The Board maintains a focus on effective risk management, which flows all the way through the organisation. The risk appetite is set at different tolerances depending on the impact categories, as mentioned previously. The culture of the organisation is consistent with risk appetite and ensures all activities, from day to day operations to high level strategic decisions, are performed in line with this approach.
The assessment of principal risks are based on the perceived impact on the Group’s ability to achieve its strategic objectives and the likelihood of their occurrence, taking into account controls that have been put in place to mitigate any impact.
Principal risks
Recognising that all business activity involves elements of risk, the Group maintains a policy of continuously identifying and reviewing risks that represent a threat to the business, or that may cause future financial results to differ materially from expected results. Our approach is not intended to eliminate risk entirely, but to manage our risk exposures across the business, whilst at the same time making the most of our opportunities.
The Directors have carried out a robust assessment of the principal and emerging risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.
For each risk we state what it means for us and what we are doing to manage it. The change in risk is assessed using the aggregation of bottom up risks which have been mapped against principal risks and also the top down view as well as emerging risks. The risk level change represents the assessed risk exposure as at 30 April 2024 compared to the same point in the previous year.
The Board is dedicated to ensuring the Group operates in a responsible and sustainable manner. Guided by the Sustainability Committee, the Group previously launched a range of sustainability commitments supported by our ESG strategy and framework and approach to data collection and reporting. Further information on our ESG strategy can be found on pages 66 to 68. While we view climate change as a significant risk for the business, we believe that it is not individually a principal risk, but is more appropriately addressed within our underlying risk categories for short to medium term impacts; and then separately through our TCFD risk assessment for its longer-term implications, as set out on pages 69 to 79. This better reflects the risks and opportunities which will arise over the longer term.
The risks specified are not intended to represent an exhaustive list of all potential risks and uncertainties. The risk factors outlined should be considered in conjunction with the Group’s system for managing risk, described on pages 54 to 56 and in the Corporate Governance Report on pages 96 to 99.
Compare risk assessment
In addition to principal risks, the Board considers emerging risks which may impact the Group. The Group considers an emerging risk to be one that does not currently have a material impact on the business but has the potential to impact future strategy or operations. The Group’s approach to managing emerging risk exposure is to:
- identify potential emerging risks; using horizon scanning techniques, published external research and peer or competitor review;
- assess these risks taking into account our industry sector and market position, and our strategy, to determine relevance;
- consider the potential impact of each risk on each risk appetite impact category, taking into account the likelihood of the risk occurring and the speed with which it may manifest; and
- regularly monitor these risks and develop actions to address them where appropriate.
The Board considers climate-related matters, including the recommendations from the TCFD as emerging risks. Our assessment around this area continues to develop and will be continually monitored. As those risks become significant in likelihood and impact within the same time horizon of the principal risk assessment, they will be integrated into the recording of principal risks and the overall risk management framework of the Group.
