Strategic risk is the risk of potential failures in strategic planning, which may lead to a company not

achieving its core objectives. Strategic risks are the possible losses a business may incur based on
decisions made at the strategic level. These include failures in business strategy or a business plan
related to internal or external forces. According to Emblemsvag J, strategic Risk can be defined as
"the use of competition as a strategy to achieve organisational goals." To put it another way, a
strategy outlines how a company plans to compete with others to achieve its goals. As such, it is
impossible to identify a strategy without also characterising the competition. Emblemsvåg, J., &
Endre Kjølstad, L. (2002).

Sasol's Strategic Risk can be the following.

1. Compliance with regulations

Legislation, conventions, standards, and best practices are becoming more and more demanded of
all organisations, regardless of their size or style of operation. They must comprehend them and
appropriately and correctly apply them to their sector. Consequently, compliance has drawn the
focus of both researchers and practitioners. Ghirana, A.-M., & Bresfelean, V. P. (2012.) .Regulations
are being changed and added to all the time in the business sector. This provides an inherent risk as
any failure to comply with a change in regulation could disrupt day-to-day operations or require the
implementation of expensive new technologies. While regulatory risk relates to a potential change in
laws and regulations, compliance risk relates to the potential of your business to violate existing laws
or regulations. Compliance and regulatory risks arise from laws and regulations that rely on penalties
or sanctions to regulate the operations of a business.

Sasol is governed in accordance with good corporate governance practices, including legal
compliance management, compliance or adherence to appropriate and relevant industry rules,
codes and standards, and internal control systems. Environmental sustainability risk- Sasol is
impacted by climate change and environmental challenges and considers developments in the
external environment. The carbon-intensive operations in South Africa, coupled with increased
regulatory, Environmental, Social and Governance (ESG) and investor pressure have heightened the
risk exposure relating to climate change.

2. Managing company reputation

Executives understand the value of the reputations of their firms. Businesses with a solid reputation
tend to draw higher talent. Since they are thought to offer greater value, they can frequently charge
more Robert G. Eccles, Scott C. Newquist, & Roland Schatz. (2007). Reputational risk is a hidden
danger that can pose a threat to the survival of the biggest and best-run companies. Often the risk
results in outcomes not easily measured; however, it can adversely affect a company's profitability
and valuation. It can wipe out millions or billions of dollars in market capitalization or potential
revenues and can occasionally result in a change at the uppermost levels of management. This is the
possibility of a company damaging its reputation, whether due to the quality of a product or service,
regulatory compliance breaches, or shareholder activism. Companies can turn controversial ideas
into opportunities to boost brand image. Reputational risk is a hidden threat or danger to the good
name or standing of a business or entity and can occur through a variety of ways.4. Risk-adjusted
performance management.

3. Financial risk management

In order to respond to changes more effectively in the macroeconomic environment, we are
protecting our balance sheet and cash flows to limit potential downside impact on the business
through the execution of our hedging strategy and policy. Our hedging programme has been
extended to include ethane, beyond crude oil prices and exchange rates. Competitiveness risks-
Sasol’s competitiveness is based on its ability to continue producing and selling products that meet
the quality standards of its target markets, at margins and service levels that provide adequate
returns. Increasing competition in relation to products originating from countries with low
production costs may adversely affect Sasol’s business, operating results, cash flows and financial
condition. Macroeconomic factors risk-Sasol’s ability to sustainably grow and deliver shareholder
value depends on key macroeconomic factors that drive the near- to medium-term business plans
and long-term strategy. Changes in year-on-year profitability and earnings growth impact Sasol’s
cash flow, solvency and liquidity

4. Environmental sustainability including a focus on climate change

Sasol has identified environmental sustainability as one of our top risks of which climate change is a
key driver. Associated risks are assessed and managed on an integrated basis, as many of the top
risks have key touch points with the environmental sustainability risk. Various scenarios linked
directly to our Group strategy have been identified and unpacked to highlight the potential strategic
and financial impacts. Furthermore, Sasol is taking a proactive approach to improve our climate
change disclosures including aligning to the recommendations by the Task Force for Climate-Related
Financial Disclosure (TCFD) for its financial filings and other relevant disclosures.

5. Operations Risks

Capital project performance risk-Sasol’s success in growing and sustaining the business depends on
the successful deployment of capital, with a focus on capital spending on larger and more complex
projects. Unexpected or unanticipated changes in the external environment or project delivery may
result in escalating project costs and schedule delays.

Information security risks- Sasol is exposed to information security breaches or attempts to disrupt
critical information technology (IT) and digital systems and services. IT and digital systems with
related services include our financial, commercial, transacting and production systems. Cyber threats
are becoming more pervasive, persistent and sophisticated and may adversely impact Sasol’s
operations. Unplanned production interruption risk-Sasol’s value chains may be impacted by
unplanned operational and reliability interruptions, including non-availability of essential utilities
and services, feedstock and supply chain disruptions, security breaches, natural disasters and
extreme weather.Safety, Health and Environmental risks- Safety performance and improvement is a
strategic imperative for sustainable and competitive operations. We remain committed to achieving
zero harm to people and minimising our impact on the environment, being a responsible and
accountable corporate citizen.

Reference

Robert G. Eccles, Scott C. Newquist, & Roland Schatz. (2007). Reputation and Its Risks.
Harvard Business Review. https://hbr.org/2007/02/reputation-and-its-risks
Ghirana, A.-M., & Bresfelean, V. P. (2012). Compliance Requirements for Dealing with
Risks and Governance. Procedia Economics and Finance, 3, 752–756.
https://doi.org/10.1016/S2212-5671(12)00225-0

Emblemsvåg, J., & Endre Kjølstad, L. (2002). Strategic risk analysis – a field version.
Management Decision, 40(9), 842–852.
https://doi.org/10.1108/00251740210441063/FULL/PDF