Risk tables

Risk trend

Evaluation is defined as management’s
assessment of whether the risk factor has:

The successful delivery of our strategy is influenced by the world we live in, and we need to adapt to a changing global environment. Changes in both economic and environmental conditions in the countries that the Group operates in or are linked to, through our supply chain, could affect how we deliver our services or change the cost base of the business.

Influencing factors

• Changes in economic conditions including economic growth forecasts, exchange rates, interest rates and inflationary pressures
• Influences of global conflicts on global supply chains
• The impact that environmental conditions such as extreme weather could have on our operations, as well as our impact on the environments in which we operate

Controls and mitigating activities

• The Group’s business model and balance sheet strength provides resilience to economic downturns, with the flexibility of our offer being attractive in times of uncertainty
• In the event of a downturn, the Group can manage its fleet flexibly, generating cash and reducing debt by reducing vehicle purchases or accelerating disposals
• The cost base related to management of insurance claims and services is flexible and can be scaled back in response to a downturn in revenue
• Pricing structures remain under review in context of cost inflation with minimum return thresholds protecting margins
• Credit risk of new and existing customers is continually assessed and the Group has a diversified customer base without overreliance on an individual or group of customers across any sector
• The Group maintains close relationships with key suppliers to ensure continuity of supply and diversifies the supplier base in periods when supply becomes restricted
• Foreign exchange exposure is minimised through sourcing supplies in the same currency as the revenue is generated. Translation risk is managed through holding a proportion of borrowings in Euro in order to hedge against the investment in Euro net assets

We operate in markets undergoing significant transformations both through changing business models and customer expectations for smarter and increasingly sustainable mobility. If the Group does not respond to behavioural, structural, legal, or technological changes in our markets there is a risk that demand for our services will reduce. Changes to the insurance market or loss of a key insurance referral partner could adversely impact the Group’s revenues.

Influencing factors

• Structural changes to the rental and insurance and legal services markets such as consolidation, digitalisation or vertical integration could impact on the viability of the business model if we are not agile enough to respond to those trends
• Changes to regulations for operation of ICE vehicles and widening of low-emission zones will change the way in which mobility services will need to be delivered
• Price competition for an equivalent service, could impact our ability to attract and retain customers at appropriate rates of return
• Increases in insurance referral rates or cost increases which cannot be passed on through claims could impact viability of returns
• Loss of a major customer or insurance referral partner could diminish returns if the cost base is not managed appropriately

Controls and mitigating activities

• Our strong reputation for trusted and expert advice and customer service improves retention of existing customers and attractiveness to new customers by differentiating our offer from other market participants
• Continued evolution of the fleet towards non-ICE vehicles with development of supplier relationships and investments in supporting infrastructure
• Continual benchmarking of pricing and service offer compared to competitors and other market participants. Pricing controls over target levels of returns and discount authorities protect margins
• Minimising the concentration of business customers and maintaining long term relationships with insurance partners with a large proportion of revenue coming from contracts with customers, greater than one year in length

Failure to secure sufficient access to fleet at appropriate pricing would impact on our ability to meet operational and customer service delivery, overall returns and our ability to grow organically.

An increase in fleet holding costs either through higher new vehicle pricing or lower residual values, if not recovered through pricing increases or operational efficiencies, would adversely affect returns.

Influencing factors

• Over recent years, global vehicle supply has been restricted following COVID-19 and geopolitical conflict which has reduced the availability of vehicles and influenced vehicle pricing. Whilst supply has improved, it still remains below pre-COVID-19 levels
• Residual values continue to be affected by the vehicle supply interruption and are influenced by other economic conditions

Controls and mitigating activities

• Flexibility over asset management means that in the short term the Group can mitigate the shortage of supply of new vehicles by ageing out the fleet
• The business model supports high levels of utilisation and vehicles returned from customers are redeployed within the fleet
• The Group maintains close relationships with key suppliers to ensure continuity of supply and has diversified the supplier base in order to broaden access to new vehicles
• The Group minimises vehicle holding costs by flexibly managing the fleet so that vehicles can be defleeted at the optimal point in their lifecycle through our own sales channels. We manage vehicle sales through our own retail sales network and online sales channels

We rely on the expertise and experience of our people in order to stay at the forefront of changes to our markets and to maintain and deliver high levels of customer service. Failure to attract, retain, develop and motivate this talent would impact the Group’s ability to meet its strategic objectives.

We also understand our responsibility to keep our people safe through appropriate health and safety risk management to maintain trust with our employees and reputation across all stakeholders.

Influencing factors

• External pressures in the labour market creates issues in attracting and retaining talent and therefore delivery of the operating model and commercial proposition
• The diverse operations of the Group growing organically and inorganically across a wide geographical area increases the challenge of fostering a shared culture in line with strategic objectives
• Not safeguarding employees’ health and welfare and failure to invest in our workforce will lead to high levels of staff turnover, which will affect customer service, operational efficiency and overall delivery of the Group’s strategy

Controls and mitigating activities

• Employee engagement with Group management through the Employee Engagement Forum and employee surveys
• Internal communications establish values which are aligned to Group strategy and we undertake regular communication of the strategic progress through various platforms including the launch of the new brand and strategy and how that best serves our people
• Ongoing benchmarking of reward and benefits against the comparable employment market
• Regular performance reviews including personal development and tailored training as well as introduction of a mentoring programme
• Regular engagement with employees and access to health and wellbeing initiatives
• Widening of rewards and benefits including share ownership, financial wellbeing initiatives and improved annual and family leave
• Group health and safety team develops policy and processes to ensure safe working practices and monitors compliance with those policies
• Continual development of Group health and safety initiatives to promote an ongoing safe working environment

Risk trend

Evaluation is defined as management’s
assessment of whether the risk factor has:

The Group must comply with all laws and regulations; certain activities within the Group are regulated, therefore ongoing compliance with regulations is required to ensure continuity of business.

Legal cases relating to the provision of credit hire and insurance-related services have provided a precedent framework which has remained stable for several years. Legal challenges or changes in legislation could undermine this framework with consequences for the markets in which the Group operates.

Influencing factors

• Changes to the legislation or regulatory environment in any of the Group’s markets could impact revenue and profitability, particularly within the credit hire, insurance and legal services businesses
• Inadequate operation of systems to monitor and ensure compliance with regulations could expose the Group to fines and penalties, or operating licences could be suspended and also adversely impact our reputation across all stakeholder groups

Controls and mitigating activities

• In-house legal and compliance team continuously monitoring regulatory and legal compliance
• Horizon scanning and monitoring of legal and regulatory developments
• Policies and procedures and compliance monitoring programmes
• Training in relation to relevant legislation, regulatory responsibilities and Group’s policies and procedures
• External advisors are retained where necessary

The Group relies on technology to ensure the safe continuity of business operations, and advances in technology offer opportunities to leverage efficiencies in processes and enhanced service delivery, with stakeholders continuing to seek deeper digital engagement. Failure of existing systems, lack of development in new systems or poor integration of new systems, could result in a loss of commercial agility and/or harm the efficiency and continuity of our operations.

The global threat of cyber-attacks is increasing as attacks are becoming more frequent and sophisticated. Unsuccessfully defending against data theft or cyber-attacks, could cause significant business interruption and reputational harm across all stakeholders.

Influencing factors

• Inadequate IT systems can be at risk from failed processes, systems or infrastructure and from error, fraud or cyber-crime
• The Group’s business is dependent on the safe and efficient processing of a large number of complex transactions and stakeholder interactions. The effective performance and availability of core systems is central to the operation of the business
• Growth through inorganic acquisitions increases the complexity and diversity of operations, IT systems and infrastructure
• Cyber attacks are becoming increasingly frequent and sophisticated. The Group remains vigilant to changes in the cyber threat landscape and continues to review the technology deployed to defend against these threats

Controls and mitigating activities

• Investments in key IT platforms and systems to ensure continued operational performance and delivery
• Changes to key IT systems are considered as part of wider Group change programmes and are implemented in phases where possible with appropriate governance structures put in place to oversee progress against project objectives
• Ongoing monitoring of the continuity of IT systems with access to support where required
• Back-up and recovery procedures for key systems including disaster recovery plans
• Operation of information security and data protection protocols to ensure that data is held securely, and is adequately protected from cyber-attacks or other unauthorised access

Risk trend

Evaluation is defined as management’s
assessment of whether the risk factor has:

Our credit hire and repair business involves the provision of goods and services on credit. The Group receives payment for the goods and services it has provided after a claim has been pursued against the party at fault (and the relevant third party insurer). This process can take a long period of time before claims are agreed and settled.

Influencing factors

• Recovery of insurance claims requires the orderly running of insurance markets with claims being settled on commonly agreed terms
• Due to the relative strength of insurance companies, they could influence the speed of settlement of claims in order to secure better terms
• Settlement of claims is normally reached through mutual agreement. Settlement through court arbitrations can be lengthy and relies on efficient operation of the court process

Controls and mitigating activities

• Services are only provided to customers after a full risk assessment process to ensure that the claim will be legally recoverable from a third party
• The Group manages collection risk by standardising terms with third party insurers (protocol agreements) where possible, which reduces collection risk under shorter payment terms. The proportion of claims under protocol terms has increased in the year to c.70%
• Other claims are managed through specialist teams in order to settle claims or managed through a court arbitration process

The Group needs access to sufficient capital to maintain and grow the fleet and fund working capital requirements.

Investors increasingly require businesses to demonstrate that they act in a responsible and sustainable manner prior to granting access to financing facilities.

Influencing factors

• Debt markets can be volatile in terms of liquidity and pricing
• Failure to maintain or extend access to credit and fleet finance facilities or non-compliance with debt covenants could affect the Group’s ability to achieve its strategic objectives or continue as a going concern

Controls and mitigating activities

• Debt facilities are diversified across a range of lenders and close relationships are maintained with key funders of the Group to ensure continuity of funding
• Debt facilities have been put in place to provide adequate headroom and maturities in order to support the strategy of the Group
• The Group continually monitors cash flow forecasts to ensure adequate headroom on facilities and ongoing compliance with debt covenants
• The Group maintains leverage within stated policy and the business model allows cash to be generated through economic cycles
• The impact of access to capital on the Group’s viability is considered in the viability statement on page 64