RISK MANAGEMENT CONTINUED
PRINCIPAL RISKS AND UNCERTAINTIES
Focus on principal risks This section of the Strategic Report provides an overview of the Group’s approach to managing risk, focusing on the major risk factors to implementing the Group’s strategy and business model. It is not an exhaustive list of all possible risks. Additional uncertainties exist, some of which may not be known to the Group and could have a negative effect on the Group’s financial position and performance. The principal risks and uncertainties detailed below were considered in assessing the long-term viability of the Group. The viability statement can be found on pages 85 to 86. In line with the risk appetite statement found on page 75, the Group takes a risk averse approach to managing its principal risks. The numbering of the below risks does not represent the ranking of these risks by the Group.
Ongoing monitoring, mitigation and improvement In addition to the processes outlined above, key risks, and the internal controls established to mitigate those risks, are subject to ongoing monitoring and review. Among other controls, this includes a review by the Group Management Committee in all of its regularly scheduled governance meetings (typically six per year) and escalation to the Board of any material developments as and when they arise. discoverIE continually pursues improvements in its Enterprise Risk Management Framework. A summary of this continual cycle of risk identification, establishment of systems and processes to mitigate, communication and ongoing monitoring, is outlined in the diagram below.
Risk description Potential impact
Mitigating actions
Change in the year
Strategic risk 1 Market, geopolitical and trade environment
1
Identify and assess internal and external risks
Exposure to macroeconomic cycles, geopolitical developments and changes in global trade policies, including tariffs and regional trade restrictions, which may impact demand, supply chains and the Group’s ability to operate effectively in certain regions
■ Reduction in sales ■ Lower margins ■ Closure of factories and suppliers stopping production ■ Difficulty raising equity and debt, impacting ability to acquire businesses
■ Focus on structurally growing, resilient target markets with diversified end-market exposure ■ Broad geographic footprint with flexibility to adjust production and sourcing across regions ■ Close monitoring of macroeconomic and geopolitical developments ■ Strong balance sheet with committed long-term financing facilities and significant headroom ■ Disciplined approach to entering higher-risk markets
■ Increased global tariffs ■ Continued conflicts in the Middle East and Ukraine
5
2
Objective: foster a culture of risk management to effectively execute discoverIE’s sustainable strategy
Monitor effectiveness of mitigation efforts
Determine appropriate risk response
Link to KSIs: A B C D E
4
3
Communicate risks and mitigation plans
Establish systems and accountability, controls policies and procedures
2 Business acquisition under-performance
Risk that acquisitions do not deliver expected strategic or financial benefits
■ Underperformance of acquired businesses against business case ■ Failure to achieve expected synergies and returns ■ Loss of key management or technical expertise ■ Failure to effectively integrate with the Group
■ Rigorous operational, financial and legal due diligence on target businesses ■ Appropriate warranties and indemnities from vendors ■ Use of earn-out structures to incentivise key management ■ Monitoring of the acquired business performance against budget and forecast ■ Hiring of experienced management and finance personnel ■ Where possible, new acquisitions become part of a cluster reporting operationally to an existing established senior business ■ Tailored onboarding process for all new acquisitions ■ Post-acquisition assurance programme put in place by Group Internal Audit function to check alignment to essential Group controls
■ Two new acquisitions (for a total of £46m) completed since 1 April 2025 Link to KSIs: A B C D E F
KEY STRATEGIC INDICATORS A Sales growth B Adjusted
Adjusted earnings per share growth
C
operating margin
Return on capital employed
Carbon emissions reduction
D Cash conversion
E
F
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discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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