PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk description Potential impact
Mitigating actions
Change in the year
Risk description Potential impact
Mitigating actions
Change in the year
3 Climate-related risks Climate-related risks arise from
5 Customer demand, key customer and end-market risk Exposure to changes in customer
Physical risks ■ Disruption to
■ Reduction in revenue and profitability from loss or reduced demand from key customers ■ Variability in sales and order intake across end markets ■ Increased bad debt risk in the event of customer insolvency ■ Loss of market
■ Low dependence on any single customer (the largest customer represents c.6% of Group revenues) ■ Exposure to diverse end markets and applications, reducing dependency on individual customers or sectors ■ Robust quality management systems (including ISO 9001) ■ Strong, long-term customer relationships supported by high service levels and engineering collaboration ■ Ongoing monitoring of customer demand trends, pipeline activity and financial health
■ An assessment of the physical risks of climate change to the Group’s facilities was conducted, which concluded that such risks are considered to be low impact overall for the Group. See the Climate Analysis Report on pages 60 to 66 for further details. ■ Diversified supply chains with ability to switch suppliers ■ Group-wide emissions reduction targets and sustainability strategy ESG targets are established both at a Group and operating company level ■ A credible Transition Plan to net-zero has been devised and implemented across the Group ■ Regular Board and Committee oversight of ESG matters
both the physical impacts of climate change and the transition to a lower-carbon economy, including evolving regulatory, reporting and
operations from extreme weather events
■ Good progress made against Scope 1 and 2 net-zero emissions plan, with an absolute reduction of 68% on the CY2021 baseline. See further details on page 71 ■ Refreshed our Scope 3 assessment. See further details on page 73 ■ Refreshed our physical risks of climate change assessment across Group facilities ■ Refreshed Transition Plan published in June 2026 ■ Net-zero targets validated by SBTi in May 2025 Link to KSIs: A B C D E F
■ Global economic instability creating
demand across the Group’s end markets, including cyclicality,
additional pressure on customers, partially offset by improving order trends and strengthening demand across key markets.
■ Supply chain
interruptions affecting production Transition and ESG risks ■ Increased regulatory requirements and compliance costs ■ Reputational impact if ESG expectations are not met ■ Reduced access to capital or customer opportunities
programme changes and competitive
pressures, as well as the risk of loss or reduction in business from key customers
Link to KSIs: A B C D
stakeholder expectations
share in specific applications or segments
6 Supply chain resilience
Risk of disruption to the supply of critical components and materials due to supplier failure, geopolitical factors or logistical constraints
■ Negative impact on production ■ Damaged relationships with key customers ■ Reduced sales
■ Low dependency on any single supplier ■ Dual source suppliers in place where possible ■ Diversified global supply base ■ Flexibility to switch suppliers where required ■ Long-term supplier relationships, enhanced by strong customer relationships ■ Monitoring of market and technological developments, including input from customers
Link to KSIs: A B C
Operational risk 4 Cyber Security and digital resilience
7 Technology, innovation and product relevance
Risk of cyberattack, resulting in data breach or system failure
■ Business interruption and operational downtime ■ Loss or theft of confidential data ■ Financial loss and regulatory penalties ■ Reputational damage
■ Layered cyber security controls including endpoint protection and network monitoring ■ 24/7 security operations monitoring through outsourced Security Operations Centre (SOC) ■ Incident response and digital forensics capabilities ■ Regular cybersecurity training across the Group ■ Segregated IT systems across operating units to limit impact of breaches ■ Regular reviews of IT infrastructure and third- party providers ■ Robust backup and recovery processes in place, including regular, automated backups, off-site and segregated storage, and periodic testing of restoration capabilities to ensure business continuity
The development of new technologies that gives rise to significant new competition or renders our products obsolete
■ Reduced sales ■ Loss of market share ■ Inventory write-offs
■ The Group is diversified into a number of differentiated technology units ■ Focus on established technologies with low capital requirements ■ Group-wide conference held to discuss use cases and best practice relating to AI ■ Monitoring of emerging technologies, including artificial intelligence ■ Businesses work closely with customers on new engineering projects to ensure products meet their needs ■ All businesses contribute to a design pipeline aimed at widening the product portfolio
■ General increase in cyber risks globally, driven by a rise in the number and sophistication of cyberattacks and the emergence of new technologies such as artificial intelligence ■ Table-top cyber exercise conducted with Senior
■ Emergence of new technologies, including AI, presents both a risk and opportunity for the Group ■ Acquisitions in the year increase the number of technologies within the Group Link to KSIs: A B C
Management across the Group to promote awareness and readiness
Link to KSIs: A B C D
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
80
81
discoverIE Group plc Innovative Electronics
Annual Report and Accounts for the year ended 31 March 2026
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