RISK MANAGEMENT CONTINUED
Emerging risks To complement our existing enterprise risk management framework, we have enhanced and refined our approach to managing emerging risks. These risks are reviewed as part of our formal risk management process and are also considered in the day-to-day operations of the Group and its operating companies. We assess the emerging risk landscape across three time horizons: short-term (0–3 years), medium-term (4–10 years), and long-term (10+ years). Our assessments are informed by: ■ Emerging risk factors identified at the operating company level through a bottom-up process ■ Insights from leading external thought leaders on global emerging risks ■ Input from members of the Board and Group Management Committee on emerging risk trends Each emerging risk is assigned a dedicated owner at Group Management Committee level. These risks are recorded in the Group Risk Register and monitored continuously throughout the year. These owners are responsible for tracking the development of risks and implementing appropriate mitigation strategies as needed.
The Group Risk function is continually looking to improve the Group’s Enterprise Risk Management framework. During FY 2023/24, the Group Risk function was subject to a maturity assessment, which assessed the effectiveness of the function against recognised risk management standards, such as ISO 31000 and the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework. The aim of this exercise was to ensure the function is best placed to manage the risks the Group currently faces and is effectively horizon scanning for new risks. Actions identified as part of this assessment were completed during FY 2025/26 to further improve the effectiveness of the Group Risk function. The Group Risk function also regularly attends round-table events with service providers and peers to ensure that its activities are aligned with leading practices. A key element in assessing the Group’s principal risks is considering likelihood and potential magnitude of impact, over a range of time horizons, as well as whether the risks are new or emerging, or have changed in importance during the year. The below diagram provides a summary of the PRUs on that basis.
Two processes are conducted in parallel:
Step 1
A top-down review of the Group Risk Register to: ■ identify new or emerging risks ■ assess changes to existing risks ■ consider the potential impact and likelihood of risks ■ evaluate existing mitigating actions and controls ■ consider the residual risks remaining after the applications of the Group’s internal control processes (and, if appropriate, the implementation of further mitigating actions)
A bottom-up review by the management of each business to:
■ identify new or emerging risks ■ assess changes to existing risks ■ consider the potential impact of risks
■ evaluate existing mitigating actions and controls ■ consider residual risks (and if appropriate the implementation of further mitigating actions)
The top-down review of the Group Risk Register is conducted by the Group Risk team, Divisional Management, Group Technology Services, and the internal Group Sustainability Team. The bottom-up review is conducted by the management team within each business with support from the Risk team. ■ Comparison of the results of the top-down and bottom-up identification processes above. The benefits of conducting both top-down and bottom-up reviews are: – increased assurance that all risks have been identified, with input from multiple perspectives – ensuring alignment between local management and Head Office – ensuring that businesses take ownership of the risks most relevant to their individual operating unit – ensuring that controls in place to mitigate risks at the operating unit level are appropriate ■ An assessment of any differences identified, and an update of the Group Risk Register as appropriate. The Group Risk team conducts a review of any risks identified through the bottom-up process to determine whether they require escalation to the Group Risk Register. Risks suggested for escalation to the Group Risk Register are reviewed in the first instance by the Group Management Committee. ■ Review of the Group Risk Register by the Group Management Committee. This review focuses on: – the materiality of each of the risks identified – prioritisation of the allocation of the Group’s resources to the most important areas – clarity of ownership for each of the risks identified This review takes into account the Group’s risk appetite in respect of the various types of risk identified. The Group Risk Register is then updated as appropriate following the review. This is then summarised in a table of principal risks and uncertainties, the final version of which (for FY 2025/26) is set out on pages 79 to 84.
Step 2
Step 3
Very high risk
1 Market, geopolitical and trade environment 2 Business acquisition under- performance 3 Climate-related risks 4 Cyber security and digital resilience 5 Customer demand, key customer and end-market risk 6 Supply chain resilience 7 Technology, innovation and product relevance 8 Major business disruption 9 Loss of key personnel 10 Product quality and liability 11 Financial Controls and Reporting 12 Liquidity and financing 13 Foreign currency 14 Legal, regulatory, and compliance
High risk
1
2
Medium risk
5
4
8
3
Low risk
10
9
Step 4
■ Review by the Audit and Risk Committee – this includes: – consideration of the Group’s risk management framework – review of the Group Risk Register – identification of any other areas of potential risk
7
6
Very low risk
– review of the table of principal risks and uncertainties – challenging actual or potential control weaknesses – review of the effectiveness of the Group’s internal controls and risk management systems, including consideration of the operation of key controls and related assurance activities
13
11
14
12
These processes are conducted twice each financial year: ■ an interim review, typically completed shortly ahead of announcement of the Group’s interim results, focuses predominantly on changes during the first half of the year ■ a comprehensive review of all risks within the Group Risk Register is completed shortly before the Group’s full-year preliminary results announcement. The processes ultimately lead to the compilation of the Group’s principal risks and uncertainties (“PRUs”), of which further detail can be found on pages 79 to 84.
KEY Category of risk: Strategic risk Operational risk
Financial risk Regulatory/ Compliance risk
76
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discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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