Responsible Gold Guidance V9

Step 3. Design and Implement a Management Strategy to Respond to Identified Risks

The objective of Step 3 is to evaluate and respond to the identified risks in Step 2 to prevent or mitigate adverse impacts. Where appropriate, Refiners should seek to exercise leverage and enhance supplier engagement to address the risk most effectively. Refiners should also enhance their own systems of information collection and transparency. Where known risks or founded suspicion of upstream suppliers sourcing from or linked to any party committing zero-tolerance or high-risk abuses are identified, the Refiner must immediately cease or suspend engagement with the counterparty.

3.1 Devise a risk management strategy for the identified risk

Refiners must determine their own risk management strategies based on internal risk appetite and processes. However, the following minimum criteria must be considered for risk management.

Terminate relationship

The Refiner should immediately stop refining gold where its EDD concludes that there are known instances of:

  • Money laundering
  • Terrorist financing
  • Serious human rights abuses
  • Direct or indirect support to illegitimate non-state armed groups
  • Fraudulent misrepresentation of the origin of minerals.

The Refiner should report such instances to the appropriate authorities and to LBMA, where applicable, and in accordance with local and international legal requirements.

Suspend relationship

The Refiner should suspend refining gold where its EDD concludes that:

  • There is a founded suspicion of:
    o money laundering
    o terrorist financing
    o serious human rights abuses
    o direct or indirect support to illegitimate non-state armed groups
    o fraudulent misrepresentation of the origin of minerals
  • There are reported catastrophic ESG impacts as defined in the Refiner’s classification criteria.

Refining may resume once additional information/data refuting the preliminary suspicions or a timely and appropriate response to addressing the ESG impacts has been obtained from the supplier. This should be approved by the Compliance Officer and/or the Board Committee.

Continue relationship with improvement plan

Refiners may continue to refine gold where the EDD is not fully satisfactory, or where it concludes that the counterparty is using reasonable and good faith efforts despite instances of:

  • Bribery
  • Non-fraudulent misrepresentation of the origin of minerals
  • Non-compliance with taxes, fees and royalties due to government
  • Material breaches of environmental, health, safety, labour and community-related local legislation, and/or ESG risks that have the high likelihood to result in highly adverse impacts.

In this case, the Refiner should require the counterparty to adopt an improvement plan which is:

  • Devised with the Refiner’s input and engagement
  • Clearly documented, including performance objectives and quantitative and/or qualitative performance measurement indicators
  • Approved by the Compliance Officer and/or the Board Committee.

3.2 Monitor the improvement plan

Where Refiners decide to continue relationships as counterparties implement an improvement plan, the principles of good faith efforts to make meaningful improvements in the supply chain must be adopted. The risk management strategies must include measurable steps to be taken by the counterparty, performance monitoring, periodic reassessment of risk and regular reporting to the Board Committee, as applicable.

Improvement plan monitoring

The risk monitoring strategy should at a minimum:

  • Identify significant and measurable improvements towards eliminating the risk within six months from the adoption of the improvement plan.
  • Define additional measures in a revised improvement plan based on the progress achieved within the first six months.
  • Formally assess performance to determine that measures have been properly undertaken by the deadline (e.g., through independent audits, a follow-up on-site visit or remote review, as appropriate).

To facilitate monitoring activities, Refiners should, as appropriate:

  • Consult relevant stakeholders such as local or central authorities, upstream companies, international or civil society organisations, and affected third parties.

After the six-month time frame, Refiners should consider:

  • Suspending the relationship where limited or no measurable improvement can be demonstrated, until the supplier responds to the improvement plan; or
  • Terminating the relationship after failed attempts at risk mitigation and performance improvement.

The Compliance Officer and/or the Board Committee should frequently revisit the decision to continue with business relationships under the risk mitigation strategy (i.e. annually, at a minimum).

3.3 Report findings to the Board Committee

The Board retains ultimate control and accountability for the gold supply chain. Actual and potential risks identified in the supply chains and proposed risk management strategies must be communicated to the Board Committee.

The Board should at a minimum receive information on the following:

  • Relevant statistics on high-risk supply chains
  • Counterparty under risk mitigation strategies and status of risk mitigation strategies
  • Reports on the progress and effectiveness of improvement plans.

3.4 Continuously monitor adequacy of risk management strategies

Supply chain due diligence is a dynamic process and requires ongoing risk monitoring. After implementing a risk management strategy, Refiners should assess if Step 2 of this Guidance should be repeated or, for instance, if another on-site visit is required. Any changes in the supply chain may require the Refiner to repeat some due diligence steps to ensure effective management of risk.