Strategic Report Risk Management
Principal risks and uncertainties The Group has determined its key principal risks as those risks that the Group considers material and which could have a significant impact on the Group’s financial position, its operations and/or reputation. Risk management The Group’s principal risk management processes comprise risk registers and reviews, control risk self-assessment and a Risk Management Committee. The Group faces a diverse range of risks and uncertainties which could have an adverse effect on its success if not managed. The Group has designed and embedded a risk management process to identify and monitor potential risks and uncertainties relevant to the Group and then seeks to eliminate or reduce these to the lowest extent possible to protect the business, its people and customers, and support delivery of its strategy. The risk management process is intended to mitigate and reduce risk to the lowest extent possible but cannot eliminate all risks to the Group and its businesses. The Group’s risk management process and controls can only provide reasonable and not absolute assurance against material misstatement or loss. The risk management process incorporates both top-down and bottom-up elements to the identification, evaluation and management of risks. Mitigating controls are identified and opportunities for their enhancement are implemented. Risk Governance The Board of Management is ultimately responsible for the Group’s system of risk management and internal controls and reviews their effectiveness on a regular basis throughout the year. Risk overview The Board of Management recognises that the risks faced by the Group change and it regularly assesses risks to manage and mitigate any impact.
Summarised below are the key risks, not in order of significance, that the Board of Management has identified as the primary risks to the Group’s successful financial performance, reputation or operations in the year ended 31 December 2022 and future years. Financial risk management The Group has established processes to identify, monitor, mitigate and where feasible, eliminate these risks. Capital management Management consider capital to consist of equity plus net debt as disclosed in the balance sheet. The primary objective of the Group’s capital management is to ensure healthy capital ratios in order to support its business and maximise shareholder value. The Group’s financial instruments comprise of cash and liquid resources and various other items, such as receivables and trade payables that arise directly from its operations. The Group’s policy is to finance its operations through operating cash flows and has access to a fully committed irrevocable £75m facility from HSBC. Market risk The Group’s activities are principally provided to UK businesses and as a result the fortunes of the business are linked to the general health of the UK economy. The company’s exposure is limited by having a broad customer base and a diversified portfolio of services, however the business remains exposed to fluctuations in marketing budgets, e-substitution, recession and continued market evolution. Regulatory risk The DSA part of the Group operates in a regulated market which affords a level of protection against any anti- competitive behaviour, mandates access to Royal Mail’s network and controls elements of Royal Mail’s pricing. The regulator, Ofcom, has made changes to the postal regulatory regime following its last review, and this framework will remain in place until 2027. Management considers this risk to be manageable and in control.
Credit risk The Group has significant credit risk which is managed by specialist credit control teams. Standardised company processes, credit checks, managed and monitored credit limits and tight credit control processes are adhered to in order to minimise the risk. In addition, the Group utilises credit insurance, where available to protect any significant exposure to bad debts. Treasury management In order to maintain liquidity and to ensure that sufficient funds are available for ongoing operations and future developments, all risk exposures including funding, foreign currency, interest rate exposures and cash management are regularly monitored by the Board of Management. The prime focus being performance and strategic issues as well as the mitigation and management of these risks to an acceptable level. The Group expects to meet its financial obligations through operating cash flows. In the event that the operating cash flows would not cover all the financial obligations, the Group has substantial, fully committed unused credit facilities available. Price Competition The Group operates in a highly competitive environment. The Group is focusing on excellent account management and consistent quality of service with initiatives designed to improve competencies surrounding customer services, operational improvement, sales support and training. In the Parcel and Mail business, the key factors for success are quality, customer confidence and competitive prices. The Group mitigates this risk through close customer contact, with key account managers regularly undertaking performance review. Pricing of Royal Mail services is determined by Royal Mail but is monitored by the regulator, Ofcom. Our success in the ecommerce fulfilment sector is dependent on a continued focus on the development of our services which are aimed at a growing ecommerce market. We continually monitor our competition and the market to ensure that we remain in a competitive position.
Whistl Annual Report 2022
29
Made with FlippingBook interactive PDF creator