Principal Risks and Uncertainties
The Board has responsibility for determining the nature and extent of the principal risks it
is willing to take to achieve the Company’s strategic objectives. The Executive Committee
is responsible for implementing and monitoring internal controls and other elements of
risk management systems and operates in parallel with the Audit Committee, which has
primary responsibility for oversight of financial controls, the Nominations Committee,
which has primary responsibility for succession risk, and the Remuneration Committee,
which has primary responsibility for remuneration and incentive structure risk.
During the year a new business unit based risk management
process was introduced within the Group. Each site is required
to develop and keep updated a full risk profile identifying the
key risks facing the site. Each risk is assessed, rated and
appropriate mitigation actions developed. Leading KPIs are
tracked for each risk and site management teams review on
a monthly basis both the risk profile, progress on mitigation
actions and KPIs to ensure appropriate actions are taken.
Site level risk profiles will be formally uploaded to the Group
intranet every six months and biannually, these will be
consolidated into divisional risk registers and a Group risk
register. By the end of March 2015 all key sites will have
conducted an initial risk profile which will be routinely reviewed
and updated. This will supersede the current process where
risks were considered primarily at divisional and Group levels.
Each Divisional Managing Director has appointed a risk
champion with responsibility for embedding the Group risk
assessment process within their business. The businesses’
risk reports, including mitigation action plans for significant risks,
are reviewed by the most senior executive within the relevant
business. These are then reviewed by the Executive Committee,
which in turn submits a full half yearly risk assessment to the
Board. The Board explicitly considers the risks associated
with the Group’s strategic objectives. The Executive Committee
also reports to the Board on major business and other risks
involved in specific investment decisions including acquisitions
and divestments.
Through these processes a list of significant risks is identified,
assessed and ranked according to their probability and
materiality and, following Executive Committee review,
the Board considers the measures to be utilised to mitigate,
transfer or avoid such risks. Risk appetite across the range of
strategic objectives of the Group is also reviewed by the Board.
In addition to strategic and operational risks, we are also exposed
to a number of financial market risks including credit risk, liquidity
risk, counter party risk and fluctuations in foreign exchange rates,
interest rates and commodity prices. A description of these risks
and our centralised approach to managing them is set out in
section 4.4 to the financial statements.
During 2015 we will be further enhancing our risk management
process in line with the recent revisions to the UK Corporate
Governance Code and associated best practice guidance.
The key strategic and operational risks facing the Group are
shown in the table on pages 31 to 33. This table includes a
description of the risk and the potential impact on the Group,
a summary of the mitigation actions, the risk movement and
the main changes during 2014.
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IMI plc
