Our comprehensive risk management framework ensures that we manage and mitigate the risks that could impact our ability to execute our strategy. A more deeply embedded risk management culture supports long-term value creation for all Fresnillo stakeholders.
The Fresnillo plc Board of Directors has overall responsibility for the Group's system of internal control, which includes risk management. Responsibility for reviewing the effectiveness of this control has been delegated to the Audit Committee, which reviews these systems on an ongoing basis. Internal Audit supports the Audit Committee through regular reviews of internal controls. Operational responsibility for managing risk and maintaining the Group's system of internal control is assumed by executive management, and carried out at the corporate and operations level by the risk owners.
The Group has established a process for identifying, evaluating and managing the significant risks faced by the Group in accordance with the Turnball Guidance. Because of the limitations inherent in any system of internal control, this system is designed to meet the Group's particular needs and the risks to which we are exposed. It is designed to manage and mitigate risk. Consequently it can only provide reasonable and not absolute assurance against material misstatement or loss.
Our risk assessment process is dynamic and ongoing: as the macro environment changes and country and industry-specific circumstances evolve, new risks may arise and others recede. Similarly, the ranking of these risks, based on probability and severity, may fluctuate.
Specifically, gold and silver prices have trended up-wards for nine years and in 2010 reached their highest level in 30 years. Given the cyclical nature of precious metal prices we believe that the associated risk of downward pricing pressure has increased. This is particularly relevant given the Group's policy not to hedge price exposure on silver and gold realisations.
With higher metal prices, profit margins in the mining industry have also expanded, increasing the likelihood of a new mining royalty or tax.
Security risk has also increased as a result of escalating violence, including robbery and kidnapping in the central and northern states if the country where the Group has operations. The risk has simultaneously affected the controls associated with the use, transportation and storage of explosives, which are overseen very closely by the defence authorities.
To support the expansion of exploration programme and new mining projects under construction, the Group has added additional contractors, some of whom do not have experience with the Group's operations. This raises safety and environmental issues due to insufficient training or adherence to Group procedures.
Conversely, the risk associated with internal union conflicts decreased following elections held in December 2010 which allowed workers for the first time to select the union of their choice.
Among the remaining risks in the full risk universe, certain rankings and assessments have also been modified due to changes in the business environment and/or the implementation of controls and mitigation.
While the nature of the risks and uncertainties the Group faces is likely to remain similar from year to year, mitigation and control measures will be mapped against the Board's risk statement to ensure full alignment at the operations level.