Economic |
Risk: Changes in government spending plans |
Trend No change Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group generates the majority of its revenues from its operations located in the UK and the USA. A reduction in UK or US government infrastructure spending, particularly in relation to national roads infrastructure in the UK, could reduce demand for our products and services. The financial burden on the governments of both jurisdictions from economic downturn may lead to reduced spending in the principal markets in which the Group operates. |
Mitigation Our existing entity portfolio contains diversity of product, market and territory and we will continue with this approach as we review potential acquisitions. Market development initiatives. Product development initiatives. Co-operation between Group businesses, leveraging the Group's size/international footprint and exploiting synergies. |
Risk: Changes in global outlook and geopolitical environment |
Trend No change Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group operates in a range of end-user markets around the world and may be affected by political, economic or regulatory developments in any of these countries. Material adverse changes in the political and economic environments in the countries in which we operate have the potential to put at risk our ability to execute our strategy. |
Mitigation The Group has a diverse portfolio of businesses with exposure to a range of markets and geographies, limiting exposure to any one country or market sector. Current and future financial performance is continuously monitored, facilitating rapid response to changes in market conditions. Entrepreneurial culture established through a decentralised management structure, ensuring that Group businesses are agile and responsive to changes in their competitive environments. Hedging mechanisms used to limit potential effects of economic volatility on forecasted revenue. |
Commercial & Financial |
Risk: Product failure |
Trend No change Link to strategy · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group operates in infrastructure markets where it is critical that its products meet customer and legislative requirements and where the consequences of product failure are potentially serious. Significant product failure arising from component defects or warranty issues may require remediation including the replacement of defective components or complete products, resulting in direct financial costs to the Group and/or wider reputational risk. |
Mitigation Products tested, approved and accredited by regulatory bodies. Quality control protocols fully implemented and continuously monitored. Contractual controls in place to minimise economic impacts. Insurance cover maintained globally with insurance partners. Litigation supported/managed by external legal specialists. |
Risk: Contractual arrangements |
Trend No change Link to strategy · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group delivers its commitments to its customers through a variety of contractual arrangements of both a short and medium term nature. Weaknesses in the contract tendering process, inappropriate pricing, misalignment of contract terms, ineffective contract management or failure to comply with contractual conditions could result in loss of revenues, pressure on operating margins and wider reputational damage to the Group. |
Mitigation Group material contract review process ensures specialist central oversight of key contractual arrangements. Contracts training for key staff. Dedicated quantity surveyors and contracts managers embedded in subsidiary management structures to control projects. Litigation supported/managed by external legal specialists. Insurance cover maintained globally with insurance partners |
Operational |
Risk: Supply chain deficiency |
Trend No change Link to strategy · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group's businesses depend on the availability and timely delivery of raw materials and purchased components, which could be affected by disruption in its supply chain. Supply chain failures as a result of performance, cost, quality and/or insolvency may have an adverse impact on the Group's production capacity and lead to an inability to meet customer requirements, resulting in reduction in revenues, potential loss of market share and possible reputational damage. |
Mitigation Group procurement standards in place, including robust due diligence of supply chain partners and requiring dual sourcing where available. Maintenance of relationships with key suppliers through regular interaction and assessment of performance/financial status. Central oversight of material procurement contracts ensuring robust contractual protections. Goods inwards and stock management processes in place to reduce the likelihood of defects in or shortage of raw materials. Raw material hedging. |
Risk: Weaknesses in IT systems |
Trend Higher Link to strategy · Target returns and leverage |
Description and potential impact The Group relies on the information technology systems used in the daily operations of its subsidiaries. A failure or impairment of those systems or any inability to effectively implement new systems could cause a loss of business and/or damage to the reputation of the Group, together with significant remedial costs. |
Mitigation External specialist support with the development and oversight of IT system change programmes. Disaster recovery plans documented, tested and monitored by Group businesses. The Group's Policy Manual incorporates IT policies in respect of system back-up procedures and hardware/software protection. External GDPR and cyber risk reviews commissioned in 2017 and reviewed by the Board in 2018 - Management responses are being prepared. |
Risk: Acquisition strategy failure |
Trend No change Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage |
Description and potential impact The Group's growth strategies include the acquisition of businesses around the world that complement or supplement its existing activities. Failure to execute an effective acquisition and integration programme would have a significant impact on the Group's ability to generate long term value growth for shareholders. |
Mitigation Our strategic planning process supports our M&A planning. Board approval required for Group acquisitions, in line with the Group Board's Schedule of Matters Reserved. Due diligence protocols deployed in relation to assessment of target businesses, including financial, commercial, legal and others where appropriate. Contractual protections and assurances sought from sellers to mitigate subsequent identification of risks. '100 Day' post-acquisition integration plan established for all material acquisitions with regular performance monitoring and reporting to the Board. |
Risk: Lack of product development and innovation |
Trend No change Link to strategy · Portfolio management · Geographic diversification · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group operates in global infrastructure markets where continuous innovation is integral to the Group's product offering and where a failure to innovate could result in product obsolescence, the entry of new competitors and/or loss of market share. The development of new products and technologies carries risk including failure to develop a commercially viable offering within an acceptable timeframe. |
Mitigation Entrepreneurial culture established through a decentralised management structure, ensuring that Group businesses are agile and responsive to changes in their competitive environments. The Group actively encourages and supports research and development programmes at subsidiary level where knowledge of the market and the needs of our customers are greatest. Executive Board approval of product development proposals within the Group's capital spend approval policies. Active Intellectual Property management. Dedicated quality compliance resources in place across Group businesses, ensuring responsiveness to regulator and/or customer approval requirements. Board monitoring of emerging risks alongside external specialist support, where both the risks identified and the potential opportunities arising are considered. |
Human Resources |
Risk: Failure to recruit and retain key employees |
Trend No change Link to strategy · Geographic diversification · Entrepreneurial culture |
Description and potential impact The Group encourages an entrepreneurial culture through a decentralised management structure. An inability to attract, develop and retain high-quality individuals in key management positions could severely affect the long term success of the Group. |
Mitigation Succession planning model driven by the Group Chief Executive and overseen by the Board. Implementation of contractual protections and retentions in employment contracts of senior management and other key employees. Competitive remuneration, benefits and incentive plans offered to employees and regularly benchmarked. Recruitment process developed to include competency requirements and skills gap analysis. Training and development of employees, which includes a programme of IOD and ILM courses for senior management and identified potential successors, and apprenticeship and other vocational courses for specialist and technical roles. |
Legal & Regulatory |
Risk: Failure to comply with applicable health and safety legislation |
Trend No change Link to strategy · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group operates a number of manufacturing facilities around the world. A failure in the Group's health and safety procedures could lead to environmental damage or to injury to or death of employees or third parties, with a consequential impact on operations and the increased risk of regulatory or legal action being taken against the Group. Any such action could result in both financial damages and damage to reputation. |
Mitigation Regular health and safety monitoring, supported by an external independent health, safety and environmental consultant and utilizing a 'safety cloud' online reporting framework. Group Health and Safety Forum established to monitor performance and share best practice. Culture of zero tolerance in respect of health and safety violations promoted by the Board and disseminated throughout Group businesses supported with appropriate HR policies and the Business Code of Conduct. Open relationships maintained with regulatory bodies. External health and safety accreditations. Health and safety required as a priority area of focus for new acquisitions. |
Risk: Violation of applicable laws and regulations |
Trend Slightly higher Link to strategy · Target returns and leverage · Entrepreneurial culture |
Description and potential impact The Group's global operations must comply with a range of national and international laws and regulations including those related to anti-bribery and corruption, human rights and employment, trade/export compliance and competition/anti-trust. A failure to comply with any applicable laws and regulations could result in civil or criminal liabilities and/or individual or corporate fines and could also result in debarment from government-related contracts, restrictions on ability to trade or rejection by financial counterparties as well as reputational damage. |
Mitigation Group Code of Conduct sets out required approach for all staff. Staff training provided on Anti-Bribery and Corruption and Competition Compliance. Competition compliance manual implemented by each Group business. Programme of audits undertaken on a cyclical basis to review subsidiary compliance with regulatory requirements, including for example simulated 'dawn raids'. Software solutions implemented globally to ensure compliance with trade and export legislation. Externally hosted whistleblowing hotline available to all employees to allow them to raise concerns in confidence or anonymously, if preferred. Modern Slavery compliance programme continued through 2017. |
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