Vector Annual Report 2020

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Our key and emerging risks

Investor engagement Vector’s Board is committed to maintaining open and transparent communications with investors and other stakeholders and it supports a programme for two-way engagement with shareholders, debt investors, the media and the broader investment community. Annual and interim reports, NZX releases, quarterly reports on operational performance, governance policies and charters and a wide variety of corporate information are posted on Vector’s website. Vector conducts detailed market briefings in conjunction with the release of the annual and interim financial results. Transcripts of the briefings are available at the annual reports page of the Investor section of the website.

STRATEGIC RISKS Business evolution and adaptation

Changing customer needs and expectations; managing the balance of regulated and non- regulated revenues effectively Appropriately innovating and keeping pace with technological advancements as they emerge

Rapid digitalisation and technology changes

Product/service commercialisation Delivery of new revenue streams in a dynamic marketplace, needing a strong coordinated approach Portfolio management Delivery of acceptable returns in the medium term, through actively managing the investment portfolio and capturing growth opportunities Political and regulatory uncertainty Ongoing changes in the New Zealand and Australian political and regulatory landscape; ensuring the regulatory environment keeps pace with technological and operational change

Accelerated climate change adaptation and mitigation

Exposure of network assets to potential changes in weather trends and increased severe weather events; transition to a net zero emissions economy (presents both risks and opportunities for the business) Heightened focus on ensuring organisations appropriately manage, use and safeguard data

Data governance and management

OPERATING RISKS Cyber security

Vector’s IT/OT environment being compromised, leading to disruption to critical services or confidential information being released, modified or deleted Significant HSE incident Safety Always is fundamental to Vector’s operations, to protect our people, contractors and the wider public Core business operational failure Strong business continuity practices to minimise disruption from the unlikely event of a significant operational incident at a critical site or the impacts of a pandemic on the Vector Group External factors, resourcing and technical constraints and Auckland’s ongoing growth; challenging Vector’s ability to achieve SAIDI and SAIFI targets Reputational damage The use, speed and hyper-transparency of social media, coupled with increasing engagement with customers EMERGING RISKS Trust and ethical conduct perceptions Heightened focus on organisational trust, transparency and conduct Talent, capability and capacity Resourcing capability and capacity due to the volume and speed of change, together with evolving workforce requirements and skillsets Compliance with quality standards

Growing value of intangible assets

Increasing role of intangibles in supporting and driving business value (presents both long-term opportunities and risks)

ENVIRONMENTAL RISKS

TECHNOLOGICAL RISKS

ECONOMIC RISKS

SOCIETAL RISKS

OPERATIONAL RISKS

THE INTERPLAY OF TODAY AND TOMORROW

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