TRAVIS PERKINS PLC
Pandemic NEW ABC High
External AE N High
Changing customer & competitor ABC ABDE ? High Medium
landscape ?
Supplier risks ?
?
? Medium
Portfolio management ?
Strategic Change management BCDE ACDE ABCE ? High
ESG NEW ? High
N
IT systems and infrastructure AD ? ? High
Technological Cyber threat and data security AE High
? ?
? ?
People ABC
Operational AE Medium Medium
Health, safety & well-being Legal ABCDE ? ? Medium
compliance
? ? Key A. Best-in-class services B. Focus on trade C. Advantaged businesses D. Simplify the Group E. Financial strength
N New
? Increasing
? Decreasing
? Limited change year-on-year
Key disruptive risks that may impact the viability of a strategy or business model are also identified and managed. Whilst several principal risks, including market conditions, supplier risks and the changing customer and competitor landscape, include elements that are considered disruptive in nature, they are categorised above according to the primary driver of the risk.
Key changes in the year
The risk environment in which we operate does not remain static and the Board has made the following changes to the principal risk set in 2020:
* Covid-19 was identified as an emerging risk in the 2019 report and has been the dominant area of focus for our risk management activities throughout 2020. Pandemic risk, specifically in relation to Covid-19, is now recognised as a new principal risk due to the inherent uncertainty associated with it. A pandemic is one of the very few risks that could result in the complete shutdown of our operations. Covid-19 has the potential to amplify or accelerate the onset of certain of our other principal risks and this potential for risk interdependencies has been kept under review during 2020, alongside the additional mitigation measures implemented.
* Brexit risk assessment and contingency planning remained a focus in 2020. In preparation for the end of the transition period, to offset potential disruption to the flow of goods in the event of "no deal", the business units again built targeted contingency stocks in the categories deemed most at risk, to ensure stock remained available to customers. To date, there has been little Brexit-related impact to the flow of goods although Covid-19 related disruption at certain ports has impacted us in a limited way. The Board no longer considers Brexit to be a principal risk.
Management have prepared for, and will continue to implement, the required changes to customs procedures, product standards and the recruitment of EU citizens, which remain the more significant areas of Brexit impact for the Group. Where relevant, Brexit-related risks have been incorporated into our other principal risks, and the underlying "bottom up" risk management processes.
* ESG is an area of increasing importance, as we recognise our impact and potential influence on the environment, the construction industry and wider society. We are seeking to take a leading position on ESG matters, which both addresses our responsibilities and an increasing level of interest and expectations from our customers, investors and other stakeholders. Accordingly ESG matters have been added as a principal risk.
* The risks in relation to Portfolio Management and Capital Allocation have been combined.
* In relation to principal risks brought forward from 2019, the Board considers that the market conditions risk, supplier risks and the changing customer and competitor landscape risk are increasing. All other risk trends are unchanged.
Emerging risks
As part of the overall risk assessment process, and in line with the requirements of the UK Corporate Governance Code, we capture and monitor areas of uncertainty that do not currently present a significant risk but which have the potential to adversely impact the Group in the future. These emerging risks are identified from regular reviews of risk research and other publications, alongside perspectives on emerging risks collated from assessments made by the business unit and functional leadership teams and the results of assurance activities. The emerging risks considered by the Board during 2020 included sustainability and climate change matters, digital technologies and, as a result of the pandemic, the impacts of changes to working locations and ways of working.
Market conditions
Impact Risk description Risk mitigation
Our markets are highly fragmented and cyclical in
nature and performance is affected by general
economic conditions and a number of specific
drivers of construction, repairs, maintenance and
improvement and DIY activity. These include the Our businesses all hold #1 or #2 positions in their
volume of housing transactions, driven by chosen markets.
mortgage availability and affordability, house-
price inflation, the timing and nature of
government activity to stimulate activity, net
disposable income, consumer confidence, interest We maintain a comprehensive tracking system for lead
rates and unemployment levels. indicators that influence the market for the
consumption of building materials in the UK.
The fundamental long-term market drivers remain
robust despite Covid-19 related uncertainty in The Board conducts an annual review of strategy,
the short-term. Whilst a number of longer-term which includes an assessment of likely competitor
themes are beginning to impact the industry, activity, market forecasts and possible future
? Adverse these present us with both opportunities and trends in products, channels of distribution and
effect on risks in responding to the changes: customer behaviour.
financial
results ? Traditional ways of working in the industry
? Loss of will change, driven by technology and an
market share increasing move to modern methods of Significant events that may affect the Group are
construction. monitored by the Group Leadership Team and reported
? There is a need to address a growing to the Board monthly by the Group CEO. Should market
productivity challenge in the construction conditions deteriorate then the Board has a range of
sector alongside an increasing scarcity of options dependent upon the severity of the change.
technical knowledge, which will hinder Historically these have included amending the
industry growth if unaddressed. Group's trading stance, cost reduction, changing the
? There is a drive for greater digitisation, focus or lowering capital investment and reducing
which has accelerated as a result of the the dividend.
pandemic.
? The ability to deliver and measure social
value will become fundamental to long-term
success. We have established a number of partnerships to
explore opportunities to work with companies
involved in modern methods of construction.
We must also manage the impacts of changing
building standards and the UK Government's future
framework for heat in buildings through the
products and services that we offer.
Pandemic
Impact Risk description Risk mitigation
The Covid-19 pandemic has significantly impacted
our operations and results in 2020. It is not
clear how long the pandemic will last, how much We acted quickly to respond to the challenges posed
more extensive it may yet become, what impact by Covid-19 with the safety and well-being of
further virus variants could have, how quickly colleagues and customers our overriding priority in (MORE TO FOLLOW) Dow Jones Newswires
March 02, 2021 14:55 ET (19:55 GMT)
