Risk management approach /
Aegis recognises the importance of effective risk management processes and systems. The Board is ultimately responsible for risk management and determining the nature and extent of the risks it is willing to take in achieving its strategic objectives. It delegates operational risk management to its Risk Committees, which report into the Group Audit Committee. There are currently two Risk Committees, the Aegis Media Risk Committee, chaired by the Group CEO, which focuses primarily on strategic and trading risks, and the Group Risk Committee, chaired by the Group CFO, which focuses on corporate and group function risks. The work of the Risk Committees is regularly reviewed by the Audit Committee.
We also aim to make risk management a key part of every manager’s role across our business. During 2011, Aegis revised the group risk management framework to increase focus on major risks that could threaten the whole business. The evaluation methodology (i.e. how we assess the size of the risk, comprising probability of happening and the size of the impact if it did occur) has been modified to reflect this.
Our risk management strategy supports the strategic objectives of Aegis Group plc, which are:
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- Increasing our exposure to faster-growing regions
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- Growing our digital profile and capability
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- Broadening our service offering across all of our clients
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- Growing our international client and new business profile
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- Strengthening our leading position in the top 20 markets, in particular China and the US.
This strategy aims to deliver continued growth whilst managing strategic risk by diversifying client base, country and media. To back this, the group maintains a strong, flexible balance sheet and ensures we remain comfortably within our financial covenants. A summary of our principal risks is as follows:
1. Maintaining strong client relationships /
Risk description /
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- We might lose key clients and fail to win new ones.
Potential risk impact /
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- Lost profit
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- Subsequent loss of key managers.
Risk management strategy /
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- Ensuring we remain a highly competitive organisation to help us win new clients and continue to provide a high quality service to our existing clients.
Risk mitigation actions /
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- We have dedicated client relationship teams in place, as well as global client management teams established in regional offices
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- We develop multiple services, with an emphasis on innovation for our clients.
2. Managing counterparty risk /
Risk description /
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- Counterparty risks include the loss of income from clients who have cash flow or insolvency problems and potential media buying liabilities in markets where we act as principal.
Potential risk impact /
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- Lost profit and bad debt.
Risk management strategy /
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- Maintaining and developing robust financial and operating systems to ensure we minimise any potential loss of income from third parties.
Risk mitigation actions /
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- Due diligence, including credit risk is undertaken for all new clients and written contracts must be in place before starting any significant work
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- Group policy requires credit limits to be imposed for all new commercial clients
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- We are enhancing our existing global credit insurance policy.
- Risk management approach
- Maintaining strong client relationships
- Managing counterparty risk
- Managing competitive risk
- Ensuring strong talent management
- Weak economic conditions
- Maintaining a sound financial position
- Managing the targeting and pursuit of acquisition opportunities
- Ensuring acquisitions are fully integrated
- Managing the security of data
- Ensuring legal and regulatory compliance
- Managing corporate responsibility risks
