the world market – The Charge On Challenge (complete electrification of surface mining vehicles - https://chargeoninnovation.com/);​
  • Target of reducing emissions by 33% for scopes 1 and 2 by 2030, and neutrality by 2050;​
  • Incentive to the development of low carbon projects;​
  • Emissions monitoring for the scopes 1, 2 and 3 with standardized metrics.

Comments​

In 2020, the company carried out a resilience analysis of its portfolio to climate change scenarios, based on the National Energy Agency (AIE) scenarios. In the challenging context of decarbonization, our commodities will be at the forefront of the challenges and opportunities presented by the climate crisis.

​Also in 2020, it was developed the Vale Climate Forecast, a methodology that promotes the physical resilience of our operations to climate changes. The methodology makes it possible to identify potential operational and financial impacts due to climate variables, such as changes in rainfall patterns and temperature variation for all the company's operations.

Russia-Ukraine War​

Risk Priority: Very High

Escalation of the conflict could lead to disruption of international trade flows, extreme pricing, high volatility in the markets, with particular impact on the energy sector, increased regulatory and contractual uncertainty, and geopolitical tensions around the world.

Root cause​

Geopolitical tension between Russia and Ukraine, a NATO partner, has been increasing in recent years. And in Feb/22, Russia started a military operation inside Ukraine, leading to several negative impacts - direct and indirect - on several countries and affecting the world economy.

Impact​

Outcomes:

  • Escalation of economic sanctions, including export banning, disconnection of the swift in Russia, reserves freezing, among others;​
  • Possible global recession;​​
  • Increase of inflationary pressure on prices and costs;​
  • Reduction in international trade;​​
  • Supply chain disruptions;​
  • Possible increase in cyber attacks

Prevention / Mitigation​

Several measures have been adopted by Vale in recent years and others have been reinforced by the conflict, among them are:

  1. Creation and strengthening of the sanctions department:
    • Sanctions policy for group companies;​
    • Daily monitoring of the sanction status;​​​
    • Compliance Program;​​​
    • Sanctions clauses in contracts;​
    • Training and constant monitoring;​​
    • Development of more automated control solutions and due diligence.
  2. ​Monitoring of market risks, especially freight, bunker and diesel, important components of the cost of the sold products.
  3. Actions being taken to mitigate the effects of the conflict.:​
    • Monitoring of counterparties around the world, especially in Europe, which may be affected by lack of raw materials, sanctions or other crisis outcomes;​
    • Adjustments in our logistics chain.
  4. Intensification of cyber risk controls

Comments​

Vale created a multidisciplinary committee, before the conflict beginning, to assess the possible impacts on the company, as well as possible prevention or mitigation actions.​​

The impact of the conflict on commodity markets is expected to be severe, since Russia is a major producer of several raw materials, such as 40% of the gas consumed by Europe, as well as an important oil supplier to the continent. This scenario may lead to the temporary paralyzation of operations of some stakeholders.​

​The medium-term impacts, such as a possible increase in other geopolitical tensions, are still uncertain. Asia is currently our main consumer market and any impact on its economy could have consequences for the company's results.

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