Identifying, measuring, managing and reporting on
material risks is key to ensuring a sustainable future for
Telkom. Furthermore, highlighting these issues is a critical
aspect of reporting in accordance with the guidelines of
the Global Reporting Initiatives (GRI), King III and the
International Integrated Reporting Council (IIRC). As such,
Telkom undertakes formal risk assessments that are tabled
at Exco for approval throughout the year.
Material risks are established in line with GRI principles
and tests of materiality and relevance. Doing so ensures
that the risks identified are sufficiently important
economic, environmental and social concerns, which could
substantively influence the assessments and decisions
of stakeholders. This process involved the analysis of the
following internal and external factors listed below:
Telkom categorises its material sustainability risks into key
focus areas. This provides a context for performance which
is reported back to the Group and its stakeholders. There
are nine sustainability focus areas in this year’s Integrated
Report:
The material sustainability risks identified, together with
the related GRI and non-GRI performance indicators have
been summarised in the table on pages 107 to 111.
As part of enabling a sustainable future, closely monitoring
these key material risks needs to become a priority. In
order to do so, we will be monitoring performance in the
nine key areas by way of a scorecard, which will be presented
to the Executive and Social and Ethics Committees on a
quarterly basis.
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High level risk description |
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Overview |
Mitigating factors |
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Execution of the Mobile strategy |
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The Group is undertaking a thorough
strategic review of its mobile arm to
manage the inherent risk around
succeeding as the fourth entrant. This risk
is amplified by the high capital
expenditure needed to grow the business
and the barriers to entry into the market. |
| • |
Rebrand the mobile business to
Telkom Mobile to target profitable
segments of the market and high
value customers. |
| • |
Launch new product offerings and
continue to develop our pipeline. |
| • |
The business is focusing on owned and
operated channels and has short listed
available channels. |
|
| |
Realisation of fixed line data
growth |
|
Broadband is key to Telkom’s strategy.
Fixed-line data growth is low due to low
penetration in the South African market. |
| • |
Review of service delivery and product
development currently underway. |
| • |
Broadband policy proposal sent
to government. |
| • |
Network transformation is underway. |
|
| |
Legal and regulatory compliance |
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Telkom is facing certain legal risks. The
regulatory uncertainty within the market
and unforeseen regulatory changes could
negatively impact the Group. |
| • |
Telkom continually engages with the
Competition Commission. |
| • |
Telkom appoints legal counsel to
advise the Group from a regulatory
perspective. |
| • |
Ongoing awareness and training to
ensure compliance with regulatory and
legal requirements. |
| • |
Telkom is engaging with ICASA on key
regulatory matters including ALD, LLU,
spectrum and others. |
|
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Customer loyalty |
|
Declining fixed voice utilisation poses a
threat to our business making it
increasingly difficult to retain customers. |
| • |
Build third party partnerships during
seasonal assurance demands. |
| • |
Ensure preventative maintenance is
scheduled during off-peak periods. |
| • |
Initiate ease of shop through product
rationalisation. |
| • |
Develop customer experience
management to track customer
experience rating. |
|
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Human capital |
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Telkom requires resources to operate the
NGN technology and therefore requires a
different skills base.
The possibility of industrial actions is a
threat.
Telkom’s employee costs are high. |
| • |
Implement training plan to equip
staff with skills to operate the
NGN technology. |
| • |
Active and open dialogue with
labour unions. |
| • |
Voluntary Early Retirement Packages/
Voluntary Severance Packages
have been offered and the Group
consistently reviews its workforce
strategy to manage the associated
risks. |
|
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Debt and capital market
expectations |
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Telkom continues to face financial
pressures.
Key financial metrics and indicators have
been deteriorating and our investment
required to grow our business is
significant. These indicators and
uncertainties relevant to future
performance could lead to a cautious
approach by funders. |
| • |
Initiatives to increase ROA. |
| • |
The Asset and Liability Committee
(ALCO) manages financial risk,
including balance sheet management:
asset management, liability
management and working capital. |
| • |
Budgets remain tightly monitored and
controlled. |
| • |
Credit rating strategy is in place. |
|
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Impairment of assets |
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Telkom has a substantial investment in
legacy assets that are carried at historical
cost in the Group’s books. The returns
from these assets will not be realised due
to rapidly changing technology,
competition and regulations. |
| • |
Took an immediate impairment of
R12 billion during the financial year to
realign the value of the Group’s assets
with market sentiment. |
| • |
The Group continues to invest large
sums in its new fixed and mobile
network technology to meet customer
needs in respect of data transmission
in particular. |
|
| |
Stakeholder relationship
management |
|
A number of stakeholders are key to
Telkom’s business objectives. These
objectives need to be aligned in order to
achieve a balanced outcome. |
| • |
A revised stakeholder engagement
plan and matrix has been mapped
out by the Group to manage key
stakeholder relationships. |
|
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Occupational health and safety |
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Management of fatalities, lost time
injuries. Management of HIV/AIDS and
chronic diseases. Absenteeism trends and
management of emerging issues.
Management and control of non-ionising.
Electromagnetic radiation exposure to
employees and third parties. |
| • |
Occupational health and safety
performance targets for all business
units have been put in place, with
an ultimate goal of maintaining an
incident frequency rate below 4 per
100 and a lost-time injury rate of
below 2 per 100 employees. |
| • |
Achieved a sick absenteeism rate
(SAR) of less than 2.5% through the
effective implementation of wellness
interventions. |
| • |
Occupational health and safety
working group has been formed and
terms of reference were approved
to adopt sustainability practices to
monitor and manage associated risks. |
|
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Business continuity management
(BCM) readiness and
preparedness |
|
BCM is critical to an organisation of
Telkom’s nature. |
| • |
Telkom management ensures that
business continuity plans are in place
and are implemented. |
|
| |
Competitiveness |
|
Market competitiveness continues to pose
a threat in an already-contested mobile
market space. Self-providing by other
operators is also an issue for the Group. |
| • |
Telkom continues to differentiate its
sales offering by up selling customers
to higher value bundles. |
| • |
The Group plans to offer greater value
through improvements in its network
through the network upgrade. |
| • |
Continuously remove obsolete
products from product suite. |
| • |
Improve product development
processes. |
| • |
Use new system tools to streamline
processes and respond quicker to
opportunities. |
|
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Leadership continuity |
|
Leadership continuity is critical to the
success of the Group’s strategic direction. |
| • |
Implement an effective leadership
development programme. |
| • |
Assessment process to identify
successors for critical senior positions is
being implemented. |
|
| |
Reputation |
|
A negative reputation could harm Telkom
and prove detrimental to the business. |
| • |
Telkom has put in place a reputational
tracking survey. The outcome of the
survey will be translated into action
plans. |
|
| |
Information security |
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Telkom carries large amounts of customer
information over its network, which needs
to be protected against hacking and other
security hazards. |
| • |
Enhancement of the information
security management system (ISMS). |
| • |
An approved information security
policy and strategy are in place. |
| • |
A dedicated Information Security
Council is in place. |
|
| |
IT and network technology |
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This risk relates to the Group’s ability to
generate a return on investment on IT and
network investments. |
| • |
Telkom has a dedicated steering
committee to monitor and manage
the required outcomes. |
| • |
The Funding Council and Investment
and Transaction Committee track the
associated benefits of the investment
on an ongoing basis. |
|
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B-BBEE |
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Transformation of the ICT sector, the
Telkom Group and the economy. |
| • |
Approval of the B-BBEE policy by Exco
and formation of working groups for
each element on the scorecard. |
| • |
Allocation of resources towards
meaningful transformation. |
|
| |
Energy and environmental
management |
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Energy cost and business continuity.
Management of carbon footprint. Cost
and commitment of the implementation
of sustainability initiatives. Telkom’s
geographic foot print (bio-diversity).
Recycling of e-waste and hazardous waste. |
| • |
An energy and environmental
management working group has
been established and meets on a
monthly basis. |
| • |
Sustainability strategy in place,
embedding energy and environmental
management across the Group. |
|
| |
Procurement and supply chain |
|
Supply chain compliance to
environmental/social criteria.
Ensure business continuity. |
| • |
Group Procurement Council was
established to oversee compliance and
ensure continuity. |
| • |
Procurement working group was
formed with terms of reference to
adopt sustainability practices and
supplier development, and to monitor
and manage the associated risks. |
|
| |
Product responsibility |
|
Defending profitable revenue through
supply of safe and high quality goods.
Investigate environmentally and socially
responsible products. Legislative
compliance (Consumer Protection Act). |
| • |
Stringent procurement processes
implemented when acquiring products
from manufacturers. |
| • |
A National Consumer Commission
complaints register is maintained
which identifies non-compliances
with the Consumer Protection Act
and where there is an urgent need to
address any gaps in existing processes. |
|
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Ethical conduct and
anti-corruption |
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Minimise exposure with regard to fraud
and irregular conduct.
Management of Telkom’s reputation.
Compliance to legislation. |
| • |
Fraud risk assessments are performed
per service organisation. |
| • |
Training and awareness of the
business Code of Ethics together with
supplementary policies, such as the
prevention of fraud and corruption
policy, takes place as part of the
ethics programme. |
| • |
A Telkom crime hotline is in place. |
| • |
A whistle-blowing policy is in place. |
| • |
An ethics mailbox is in place to provide
staff with advice on ethical dilemmas. |
| • |
Implementation of enterprise-wide
compliance programme. |
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