Preparation for Interview

Some risk factors that may affect BHP Billiton's long term strategy are listed below:

Changes in commodity prices - As BHP Billiton's core business are mining of raw materials to be converted into commodities in the market. If the price of these commodities drops, so will the value of their mined products, cutting into the company's profit margins.

Failure or delay to discover new reserves, maintain and exploit existing reserves - BHP faces tough competition with other global mining companies over discovery of new reserves especially in emerging markets. The firm has to be proactive in acquiring mining rights to new discoveries but at the same time concentrate on developing technology to exploit its existing reserves in the most efficient way possible.

Reduction in demand particularly in Chinese market -BHP has been a big beneficiary from the rapid infrastructural growth in China and as a result is strongly dependent on the country continuous appetite for its products.

The accounting choices made by BHP are based on the ability to make estimates about future assets and liabilities. The management constantly evaluates its estimates about its assets, liabilities, revenue and costs. These estimates are based on historical experience and factors that may affect the company in the future and may not hold to the true value. BHP accounting policies are based on the following seven basic principles:

Reserve estimates

Exploration and evaluation expenditure

Development expenditure

Property, plant and equipment

Defined benefit pension schemes

Provision for closure and rehabilitation

Taxation

These principles might apply differently for operations in different geographical regions. As such, each region and operation has to be analysed separately and the estimates from each of them are then combined to define the accounting estimates for the company as a whole.

Rio Tinto's strategy may be affected by 5 different categories of risks :

External risks: Commodity prices and global demand for the Group's products are expected to remain uncertain, which could have a positive or negative impact on the Group's business. Continued growth in demand for the Group's products in China could be affected by future developments in that country.

Strategic risks: Failure of the Group to make or successfully integrate acquisitions could have an adverse effect on the business and results of operations. The Group's proposed iron ore production joint venture with BHP Billiton in Western Australia may not yield the synergies anticipated. The Group's