External auditor The effectiveness, performance and independence of the external auditor is reviewed annually by the Audit Committee. The company’s external auditor is KPMG. Malcolm Downes has been the Audit Partner since 2018 and Laura Youdan has been the Assurance Partner since 2018. KPMG has provided the Board with the required independence declaration for the financial year ended 30 June 2019. The Audit Committee has determined that there are no matters that have affected the auditor’s independence. It is the Board’s policy that all non-audit services proposed to be undertaken by the external auditor must be pre- approved by the Audit Committee. The Audit Committee considered and gave its approval for the auditor to undertake certain non-audit related matters. KPMG was paid $1.2m for services in the financial year to 30 June 2019. Of this sum, $1.0mwas for audit- related services and $0.2mwas for non- audit related services. Further detail is provided on page 64 of this annual report.
Risk management At Vector, we recognise that rigorous risk and opportunity management is essential for corporate stability and performance, and supports Vector in its pursuit to create a new energy future. To drive sustainable growth and ensure business resilience, we must anticipate risks to our operations while capitalising on opportunities as they arise. Vector’s enterprise risk management (ERM) framework provides a flexible and purpose-built approach to the application of risk management across Vector and is consistent with the Australian/New Zealand Risk Management Standard “AS/NZS ISO 31000:2009 Risk management – Principles and Guideline”. Our risk management processes and tools are embedded within our business operations to drive consistent, effective and accountable decision-making. Consistent with the “Three Lines of Defence” principle, all Vector people are responsible for applying Vector’s ERM framework within their individual roles and are encouraged to proactively identify, analyse, escalate and treat risks.
This risk mindset has been implemented through: ‒‒ Acknowledgement of risk management’s value at Executive and Board level; ‒‒ Relatable and easily applied risk management policies, processes and tools; ‒‒ Integration of risk champions throughout the business; and ‒‒ Continuous training and education, both formal and informal. Vector regularly monitors the changing business landscape, assessing the influence of macrotrends on Vector’s group wide risks and opportunities. To further promote accountability and transparency, key business areas formally present their material risks to the Risk and Assurance Committee on an annual basis. These material risks are assessed against a group wide set of criteria covering both consequence and likelihood, as defined in Vector’s Group Risk Assessment Matrix. operating environment. These perspectives, along with material risks from individual business unit risk profiles, support the identification of key Vector’s IT/OT environment being compromised, leading to disruption to critical services or confidential information being released, modified or deleted Safety Always is fundamental to Vector’s operations, to protect our people, contractors and the wider public Strong business continuity practices to minimise disruption from the unlikely event of a significant operational incident at a critical site External factors, resourcing and technical constraints and Auckland’s ongoing growth; challenging Vector’s ability to achieve SAIDI and SAIFI targets The use, speed and hyper-transparency of social media, coupled with increasing engagement with customers
Our key and emerging risks
STRATEGIC RISKS Business evolution and adaptation Rapid digitalisation and technology changes Product/ service commercialisation
OPERATING RISKS Cyber security
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 Delivery of new revenue streams in a dynamic marketplace, needing a strong coordinated approach Delivery of acceptable returns in the medium term, through actively managing the investment portfolio and capturing growth opportunities Ongoing changes in the New Zealand and Australian political and regulatory landscape; ensuring the regulatory environment keeps pace with technological and operational change 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
Significant HSE incident
Core business operational failure
Portfolio management
Compliance with quality standards
Political and regulatory uncertainty
Reputational damage
EMERGING RISKS Trust and ethical conduct perceptions
Accelerated climate change adaptation and mitigation
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 Increasing role of intangibles in supporting and driving business value (presents both long-term opportunities and risks)
Data governance and management
Growing value of intangible assets
ENVIRONMENTAL RISKS
TECHNOLOGICAL RISKS
ECONOMIC RISKS
SOCIETAL RISKS
OPERATIONAL RISKS
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