Risk Assessment and Information
Whilst the Board has overall responsibility for setting the risk appetite within the business and for Group risk management, day to day risk management responsibility is delegated to the Executive Directors who work closely with the senior management teams in reviewing and monitoring risk across the business. Risk appetite is an expression of the type and amount of risk we are willing to accept to achieve our strategic objectives. The Board sets the appetite for risk across the business by reviewing and challenging the risk registers and ensuring that risks are considered and mitigated to an appropriate degree and that they are consistent with the strategic objectives of the business. The register inherently defines the level of risk the Board is content for the business to be subjected to and is a key consideration in decision-making across the Group and helps to define the actions required to mitigate our risks. Effective risk management is inherent in the culture of the Group and the way in which we do business. An understanding of the risks within our business and their strategic, commercial, financial and legal implications encourages clear decision-making in respect of the risks that we will and will not take.
As well as being inherent in the way we work, our risk management framework provides a consistent and structured process for identifying, assessing, responding to and monitoring risk. The senior management teams compile Group risk registers considering the effects of risks on the business and determining appropriate and proportionate risk mitigation strategies. Responsibility for monitoring and review of each risk is taken by a designated senior member of staff, ensuring that there is appropriate accountability. The risk register includes over 80 risks which are rated on their probability and impact and re-rated after mitigation. Any risks that remain classified as high or medium post mitigation form the Board risk register, providing details of those risks that may impact upon the strategic direction of the Group. The Board reviews the detailed risk registers twice a year and upon any material change, with any amendments, control issues, accidents or commercial, financial or reputational issues being reported to the Board in the meantime.
The Board has conducted a review of the effectiveness of the Group’s system of internal controls and risk management procedures. The Board receives an annual paper detailing the effectiveness of the Group’s internal controls, which is reviewed and discussed by the Board. This paper covers all material controls including financial, operating and compliance controls. The Board has also monitored and reviewed the effectiveness of the Group’s approach to risk management and has solicited the views of a number of senior managers relating to health and safety and legal and insurance matters and the management of those risks. The Board has concluded that the current risk management procedures for identifying risks and considering risk mitigation are appropriate.
Whilst foreign exchange is a risk to the business, it is not a material risk to the strategy due to its short term effects and due to the hedging strategies which we have in place. The majority of the Group’s raw material purchases are made in US dollars, as are the majority of the Group’s sales. Sharp fluctuations in currency have a short term effect on the Group’s profits. However, the Group has hedging policies in place which minimise the impact of movements in the US dollar exchange rate.
How we manage risks
The management of risk is embedded within the framework of the Group, which includes:
- the process of strategy setting;
- a clear understanding of market conditions and raw material prices;
- the quality of our people and culture;
- established policies, procedures and internal controls;
- processes for identification, review and monitoring of risk;
- regular dissemination of both financial and non-financial information and KPIs; and
- oversight of risk by the Board.