| Issued by: | BHP Group Plc
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| Date: | 17 September 2019
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| To: | London Stock Exchange JSE Limited
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| For Release: | Immediately
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| Contact: | Helen Ratsey +44 (0) 20 7802 7540
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BHP Group Plc - Annual Financial Report 2019
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UK Listing Authority Submissions
The following documents have today been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/NSM
- Annual Report 2019
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-reports/2019/bhpannualreport2019.pdf
- Sustainability Report 2019
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-reports/2019/bhpsustainabilityreport2019.pdf
- US Annual Report (Form 20-F)
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-reports/2019/bhpform20f2019.pdf
- Economic Contribution Report 2019
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-reports/2019/bhpeconomiccontributionreport2019.pdf
- XML format of the Economic Contribution Report 2019
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-reports/2019/bhpeconomiccontributionreport2019.xml
- BHP Group Plc Notice of Meeting 2019
https://www.bhp.com/-/media/documents/investors/annual-reports/2019/bhpnoticeofmeetingplc2019.pdf
- Proxy Form (UK Principal Register)
- Proxy Form (South Africa Branch Register)
The documents (with the exception of the Proxy Forms) may also be accessed via BHP's website - bhp.com - or using the web links above.
Additional Information
The following information is extracted from the Annual Report 2019 (section references are to sections of the Annual Report) and should be read in conjunction with BHP's Results announcement issued on 20 August 2019. Both documents can be found at bhp.com and together, constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the Annual Report 2019 in full.
1. Principal risks and uncertainties
The identification and management of risks is central to achieving our strategic objectives. It protects us against potential negative impacts, enables us to take risk for strategic reward and improves our resilience against emerging risks. BHP believes an essential element of effective risk management is to have a single, consolidated view of risks across the business to understand the Group's full risk exposure and to prioritise risk management and governance activity. As such, we apply a single framework (known as the 'Risk Framework') for all risks.
Refinements were made to BHP's Risk Framework during FY2019. There are four pillars in our Risk Framework: risk strategy, risk governance, risk process and risk intelligence.
Group Risk Architecture
In order to understand and manage the risks that BHP is exposed to, we have developed a Group Risk Architecture, which is a tool to identify, analyse, monitor and report risk. The Group Risk Architecture is currently made up of 10 Group Risk categories, which cover a number of Group Risks. Risks in BHP's profile are connected to a Group Risk. This gives the Board and management visibility over the aggregate exposure to risks on an enterprise-wide basis and supports performance monitoring and reporting against BHP's risk appetite.
For example, under the Group Risk of occupational safety, we have identified risks relating to the safety of our people in performing their work, such as vehicle incidents, falls from height and dropped objects.
The Group Risk Architecture (as at 30 June 2019) is illustrated below. The left column shows the Group Risk category and the columns to the right show the allocation of the Group Risks to each category. This Group Risk Architecture will change over time to reflect our strategy, changing activities and consideration of the external context. Our principal risks are shown in bold in the diagram below, and are described further in the Risk factors section below.
| Group Risk Categories | Group Risks | |||
| 1.Strategy | Capital allocation | Competitive advantage | Returns sustainability | |
| Geopolitics and macro economics | Market disruption | |||
| 2.Exploration, Growth and Development | Assessment and estimation | Expansions, organic growth and major projects | ||
| Political stability and new country entry | ||||
| 3.Production and Operations | Asset performance | Business continuity | Third party performance | |
| Production volume and cost | Asset integrity | Rehabilitation and closure | ||
| 4.Commercial | Commodity price | Counterparty risk | Supply chain management | |
| Procurement cost | Sales and supplier concentration | Contractual terms | ||
| 5.People and Culture | Attract and retain talent | Critical skills and technical capabilities | Diversity, inclusion and equal opportunity | |
| Employee and labour relations | Performance management | |||
| 6.Health and Safety | Aviation | Process safety | Physical security and emergency preparedness | |
| Mental and physical health | Occupational safety | Occupational health exposures | ||
| 7.Environment, Climate Change and Community | Biodiversity loss | Human rights | Social unrest | Community wellbeing |
| Land use impacts | Water interactions
| Climate change, greenhouse gas emissions and energy | ||
| 8.Technology, Innovation and Systems | IT/OT service management | Cybersecurity | ||
| Automation and technology innovation | Information security | |||
| 9. Financial Management | Liquidity | Financial Control and reporting | ||
| Tax | Balance sheet | |||
| 10. Legal Compliance and Stakeholder Management | Stakeholder relations | Ethics and Compliance | Risk treatment and insurance
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| Legal and regulatory | Competition | |||
Risk appetite
BHP's Risk Appetite Statement has been approved by the Board and is a foundational element of our Risk Framework. It is made up of a qualitative statement for each Group Risk category that describes the nature and extent of risk we are prepared to take in pursuing our objectives. The Risk Appetite Statement defines the parameters that management is obliged to operate within and we use key risk indicators to indicate any changes to our risk exposure.
Key risk indicators
Key risk indicators (KRIs) assist in identifying whether BHP is operating within or outside of our risk appetite, as defined in our Risk Appetite Statement. They also support decision making by providing management with information about risk exposure at a group level. KRIs are defined for Group Risks to provide the data for proactive monitoring of BHP's risk performance. Where KRI limits are exceeded, management will review potential causes to understand if BHP may be taking too little or too much risk, and to identify whether further action is required. For example, our current KRIs monitor data such as market concentration based on the percentage of revenue linked to a single jurisdiction, the number of critical cybersecurity incidents, greenhouse gas emissions relative to the FY2017 baseline and trends in the number of community complaints received.
Risk governance
Risk management accountability and oversight is an integral part of BHP's governance. The Board and senior management (including the Executive Leadership Team) provide oversight and monitoring of risk management outcomes. They are ultimately responsible for ensuring BHP maintains a robust Risk Framework and an effective internal control environment.
BHP uses the 'three lines of defence' model of risk governance and management to define the relationships and clarify the role of different teams across the organisation in managing risk. This approach integrates risk management, control definition, control improvement, governance and assurance frameworks into one governance model.
For example, for a loss of containment risk within the Group Risk of process safety, our first line operations personnel would be responsible for implementing pipe thickness checks to ensure corrosion is within acceptable limits. Second line functions, such as our engineering teams, would define and assure minimum standards for pipe materials and acceptable levels of corrosion. Our Internal Audit and Advisory team would then audit the effectiveness of the standards and their application, as the third line.
BHP Board and committees
The Board reviews and considers BHP's risk profile, covering operational and strategic risks, using the Material Risk Report. The report includes an overview of the risk profile, summary of material changes to the profile, performance against KRIs and summaries of our priority group risks. The contents of this report are further described in the diagram below 'Risk intelligence'.
The Risk and Audit Committee (RAC) assists the Board with the oversight of risk management, including by receiving a range of reports from management on all types of risk, although the Board retains overall accountability for BHP's risk profile. In addition, the Board requires the CEO to implement a system of control for identifying and managing risk. The Directors, through the RAC, review the systems that have been established for this purpose, review the effectiveness of those systems and monitor that necessary actions have been taken to remedy any significant failings or weaknesses identified from that review. The RAC regularly reports to the Board to enable the Board to review our Risk Framework. For more information, refer to section 2.13.
The Sustainability Committee has oversight of health, safety, environment and community related (HSEC) risks. Identification and management of HSEC risks and the investigation of any HSEC incidents are undertaken by management and reported to the Sustainability Committee. For more information, refer to section 2.13.
The Risk Appetite Statement is the mechanism by which the Board sets boundaries for taking risk. It enables management to make risk-informed decisions within the risk appetite of the Board. Performance against risk appetite is monitored and reported to the RAC and the Board, as described below. This includes reporting of performance that is outside upper or lower tolerance limits to indicate whether management is taking sufficient or excessive risk.
In FY2019, we introduced an additional second-line led review of the Group's most significant risks, such as dam failure, to provide a further level of rigour in the management of these risks. This process, referred to as the Priority Group Risk Review process, reviews the analysis and controls for risks that could impact the Group's viability or strategy, with findings and recommendations reported to the Board's Risk and Audit, and Sustainability Committees. Findings and recommendations will be used to inform strategic decisions on whether to accept, reduce or further eliminate risks to align with the Group's risk appetite, and to develop remediation plans, such as to improve risk analysis or control definition.
Additional information on risk management and internal controls is provided to the Board and the RAC by the Business Risk and Audit Committees (covering each asset group), other Board committees, management committees and our Internal Audit and Advisory team. For more information, refer to section 2.13. Our approach to risk reporting is outlined in the 'Risk intelligence' section.
Risk process
Our Risk Framework requires identification and management of risks to be embedded in business activities through the following processes:
- Risk identification - new and emerging risks are identified and owned where they occur within BHP;
- Risk assessments - risks are assessed with the most appropriate technique and results are translated for BHP to understand and appetite to be considered;
- Risk treatment - risks are prevented, reduced or mitigated with controls;
- Monitoring and review - risks and controls are reviewed periodically and on an adhoc basis to evaluate performance.
Our Risk Framework includes requirements and guidance on the tools and process to manage all risk types (current, strategy and emerging).
Current risk
Current risks may have their origin inside BHP or originate as a result of BHP's activities. These may be strategic or operational in nature and include material and non-material risks.
The materiality of our current risks is determined by calculating an estimate of the maximum foreseeable loss (MFL). The MFL is the estimated impact sustained by BHP in the 'worst case' scenario for that risk. The 'worst case' scenario considers all potential impacts without regard to probability and assumes all risk controls, including insurance and hedging contracts, are ineffective. For example, when calculating the number of fatalities to assess MFL in an underground explosion, we might assume the maximum number of people who are allowed to enter the underground mine.
Our focus for current risks is to prevent their occurrence or minimise their impact should they occur. Current material risks are required to be evaluated once a year at a minimum to determine whether the risk exposure is within our risk appetite.
Strategy risk
Strategy risks inform, are created, or are affected by business strategy decisions or pursuit of strategic objectives. They represent opportunities as well as threats. The Risk Appetite Statement and KRIs are available to assist in determining whether a proposed course of action is within BHP's appetite. Once a decision has been made, our risk process as described above applies. In addition to calculating the MFL, another tool available to inform decision-making is the Maximum Foreseeable Gain (MFG). The MFG is the 'best case' scenario that should be articulated when seeking to take risk for strategic returns. It represents the optimum return.
Our focus for strategy risks is to enable the pursuit of high-reward strategies. Therefore, as well as having controls to protect BHP from the downside risk, we will implement controls to increase the likelihood of the opportunity being realised. For example, we might establish additional governance, oversight or reporting to ensure new initiatives remain on track.
Emerging risk
Emerging risks typically have their origin outside BHP. There is often insufficient information for these risks to be fully understood and they cannot be prevented by BHP. Effective management of emerging risks is critical to strengthening our resilience to foreseeable changes and our ability to capture competitive advantages. We assess and manage emerging risks based on the expected consequence, timing and speed of the risk event, as well as the capacity for BHP to respond.
Emerging risks are identified and initially monitored by subject matter experts. Ongoing management is handed over to risk owners when the impact and our response is defined. For example, BHP has a dedicated climate change team that monitors and manages the emerging risks relating to climate change as they evolve. However, operational aspects (such as managing the increased risk of extreme weather events) are managed by our operations.
Our focus for emerging risks is on reducing the impact should an event occur, and on advocacy efforts to reduce the likelihood of the risk manifesting. Our approach is to apply contingency controls, such as response plans, to emerging risks that are outside our appetite. These controls increase the resilience of BHP to shocks from the external environment. Emerging risks are evaluated annually to determine whether the risk remains emerging and if the exposure is within our risk appetite.
Our emerging risk process was formalised during FY2019 and in FY2020, emerging risks will be included in our Group-wide risk register.
1.2 Risk intelligence
Board and senior management are provided with insights on trends and aggregate exposure for our most significant risks, as well as performance against risk appetite, by the Risk team. The Board also receives reports from other teams to support their robust assessment of principal risks; including internal audit reports, ethics and compliance reports and the Chief Executive Officer's report.
1.3 Robust risk assessment and viability statement
During the year, the Board carried out a robust assessment of BHP's principal risks, including those risks that would threaten the business model, future performance, solvency or liquidity.
The Directors assessed the prospects of BHP over the next three years, taking into account our current position and principal risks.
The Directors believe a three-year viability assessment period is appropriate for the following reasons. BHP has a two-year budget, a five-year plan and a longer-term life of asset outlook. We have publicly stated our view that, while commodity prices remain volatile, our short-term outlook is optimistic. Price and exchange rate volatility results in variability in plans and budgets. A three-year period strikes an appropriate balance between long and short-term influences on performance.
The viability assessment took into account, among other things, BHP's commodity price protocols, including: low-case prices; the latest funding and liquidity update; the long-dated maturity profile of BHP's debt and the maximum debt maturing in any one year; the Group-level risk profile and the mitigating actions available should particular risks materialise; the regular Board strategy discussions, which address the range of outcomes under the capital allocation framework; the flexibility in BHP's capital and exploration expenditure programs under the capital allocation framework; and the reserve life of BHP's minerals assets and the reserves-to-production life of our oil and gas assets.
The Directors' assessment also took account of additional stress-testing of the balance sheet against two hypothetical significant risk events: a well blow-out in the Gulf of Mexico and a low-price environment. A further level of robustness is added given no debt issuance is required in the three-year period, and BHP would still have access to US$6.0 billion of credit through its revolving credit facility. The Directors were also mindful of the assessment of our portfolio against scenarios as part of BHP's corporate planning process to help identify key uncertainties facing the global natural resources sector.
In making this viability statement, the Directors have considered the capital allocation framework and have also made certain assumptions regarding management of the portfolio, the alignment of production, capital expenditure and operating expenditure with five year plan forecasts and the alignment of prices with the cyclical low price case used in the control stress case for monthly balance sheet testing.
Taking account of these matters, and BHP's current position and principal risks, the Directors have a reasonable expectation that BHP will be able to continue in operation and meet its liabilities as they fall due.
1.4 Risk factors
Our Group Risk Architecture currently has 10 Group Risk categories that represent BHP's areas of risk. These categories are further broken down into Group Risks. This section highlights our most significant Group Risks. Each of the risk factors listed below could materially and adversely affect our business, financial performance, financial condition, prospects or reputation, leading to a loss of long-term shareholder and/or investor confidence.
Asset integrity
Risks associated with operational integrity and performance of our assets.
Why is this important to BHP?
Maintaining the operational integrity and performance of our assets is crucial to protect our people, the environment and communities in which we operate from incidents. We have onshore and offshore assets in variety of geographic locations. All our assets exist in and around broader communities and environments. A serious incident (such as dam failure or underground explosion) or the failure to appropriately maintain or develop our assets, could have an impact on our people, surrounding communities and environments, as well as our cash flow, operations or the longevity of our assets.
Threats
Failure to maintain operational integrity and performance of our assets may result in operational incidents or reduce asset value.
An operational incident, such as dam failure or underground explosion, could result in:
- multiple injuries and fatalities;
- extensive community disruption (including impacts to personal safety, livelihood and quality of life);
- short-term and long-term health risks to our people or the community;
- environmental damage (for example, affecting air quality, biodiversity or water resources);
- loss of licences, permits or necessary approvals to operate assets;
- loss of community infrastructure and services (such as power, water or transport);
- failure or redundancy of mining, processing or support infrastructure or equipment (such as a structural collapse or failure of a conveyor, petroleum platform or rail line);
- disruption to essential supplies or delivery of our products (for example, where channel blockage is caused by a vessel incident);
- significant repair costs;
- interruption in production or other critical activities and loss of revenue from affected operations;
- litigation, including class actions, or fines and investigations by authorities.
A failure to maintain operational integrity and performance of our assets may impact asset value due to production shortfalls, loss of development options or a delay in asset development. For example, poor maintenance of facilities that manage fugitive emissions could result in excess dust or noise and restrict the ability to obtain approvals to increase output or throughput. It may also negatively impact cash flows and profitability, result in financial write downs (for example, due to a need to abandon remaining reserves where it is uneconomic to reconstruct or recover the asset following a major incident) or increased costs or other commercial impacts. We take steps to maintain the operational integrity and performance of our assets through planning, design, construction, operation and closure. However, our projects are complex and may be adversely impacted by factors out of our control, such as natural disasters.
Our risk financing approach is to self-insure or not purchase external insurance for certain risks, including property damage and business interruption, sabotage and terrorism, marine cargo, construction, primary public liability and employee benefits. Business continuity plans may not provide protection for all costs that arise from such events, and where external insurance is purchased, third party claims may exceed the limit of liability of policies. Any uninsured or underinsured losses could impact our financial position or the financial results of our assets.
Management
We employ a number of measures designed to protect the operational integrity and performance of our assets, and to detect, eliminate, prevent and mitigate operational incidents and outages. These measures include:
- BHP's standards on health, safety, the environment, communities, water and tailings dams, maintenance, crisis and emergency management, and event and investigation management;
- planning, designing and constructing mines, dams and equipment to avoid incidents;
- maintaining and improving infrastructure and equipment to protect our people and assets (for example controls to prevent the accumulation of flammable gas and coal dust);
- inspections and reviews (including a dam risk review to assess the management of significant tailings storage facilities, both active and inactive as described in section 1.8);
- routine reviews and revisions to management plans and manuals (for example, to test and update for alignment with operating specifications and industry dam codes);
- training and qualifications for staff and contractors;
- maintaining mine evacuation routes and supporting equipment (such as breathing apparatus), crisis and emergency response plans and business continuity plans.
FY2019 insights
The Group's exposure to asset integrity risks is expected to remain relatively stable. The Priority Group Risk Review process (described above) aims to provide additional rigour around the management of top operational risks, such as dam failure and underground fire and explosion.
Occupational and process safety
Risks associated with the safety of BHP employees and contractors in performing their work.
Why is this important to BHP?
All our sites may be subject to operational accidents, including fires, explosions, road, vehicle, port, shipping, railroad, aircraft or airport incidents, rock fall incidents, loss of power supply, environmental pollution, mechanical equipment failures, mine-related accidents, personal conveyance equipment failures, loss of primary containment of hazardous materials, or loss of well control (involving an uncontrolled flow of well fluids or formation fluids from the wellbore to the surface).
We have onshore and offshore extractive, processing and logistical operations in many geographic locations. Transporting our people to the locations of our exploration activities and operations can involve helicopters, aircraft or high occupancy vehicles. We have port facilities and four underground mines, including one underground coal mine. The nature of the activities performed at such facilities and mines can involve safety hazards.
We operate in zones prone to natural disasters. This includes our Western Australia Iron Ore, Queensland Coal and Gulf of Mexico oil and gas assets, which are located in areas subject to cyclones or hurricanes, and our Chilean copper and Peruvian base metals assets and Global Asset Services office in Manila, which are located in known earthquake and tsunami zones.
Threats
Occupational and process safety incidents may lead to serious injuries, loss of life or livelihood or quality of life to BHP employees, contractors and members of the community. In addition, occupational and process safety incidents may result in:
- interruption in production or other activities critical to our business;
- disruption to essential supplies (such as explosives or maintenance parts);
- failure of mining or processing equipment or support infrastructure (for example, relating to power, water, transport or technology);
- environmental damage;
- increased costs or other commercial impacts;
- litigation (including class actions), fines or investigations by authorities;
- reputational damage.
Our risk financing (insurance) approach is to self-insure or not purchase external insurance for certain risks. For more information, refer to Asset integrity section.
Management
We employ a number of measures designed to detect, eliminate, prevent and mitigate operational and process safety incidents, including:
- BHP's standards on aviation, health, safety, the environment and community, crisis and emergency management;
- compliance with quality assurance standards (for example, the Drilling and Completions Quality Assurance Standard for Petroleum offshore drilling and completion activity);
- selection and design of mine plans, wells and equipment to prevent incidents (including slope design and underground support systems);
- inspection, maintenance and improvements of infrastructure to protect our people and assets (for example, cyclone resilience);
- inspection, maintenance and improvement of key equipment designed to prevent or mitigate an occupational or process safety incident (for example, pressure vessels designed to contain fluids or gas at pressure and emergency response equipment);
- training and qualifications for staff and contractors (including drill rig contractors and aircraft operators);
- influencing joint venture partners to align with BHP standards;
- monitoring adverse weather conditions, ground stability and pressure/temperature of materials;
- continuity plans and crisis and emergency response plans;
- self-insurance for losses arising from property damage, business interruption and construction.
FY2019 Insights
Although the divestment of our Onshore US assets in FY2019 decreased the onshore risk exposure in Petroleum, the Group's exposure to operational and process safety risk is expected to remain relatively stable.
Capital allocation and returns sustainability
Risks associated with the allocation of capital through annual planning and other processes, and ongoing returns from BHP's assets and investments.
Why is this important to BHP?
Our strategy is to have the best capabilities, commodities and assets to create long-term value and high returns. Our decisions and actions relating to the allocation of capital across asset or reserve discovery, acquisition, maintenance, development or divestment, impacts our financial performance and financial condition, and therefore the sustainability of our returns. This is particularly the case with commodities that we view as attractive (for example, copper, oil and nickel sulphides).
Threats
Changes in our portfolio, missed opportunities to invest or a failure to effectively allocate capital or achieve expected returns from assets or investments may lead to:
- loss of value, for example due to incorrect reserve estimates, incorrect or changing assumptions (including those related to commodity prices) or early depletion of reserves;
- failure to achieve expected commercial objectives, including cost savings, sales revenues or operational performance;
- unexpected costs or liabilities, including due to the imposition of adverse regulatory conditions, from acquired assets or entities (such as rehabilitation costs) or legal dispute costs;
- adverse market reaction;
- adverse impacts on BHP's ability to deliver returns to shareholders;
- financial write-downs (for example, as a result of changes in market or industry, prices, inability to recover reserves or additional costs);
- exchange rate related additional costs;
- inability to retain key staff important to the success of our business.
Management
We have a number of strategies, processes and frameworks in place designed to grow and protect the strength of our portfolio and to help deliver ongoing returns to shareholders, including:
- a long-term strategy that informs the decisions and actions in capital allocation;
- an ongoing strategy process that assesses the competitive advantage of our business and enables identification of risks and opportunities for our portfolio using fit-for-purpose scenarios;
- monitoring indicators to interpret external events and trends;
- commodity strategies and commodity price protocols that are reviewed and presented to the Executive Leadership Team and Board;
- life of asset plans, which inform forecasts for proposed investments and operations;
- management reviews and governance activities to support operational and project forecasts and planning;
- our Capital Allocation Framework, which provides the structure and governance for prioritising capital allocation across the Group and adding growth options to our portfolio. Refer to section 1.4.3 for more information;
- investment approval processes that apply to investment decisions, including mergers and acquisitions activity, overseen by an investment committee as described in sections 2.14 and 2.15;
- annual reviews of our portfolio valuations to identify any value change and test internal value methodologies and assumptions against external benchmarks.
FY2019 insights
The Group's exposure to risks related to capital allocation and returns sustainability is expected to remain relatively stable. The divestment of our Onshore US assets in FY2019 has further simplified our portfolio.
Geopolitics and macroeconomics
Risks associated with geopolitical and macroeconomic changes that impact our ability to access resources and markets needed to realise our strategy.
Why is this important to BHP?
BHP operates in multiple locations around the globe and may consider operating in new locations to access the resources we require. Our customers and suppliers are also located in markets around the world. Geopolitical and macroeconomic developments have the potential to restrict our ability to access resources in certain countries or effectively trade in markets. Any restrictions will impact our ability to realise our strategy as competition for resources grows, existing reserves are depleted and supply sources become more expensive to develop.
Threats
Changes in relations between countries, trade protectionism and political uncertainty can impact our ability to access resources and markets, such as:
- a continued slowing in China's economic growth and demand could result in lower demand or prices for our products and materially, and adversely impact our results, including cash flows. Sales into China generated US$24.3 billion (FY2018: US$22.7 billion) or 54.8 per cent (FY2018: 52.5 per cent) of our revenue in FY2019, on a Continuing operations basis. Section 5 note 2 'Revenue' details our calculation of revenue, including the impact of new accounting standards. FY2019 sales into China by commodity included 57 per cent Iron Ore, 26 per cent Copper, 14 per cent Coal and 2 per cent Nickel (reported in Group and Unallocated);
- a marked rise in geopolitical uncertainty and protectionism has the potential to inhibit international trade, weigh on business confidence and constrain investment. In particular, restrictive trade policies in the United States and China have ramifications for business, governments and citizens. They may adversely affect BHP's ability to trade, and impact demand for BHP's products in those and other economies;
- BHP's ability to obtain and retain licences to explore or develop resources or to access markets for sales or supply may be inhibited if there are tensions between a host country where we operate or sell our products in other countries that BHP is seen to be allied with. Such tensions may result in rescission of licences, nationalisation of assets, detention of BHP employees for regulatory investigations or limitations on markets or customer access;
- our access may be restricted through disruptions to shipping lanes, ports or other facilities as a result of conflicts or embargoes that are not directly related to BHP or our customers;
- our business may be negatively impacted by the exit of the United Kingdom from the EU, potentially triggering a deterioration of business activity in Britain and other countries. There remains uncertainty surrounding financial and trade implications of Brexit, which may be more severe than expected.
For a discussion of the current geopolitical and macroeconomic forces relevant to BHP's performance, refer to section 1.6.1.
Management
The diversification of our portfolio of commodities, markets, geographies and currencies is a key strategy intended to reduce our exposure to geopolitical and macroeconomic shifts.
We regularly monitor geopolitical and macroeconomic trends to understand potential impacts on our business and seek to identify mitigating actions as soon as possible.
We also engage with governments and other key stakeholders to understand and attempt to mitigate any potential impacts from changes in trade or resource policies.
FY2019 insights
The Group's exposure to geopolitics and macroeconomics risks is anticipated to increase in the short term due to heightened political and policy uncertainty.
Cybersecurity
Cyber-related risk events, including attacks on our enterprise or incidents relating to human error.
Why is this important to BHP?
Many of our business and operational processes are heavily dependent on technology. We have a significant and increasing reliance on autonomous systems for haulage and drilling. In addition, we have substantial integration between our information technology and our operating technology.
Threats
Cyber events or attacks may lead to:
- operational or commercial disruption (such as the inability to process or ship resources);
- corruption or loss of system data;
- a misappropriation or loss of funds;
- unintended disclosure of commercial or personal information;
- health and safety incidents, including fatalities (where cyber events cause system error or malfunction, which result in operational incidents);
- environmental damage (for example, cyber incidents could cause train derailments for autonomous transport);
- inability to respond appropriately to unrelated incidents;
- regulatory fines and compensation to people impacted;
- reputational damage.
Management
We employ a number of measures designed to protect, detect and respond to cyber events, including:
- BHP's standards on technology and cybersecurity, communications and external engagement;
- cybersecurity strategy and resilience programs;
- enterprise security framework and cybersecurity standards;
- cybersecurity awareness plan and training;
- security assessments and monitoring;
- restricted physical access to critical centres and servers;
- incident response plans, process and root cause analysis.
FY2019 insights
Although there were no identified cyber breaches to the Group's technology environment during FY2019, the Group's exposure to cyber-related risk events is expected to increase primarily due to our growing reliance on technology and the increasing sophistication of external cyberattacks.
Third party performance
Risks associated with the delivery of products and services by third parties engaged by BHP, including contractors and non-operated joint ventures.
Why is this important to BHP?
BHP holds interests in assets and joint ventures that it does not directly operate, primarily within Minerals Americas (Samarco, Antamina, Resolution, Cerrejón and Nimba) and Petroleum (Algeria, Australia and Gulf of Mexico). Joint venture partners or other companies managing non-operated joint ventures take action contrary to our standards or fail to adopt standards equivalent to BHP's standards. In such situations, BHP may be unable to influence non-operated joint venture activities.
In addition, BHP's workforce is made up of a combination of permanent employees and contractors across all our operations. As a result, appropriate contractor selection and effective management of contractors from a safety, cost, quality, schedule and performance perspective is important to the success of our business. We also contract with many commercial and financial counterparties, including end customers, suppliers and financial institutions in the context of global financial markets that remain volatile.
Threats
Third party (including contractor) activities, including a failure to adopt standards, controls and procedures that are equivalent to BHP's, could lead to increased risk of:
- operational incidents or health and safety accidents, including fatalities;
- failure to meet remediation and compensation requirements (such as delays to community resettlements related to the Samarco dam failure, see section 1.7 for information on our response, support and commitments);
- inadequate quality of construction (for example, if contractors do not follow appropriate standards);
- reduced production (for example, from poor planning that does not align to appropriate standards);
- disengagement of the remaining workforce;
- litigation or regulatory action (for example, if a third party was in breach of a law or regulation);
- cost overruns, schedule delays or interruptions (such as in major development projects).
A failure by suppliers, contractors or joint venture partners to perform existing contracts or obligations may lead to the following impacts:
- non-supply of key inputs, such as explosives, mining equipment, petrol and other consumables important to our business;
- loss of access to third party owned or supplied infrastructure;
- disruption to essential supplies or delivery of our products (for example, where access or use of BHP owned and operated rail is disrupted by third parties);
- reduction in production at our assets;
- litigation (for example, for contractual breach);
- loss of revenue.
Our existing counterparty credit controls may not prevent a material loss to us due to our credit exposure to certain customer segments or financial counterparties.
Our risk financing (insurance) approach is to self-insure or not purchase external insurance for certain risks. For information, refer to the Asset integrity section.
Management
We have global practices and standards for operations and production that apply to third parties, including:
- BHP's standards on supply, safety and capital projects that apply to contractors and include requirements relating to contractor management;
- Our Code of Conduct, which sets out requirements related to working with integrity, including dealings with third parties as described in section 2.16;
- our Contractor Management Framework, which specifies a holistic approach to support regional alignment and is supported by global training;
- anti-corruption training, competition training, and Our Code of Conduct training;
- independent inspections, assurance and verifications (in some cases performed by regulatory bodies);
- governance frameworks for our joint ventures, which define how shareholders work together with management to govern the joint venture;
- BHP and external reviews of joint venture projects, risk management and governance activities;
- internal and shareholder audits of joint ventures.
We maintain a 'one book' approach with commercial counterparties, which means that we aim to quantify and assess our credit exposures on a consistent basis. We also have contingency plans in place if production or shipping is interrupted.
FY2019 insights
There are no changes identified in the risk environment for third party performance, internally or externally, that are expected to significantly increase the Group's exposure.
Community wellbeing and human rights
Risks that have the potential to impact communities and the environment and damage support for our business with communities, government or the general public.
Why is this important to BHP?
Our approach to all phases of the life cycle of an operation from exploration to closure can impact the environment, communities or other stakeholders, which can affect support for our existing or future operations. The nature of our activities may cause adverse impacts to air quality, biodiversity, water resources and related ecosystem services or health risks. Our activities may also have an impact on human rights, community livelihoods and wellbeing. Our assets are subject to law and regulations on a range of issues, including safety, health, environmental, anti-corruption, human rights, ethics, and employment conditions. Environmental and community impacts or non-compliance or alleged non-compliance with such laws and regulations could adversely impact the environment or communities, and damage community or governmental support for our business. Finally, our activities may be affected by shareholder activism or civil society activism.
Threats
BHP may engage in activities (or fail to engage in activities) that impact the environment, communities, human rights and social wellbeing. This can affect BHP's relationships with, or be viewed negatively by, the community and other stakeholders. A loss of stakeholder support could result in the following impacts to our business:
- loss of licences or permits for the operation of assets, or delays in approvals for new projects;
- opposition to new BHP projects or BHP's entry to new jurisdictions by communities, including through legal or social action;
- increased costs for mitigation, offsets or financial compensatory actions or obligations;
- potential schedule delay, increased costs or reduced production;
- increased taxes and royalties;
- industrial relations disputes, negotiations, litigation or regulatory action, resulting in a loss of productivity;
- loss of business opportunity.
In addition, changes to legal requirements or community expectations, for example, related to the rehabilitation or closure of assets, may increase required financial provisioning and costs.
Management
We have Group-wide standards for communications, community and external engagement; and environment and climate change. These standards and underpinning practices strengthen our environmental and social performance and include:
- conducting regular impact assessments for each asset to understand the social, environmental and economic context;
- identifying and analysing stakeholder, social, environmental and human rights impacts and business risks;
- engaging in regular, open and honest dialogue with stakeholders to understand their expectations, concerns and interests;
- contributing to environmental and community resilience through social investment;
- applying the mitigation hierarchy (avoid, minimise, rehabilitate, compensate) to minimise environment and community impacts, and achieve target environmental outcomes.
These activities also assist us to identify, mitigate or manage key potential social, environmental and human rights risks, as described in section 1.10.
FY2019 insights
The Group's exposure to risks associated with the community and human rights is assessed as increasing due to increasing societal and political requirements and expectations.
Climate change, greenhouse gas emissions and energy
Risks associated with changes in climate patterns, as well as risks arising from policy, regulatory, legal, technological or market responses to climate change.
Why is this important to BHP?
We are exposed to a broad range of climate-related risks arising from both the physical and non-physical impacts of climate change. Climate-related risks may affect our operations, the markets in which we sell our products, the communities in which we operate and our upstream and downstream value chains.
Risks related to the physical impacts of climate change include acute risks resulting from increased severity of extreme weather events and chronic risks resulting from longer-term changes in climate patterns.
Risks also arise from a wide variety of policy, regulatory, legal, technological and market responses to the challenges posed by climate change and the transition to a lower carbon economy. Fossil fuel use is a significant source of greenhouse gas (GHG) emissions, which contribute to climate change. The production and use of fossil fuels receive scrutiny from a range of stakeholders, including governments, investors, NGOs and communities. At BHP, we produce fossil fuels (energy coal, oil and gas) used primarily in the transport and electricity generation sectors, as well as fossil fuels and other commodities that are used as inputs to emissions-intensive industrial processes (including metallurgical coal and iron ore used in steelmaking). We also use fossil fuels in our mining and processing operations either directly or through the purchase of fossil fuel-based electricity. We can therefore be impacted by policies and regulations to reduce GHG emissions from the resources, electricity generation, transport and industrial sectors. Technological and market-related risks include the substitution of existing technologies with lower emissions options, such as renewables, particularly in the electricity generation and transport sectors, which have the potential to reduce demand for fossil fuels.
Threats
The impacts of climate change could affect the execution of our strategy, the expansion of our portfolio and the ability of our operated and non-operated assets to operate efficiently. The following threats relating to climate change may affect us:
- the physical impacts of climate change (for example, changes in precipitation patterns, water shortages, rising sea levels, increased storm intensities and higher temperatures) may materially and adversely affect our assets, the productivity of our assets and the costs associated with our assets, as well as our supply chains, transport and distribution networks, customers' facilities and the markets in which we sell our products;
- the Group's asset carrying values or financial performance may be affected by any adverse impacts to reserve estimates or market prices that may occur if, for example, reserves are rendered incapable of extraction or demand for fossil fuel commodities decreases due to policy, regulatory (including carbon pricing mechanisms), legal, technological, market or societal responses to climate change in our operating jurisdictions or markets;
- climate change may increase competition for, and the regulation of, limited resources, such as power and water, which are critical to the operation of our business. This could affect the productivity of our assets and the costs associated with our assets;
- we are impacted by current and emerging policy and regulation aimed at reducing GHG emissions from the resources, electricity generation, transport and industrial sectors, including the introduction of carbon pricing mechanisms. Climate policy and regulation may reduce demand for our products or increase the costs associated with our assets. Examples of recent regulatory changes include the launch of an emissions trading scheme in China in 2017 and the introduction of a carbon tax in Chile in 2017;
- applications for licences, permits and authorisations required to develop our assets and projects may face greater scrutiny and be contested by third parties. This could delay, limit or prevent future development of our assets or affect the productivity of our assets and the costs associated with our assets;
- the Group's reputation and financial performance may be impacted by concerns regarding the contribution of fossil fuels to climate change. Impacts could include a reduction in investor confidence and constraints on our ability to access capital from financial markets;
- the Group may be subject to or impacted by climate-related litigation (including class actions) and the associated costs.
Assessments of the potential impact of future climate change policy, regulatory, legal, technological, market and societal outcomes are uncertain given the wide scope of influencing factors and the many countries in which we do business. For example, countries will need to introduce new or strengthen existing policies and regulation in order to meet the goals of the Paris Agreement.
Management
We work with globally recognised agencies to obtain regional analyses of climate science to improve our understanding of the potential climate vulnerabilities of our operations and communities where we operate, and to inform resilience planning at an asset level. Our assets are required to build climate resilience into their activities, for example, by designing facilities to withstand sea level rise or changing climate patterns, or factoring forecast increases in extreme weather events into operational plans. We also require new investments to assess and manage risks associated with the forecast physical impacts of climate change.
We evaluate the resilience of our portfolio to climate change and the low carbon transition by using a broad range of scenarios that consider divergent policy, regulatory, legal, technological, market and societal outcomes, including low plausibility, extreme shock events. We also continue to monitor climate-related developments that could impact the resilience of our portfolio. Our investment evaluation process has incorporated market and sector-based carbon prices for more than a decade.
We seek to mitigate our exposure to risk arising from current and emerging policy and regulation in our operating jurisdictions and markets by reducing our operational emissions and developing a product stewardship approach to emissions in our value chain.
We also respond to our exposure to policy and regulatory risk by advocating for the development of an effective, long-term policy framework that can deliver a measured transition to a lower carbon economy.
Identifying cost-effective and robust carbon offsets is important to meeting our emissions reduction commitments and managing reputational risk. We therefore also support the development of market mechanisms that reduce global GHG emissions through projects that generate carbon credits.
The Group continues to monitor policy, market and technological changes and community, investor and regulatory standards and expectations, as they develop, to inform appropriate management actions. For more information on our climate change risk management strategy, refer to section 1.10.8.
FY2019 insights
During FY2019, there was an accumulation of new indicators of the risks and costs associated with climate change, including the Intergovernmental Panel on Climate Change's Special Report on Global Warming of 1.5°C, which stated that the effects of climate change are already being observed, that warming of even 1.5°C would have profound impacts and that 2°C of warming would be more damaging than previously believed.
Community, investor and regulatory standards and expectations in relation to climate change continued to increase during FY2019. There has also been a recent escalation of climate-related litigation involving companies, particularly in the United States.
Legal, regulatory, ethics and compliance
Risks associated with BHP's legal, regulatory, ethics and compliance obligations.
Why is this important to BHP?
Our operated assets and non‐operated joint ventures are based on material long‐term investments that are dependent on long-term legal, regulatory, political, judicial and fiscal stability. In addition, the nature of the industries in which we operate means many of our activities are highly regulated, including through: (i) law and regulations relating to bribery and anti-corruption, trade and financial sanctions, market manipulation, taxation, royalties, competition, data protection and privacy; and (ii) local regulations and standards, such as controls on production, imports, exports, prices on greenhouse gas emissions, native title, and health, safety and environment.
Section 1.7 details our response and support in relation to the Samarco incident as well as the progress on our commitments.
Threats
BHP's activities or those of our associates could result in actual or alleged corruption, bribery, collusion, anti-competitive behaviour, market manipulation, tax avoidance or other breaches of legal, regulatory, ethics or compliance obligations. These activities, or changes in laws or regulations due to the developing nature of government regulations and international standards, could lead to the following threats to BHP's business, reputation and operations:
- actions, investigations or inquiries by regulatory authorities or courts over actual or alleged legal or regulatory breaches (for example, over suspected facilitation payments or bribery and corruption which are prevalent in some of the countries where we do business or our assets are located);
- disgorgement of profits (for example, if bribery or corruption is established);
- civil or criminal prosecution of employees or third parties;
- loss of operating licences, permits or approvals;
- operational impacts, such as unforeseen closures, site rehabilitation expenses, delays or disruption;
- increased compliance costs (for example, to meet new or more onerous operating or reporting standards);
- regulatory fines or settlements (for example, from a failure to comply with reporting standards or recognise royalties);
- increased costs in relation to taxation or royalties if laws or policies change;
- adverse impacts to the quality and condition of infrastructure that BHP uses in the operation of its assets, such as rail or ports (which can be affected by political and legislative change);
- adverse change to regulatory regimes for access to government-owned or privately-operated infrastructure or resources (for example, rail, electricity or water), resulting in additional costs or limitations on access by BHP;
- renegotiation or nullification of existing contracts, leases, permits or other agreements;
- litigation or disputes (such as in connection with ownership and use of land) and the associated cost of such litigation or disputes;
- loss or uncertainty of land tenure, for example, in countries where native title must be established and recognised, such as in Australia;
- effects on the economics of new mining projects and the expansion of existing assets and operations.
We conduct our business globally in numerous jurisdictions with complex regulatory frameworks. Our governance and compliance processes may not identify or prevent misstatements or fraud or prevent potential breaches of law, accounting or governance practice.
Management
We have internal policies, standards, systems and processes for governance and compliance, including:
- BHP's standards on business conduct, market disclosure, and information governance and controlled documents;
- Our Code of Conduct;
- contractor due diligence and automated risk screening;
- ring fencing protocols to separate potentially competitive businesses within BHP;
- classification of compliance sensitive transactions;
- governance and compliance processes (including the review of internal controls over financial reporting and specific internal controls in relation to trade and financial sanctions, market manipulation, competition, data protection and privacy and corruption);
- anti-corruption training, competition training, Our Code of Conduct training;
- oversight and engagement with higher risk areas by our Ethics and Compliance function, Internal Audit and Advisory team and the Disclosure Committee;
- global monitoring of compliance controls by our Ethics and Compliance function;
- EthicsPoint anonymous reporting service, supported by an ethics and investigations framework and central investigations team (within the Ethics and Compliance function) to investigate Our Code of Conduct concerns.
FY2019 insights
There are currently no changes identified in the risk environment for BHP's legal and regulatory obligations that are expected to significantly increase the Group's exposure, with the exception of those noted above for climate change and community and human rights. The Group's exposure to risks associated with legal, regulatory, ethics and compliance issues may increase in the event of increased investment and activity in higher risk jurisdictions.
Commodity prices
Risks associated with the prices of commodities, including sustained price shifts relative to the price of extraction.
Why is this important to BHP?
The prices we obtain for our minerals, oil and gas are determined by, or linked to, prices in world markets, which have historically been, and may continue to be, subject to significant volatility
Threats
Fluctuations in commodity prices can occur in response to a range of factors. These include price shifts triggered by global economic and geopolitical factors, industry demand, increased supply due to the development of new productive resources or increased production from existing resources, technological change, product substitution and national tariffs. The effects of the trade negotiations between the United States and China and the United Kingdom's exit from the EU may also have an impact on price volatility and therefore affect us.
We are particularly exposed to price movements in minerals, oil and gas. For example, a US$1 per tonne decline in the average iron ore price and US$1 per barrel decline in the average oil price would have an estimated impact on FY2019 profit after taxation of US$154 million and US$29 million, respectively. For more information on commodity price impacts, refer to section 1.6.2. Commodity price impacts can also be exacerbated by exchange rate fluctuation, which may impact our financial results.
Long-term price volatility or sustained low prices may adversely affect our future profitability. This could result in cost pressure, as we do not generally have the ability to offset costs through price increases. In addition, this impact may result in lower than desired credit ratings for BHP, restricting our access to debt funding or increasing our financing costs.
Management
Our usual policy is to sell our products at the prevailing market prices. We manage our exposures primarily through the diversity of commodities, markets, geographies and currencies provided by our relatively broad portfolio of commodities. However, this does not necessarily insulate BHP from the effects of price changes.
Note 21 'Financial risk management' in section 5 outlines BHP's financial risk management strategy, including market, commodity and currency risk.
FY2019 insights
With the exception of geopolitical and macroeconomic developments (mentioned in the Geopolitics and macroeconomics section), which are expected to increase commodity price volatility, there are no changes identified in the risk environment for commodity prices that are likely to significantly increase or decrease the Group's exposure to commodity prices. Volatility in the market will continue to translate into profit variability.
Balance sheet and liquidity
Risks associated with BHP's ability to maintain a robust and effective balance sheet, distribute dividends and remain financially liquid.
Why is this important to BHP?
Fluctuations in commodity prices and ongoing global economic volatility could materially and adversely affect our future cash flows and ability to access capital from financial markets at acceptable pricing. If our liquidity and cash flows deteriorate significantly, it may adversely affect our ability to fund our strategy.
Threats
If our key financial ratios and credit ratings are not maintained, our ability to fund current and future capital projects and acquisitions, cost of financing, solvency, ability to pay a dividend and/or share price may be impacted.
Management
The Financial Risk Management Committee (FRMC) oversees the financial risks faced by BHP and endorses or approves financial risk management strategies, mandates and activities, including those related to commodity, currency, credit and insurance markets. The role of the FRMC is described in sections 2.14 and 2.15. Note 21 'Financial risk management' in section 5 outlines our financial risk management strategy.
We seek to maintain a strong balance sheet supported by our portfolio risk management strategy. To achieve this, we:
- operate a diversified portfolio, which reduces overall cash flow volatility;
- maintain access to key debt markets globally;
- monitor target gearing levels and credit rating metrics;
- assess cash flow at risk to monitor sensitivities to market prices and their impact on key financial ratios;
- maintain target cash and liquidity buffers within ranges set by the Board (which are designed to sustain BHP through periods where there is limited access to debt markets);
- operate within credit limits set by frameworks approved by the FRMC.
FY2019 insights
Protectionism and political uncertainty heightened during FY2019, which we expect will constrain global economic growth. However, no material changes have been identified in the risk environment, internally or externally, that are expected to significantly increase the Group's risk exposure or significantly impact the Group's ability to maintain a strong balance sheet, distribute dividends and remain financially liquid.
2. Related party transactions
There have been no related party transactions that have taken place during the year ended 30 June 2019 that have materially affected the financial position or the performance of the BHP Group during that period. Details of the related party transactions that have taken place during the year ended 30 June 2019 are set out in notes 22 'Key management personnel' and 31 'Related party transactions' to the Financial Statements set out below.
22 Key management personnel
Key management personnel compensation comprises:
| | | 2019 US$ | 2018 US$ | 2017 US$ |
| Short-term employee benefits | | 11,557,506 | 13,190,838 | 16,439,948 |
| Post-employment benefits | | 1,490,716 | 1,506,108 | 1,895,828 |
| Share-based payments | | 15,821,972 | 13,356,657 | 13,747,355 |
| Total | | 28,870,194 | 28,053,603 | 32,083,131 |
Following the dissolution of the Operations Management Committee (OMC) in FY2018, the Remuneration Committee re-examined the classification of Key Management Personnel (KMP) for FY2018 and determined that the roles which have the authority and responsibility for planning, directing and controlling the activities of BHP are Non-executive Directors, the CEO, the Chief Financial Officer, the President Operations, Minerals Australia, the President Operations, Minerals Americas, and the President Operations, Petroleum. The Remuneration Committee also determined that, effective 1 July 2017 the Chief External Affairs Officer and Chief People Officer roles are no longer considered KMP
Transactions and outstanding loans/amounts with key management personnel
There were no purchases by key management personnel from the Group during the financial year (2018: US$ nil; 2017: US$ nil).
There were no amounts payable by key management personnel at 30 June 2019 (2018: US$ nil; 2017: US$ nil).
There were no loans receivable from or payable to key management personnel at 30 June 2019 (2018: US$ nil; 2017: US$ nil).
Transactions with personally related entities
A number of Directors of the Group hold or have held positions in other companies (personally related entities) where it is considered they control or significantly influence the financial or operating policies of those entities. There were no reportable transactions with those entities and no amounts were owed by the Group to personally related entities at 30 June 2019 (2018: US$ nil; 2017: US$ nil).
For more information on remuneration and transactions with key management personnel, refer to section 3.
31 Related party transactions
The Group's related parties are predominantly subsidiaries, joint operations, joint ventures and associates and key management personnel of the Group. Disclosures relating to key management personnel are set out in note 22 'Key management personnel'. Transactions between each parent company and its subsidiaries are eliminated on consolidation and are not disclosed in this note.
- All transactions to/from related parties are made at arm's length, i.e. at normal market prices and rates and on normal commercial terms.
- Outstanding balances at year-end are unsecured and settlement occurs in cash. Loan amounts owing from related parties represent secured loans made to joint operations, associates and joint ventures under co-funding arrangements. Such loans are made on an arm's length basis with interest charged at market rates and are due to be repaid by 16 August 2022.
- No guarantees are provided or received for any related party receivables or payables.
- No provision for expected credit losses has been recognised in relation to any outstanding balances and no expense has been recognised in respect of expected credit losses due from related parties.
- There were no other related party transactions in the year ended 30 June 2019 (2018: US$ nil), other than those with post-employment benefit plans for the benefit of Group employees. These are shown in note 25 'Pension and other post-retirement obligations'.
Transactions with related parties
Further disclosures related to other related party transactions are as follows:
| | Joint operations | Joint ventures | Associates | |||
| | 2019 US$M | 2018 US$M | 2019 US$M | 2018 US$M | 2019 US$M | 2018 US$M |
| Sales of goods/services | − | − | − | − | − | − |
| Purchases of goods/services | − | − | − | − | 1,141.230 | 1,358.016 |
| Interest income | 1.532 | 1.764 | − | − | 0.826 | 19.337 |
| Interest expense | − | − | − | − | 0.011 | − |
| Dividends received | − | − | − | − | 509.577 | 693.105 |
| Net loans made to/(repayments from) related parties | 12.539 | 60.566 | − | − | 14.547 | (599.979) |
Outstanding balances with related parties
Disclosures in respect of amounts owing to/from joint operations represent the amount that does not eliminate on consolidation.
| | Joint operations | Joint ventures | Associates | |||
| | 2019 US$M | 2018 US$M | 2019 US$M | 2018 US$M | 2019 US$M | 2018 US$M |
| Trade amounts owing to related parties | − | − | − | − | 169.773 | 210.716 |
| Loan amounts owing to related parties | 40.513 | 55.667 | − | − | 10.097 | 4.097 |
| Trade amounts owing from related parties | − | − | − | − | 3.828 | 3.932 |
| Loan amounts owing from related parties | 15.474 | 18.089 | − | − | 33.486 | 12.939 |
3. Directors' Responsibility Statement
The following statement which was prepared for the purposes of the Annual Report 2019 is repeated here for the purposes of complying with DTR 6.3.5. It relates to and is extracted from the Annual Report 2019 and is not connected to the extracted and summarised information presented in this announcement.
"In accordance with a resolution of the Directors of BHP Group Limited and BHP Group Plc, the Directors declare that:
(a) in the Directors' opinion and to the best of their knowledge the Financial Statements and notes, set out in sections 5.1 and 5.2, are in accordance with the UK Companies Act 2006 and the Australian Corporations Act 2001, including:
(i) complying with the applicable Accounting Standards;
(ii) giving a true and fair view of the assets, liabilities, financial position and profit or loss of each of BHP Group Limited, BHP Group Plc, the Group and the undertakings included in the consolidation taken as a whole as at 30 June 2019 and of their performance for the year ended 30 June 2019;
(b) the Financial Statements also comply with International Financial Reporting Standards, as disclosed in section 5.1;
(c) to the best of the Directors' knowledge, the management report (comprising the Strategic Report and Directors' Report) includes a fair review of the development and performance of the business and the financial position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces;
[Paragraphs related to Australian regulatory requirements have been omitted.]
Signed in accordance with a resolution of the Board of Directors.
Ken MacKenzie, Chairman
Andrew Mackenzie, Chief Executive Officer.
Dated this 5th day of September 2019."
BHP Group Plc Registration number 3196209
LEI 549300C116EOWV835768
Registered in England and Wales
Registered Office: Nova South, 160 Victoria Street, London SW1E 5LB United Kingdom
A member of the BHP Group which is headquartered in Australia