Risk Identification and Management The Company recognises that the management of risk is a critical component in achieving its purpose of delivering growth in shareholder value. The Company has a framework to identify, understand, manage and report risks. As specified in its Board Charter, the Board has responsibility for overseeing The Company’s risk management framework and monitoring its material business risks. The Board continues to be committed to embedding risk management practices to support the achievement of business objectives. As such the Board has established the Audit and Risk Committee which is responsibility for reviewing and overseeing the risk management strategy of the Group and for ensuring it has an appropriate corporate governance structure. The Board discusses with management and the external auditors at least bi-annually: – Internal controls systems; – Policies and procedures to assess, monitor, and manage business, economic, environmental and social sustainability risks; – Insurance program having regard to the insurable risks and the cost of this cover; and – Legal and regulatory compliance programs. As part of the Company’s risk management structure, risk registers are maintained and reported to the Audit and Risk Committee periodically and at least annually, detailing likelihood and severity of risks occurring. Management undertakes a review of its insurable risks each year in order to fully consider potential impacts and how they are financed in terms of limits and scope under the Company’s insurance program. The Company’s material exposures to risk, and how the Company responds and manages these risks, is detailed below. Material Risks Risk Management Approach Cuba Country Risks The Company’s main operations currently are in Cuba. As a result, Melbana is exposed to the political, economic, environmental and other risks and uncertainties associated with operating there. Cuba is currently subject to sanctions imposed by the United States and while they remain in place, access to equipment and personnel of United States origin in support of operations in Cuba is restricted. These sanctions also restrict access to the project financing, banking and insurance markets of the United States and may also impact the Company’s ability to sell and transport abroad to the United States any oil discovered there. The United States is the only country that maintains sanctions against Cuba, and these only apply to people and corporations subject to the laws of the United States. The Company is domiciled in Australia and is therefore not subject these sanctions. Australia does not have sanctions against Cuba. To ensure it does not fall within the scope of the United States’ sanctions against Cuba, the Company has structured its international banking, operations and insurance relationships in countries other than the United States. These countries also afford the Company an avenue to sell and transport any oil that will be produced in the future. In relation to its Cuban operations, the Company also does not transact with United States individuals or corporations, source or use prohibited goods originating or manufactured in the United States or conduct any transaction in United States Dollars. The Company monitors the country risk of operating in Cuba and keeps appraised of the status of the United States’ Cuba sanctions. Permits and Tenure Risks All licences, permits and production sharing contracts in which the Company has interests are subject to renewal and completion of minimum work conditions which will be at the discretion of relevant organs of government in the countries in which it operates. The maintenance of licences and permits, obtaining renewals or getting licences and permits granted often depends on the Company being successful in obtaining required statutory approvals for proposed activities and/or satisfying the various financial obligations associated with the ongoing maintenance of such licences and permits, amongst other obligations. The Company actively monitors the obligations in all its licenses, permits and production sharing contracts. There is in place an established process to determine whether licenses and permits are retained, extended, or surrendered after considering the overall value of the license or permit to the Company’s portfolio as a whole and therefore decide whether capital should be allocated to those permits. Governance and Risk 32 Melbana Energy Limited Annual Report 2023
RkJQdWJsaXNoZXIy MjE2NDg3