21 Dec 2016 12:04
EUROMONEY INSTITUTIONAL INVESTOR PLC
PUBLICATION OF ANNUAL REPORT AND ACCOUNTS 2016 AND NOTICE OF 2017 ANNUAL GENERAL MEETING
Euromoney Institutional Investor PLC has today published the following documents on its website www.euromoneyplc.com:
Document | Location |
Annual Report and Accounts 2016 | www.euromoneyplc.com/investor-relations/reports-and-presentations |
Notice of Annual General Meeting 2017 | www.euromoneyplc.com/investor-relations/shareholder-services/agm-information |
The printed Annual Report and Accounts were posted to those shareholders who have requested them on or around Wednesday December 21 2016, together with the circular incorporating the Notice of Annual General Meeting and Form of Proxy. These documents and web default letter (for those shareholders opting for electronic communications) have been uploaded to the UK Listing Authority's National Storage Mechanism and will be available in two business days.
The information below is provided solely for the purpose of complying with DTR 6.3.5 and is not a substitute for reading the full Annual Report and Accounts.
As required by DTR 6.3.5 (1), we set out below the Directors' responsibilities statement contained within the Annual Report as follows:
Directors' Responsibility Statement
"Each of the directors confirm that to the best of their knowledge:
· the group financial statements, are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the group taken as a whole; and
· the Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the group taken as a whole, together with a description of the principal risks and uncertainties that it faces."
Principal risks and uncertainties
The principal risks and uncertainties the group faces vary across the different businesses and are identified in the group's risk register. Management of significant risk is regularly on the agenda of the board, the risk and audit committees and other senior management meetings.
The group's principal risks and uncertainties are summarised below. The arrows provide a pictorial indication of the change in level of perceived risk compared to last year.
Downturn in key geographic region or market sector (cyclical downturn) | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Third of revenue exposed to emerging markets § Concentration of customers in financial services sector makes this exposure acute § Economic or geopolitical uncertainty increases this risk § Brexit risk is creating some uncertainty though impact limited so far § Events like 9/11 or the 2008-9 financial crisis may trigger or accelerate cyclical downturns | § Active portfolio management with a clear framework and operating in line with agreed strategy § Group operates in many geographical markets § Some diversity in product mix § Ability to cut some costs temporarily and quickly § Events can be switched to better performing regions
| Risk tolerant |
| |
Prior years (relative position) 2015: Risk tolerant 2014: Risk tolerant | ||||
| Risk trend | ||||
| Ý | This risk is increasing | |||
| Description of risk change | ||||
| Global economic and geopolitical uncertainty is increasing following Brexit and the U.S. election with upcoming national elections in Europe during 2017 further increasing this risk. | ||||
Board's view
There are limited options to mitigate impact in the short and medium term from a significant cyclical downturn. The residual risk will remain high.
Product & market transformation/disruption (structural change) | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Competition from existing competitors, new disruptive players and new entrants § New technologies change how customers access and use the types of products the group provides § Changing demographics can affect customer needs and opportunities § Structural pressure on customer business models will affect demand for group's products and services particularly, for us, in financial services § Free content available via the Internet increases the threat to paid subscription model § Lower barriers to entry for new entrants | § Strategy designed to understand these risks and respond to them, and take advantage of the opportunities they also present § Regular CEO-led reviews across all divisions § Entrepreneurial approach § Effective management reporting with regular budget reviews § Active investment programme in technology § Engagement of external expert consultancy § Portfolio spreads risk to some degree § Third of group's profits remain event-based § Portfolio management allows the group to divest structurally challenged businesses and to buy structurally strong ones
| Risk tolerant |
| |
Prior years (relative position) 2015: Risk tolerant 2014: Risk tolerant | ||||
| Risk trend | ||||
| Ü | This risk is unchanged | |||
| Description of risk change | ||||
| As an entrepreneurial business, the group is experienced at managing this risk. | ||||
Board's view
High-quality controls are in place but exposure to this risk cannot be entirely mitigated.
Exposure to US dollar exchange rate | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Approximately two-thirds of revenues and profits are generated in US dollars, including approximately 30% of the revenues in its UK-based businesses § Includes Canadian operations which are reported in US dollars § Significant reliance on strength of US dollar for both UK revenues and translation of results of foreign subsidiaries § Strengthening of sterling against US dollar will reduce revenues and profit, and consequently dividend § Weakening of sterling following Brexit has had a favourable impact on translation of overseas results | § US dollar forward contracts in place to hedge 80% of UK based US dollar revenues for coming 12 months and 50% of UK based US dollar revenues for further six months § Sensitivity analysis performed regularly to assess impact on results if sterling strengthens against US dollar § Exposure from the translation of US dollar-denominated businesses is in part offset by local US dollar costs. However, a significant weakening of the US dollar could materially affect the translation of these results in the consolidated financial statements
| Risk tolerant |
| |
Prior years (relative position) 2015: Risk tolerant 2014: Risk tolerant | ||||
| Risk trend | ||||
| Ü | This risk is unchanged | |||
| Description of risk change | ||||
| The group is experienced at managing risks related to its exposure to US dollar exchange rate. | ||||
Board's view
The risk to revenue resulting from a depreciation of the US dollar against sterling has previously been reported within risks from treasury operations. Although the group considers this risk unchanged, following the increased volatility and uncertainty of sterling both before and after Brexit, which is likely to continue for some time, it is now being tracked separately.
Information security breach resulting in challenge to data integrity | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Integrity of data products is fundamental to the success of the business § The group relies on large quantities of data including customer, employee and commercial data § Increasing number of cyber-attacks affecting organisations globally § The group has many websites and is reliant on distributed technology increasing exposure to threats from cybercriminals § A successful cyber-attack could cause considerable disruption to business operations, lost revenue, regulatory fines and reputational damage § Impact of new EU General Data Protection Regulation will increase regulatory scrutiny and penalties § Technological innovations in mobile working, cloud-based technologies and social media introduce new information security risks | § Governance provided by risk committee and information security group § Comprehensive information security standards and policies which are reviewed on a regular basis § Active information security programme to align all parts of the company with its information security standards § Crisis management and business continuity framework covers all businesses including disaster recovery planning for IT systems § IT controls including firewalls and intrusion detection software § Access to key systems and data is restricted, monitored and logged with auditable data trails in place § Comprehensive backups for IT infrastructure, systems and business data § Professional indemnity insurance provides cover for cyber risks including cyber-attack and data breach incidents § Information security reviewed as part of every internal audit § Mandatory annual information security training for all employees and freelancers
| Risk averse: becoming more averse |
| |
Prior years (relative position) 2015: Risk averse 2014: Risk neutral | ||||
| Risk trend | ||||
| Ý | This risk is increasing | |||
| Description of risk change | ||||
| Most industry information security analysts report that this risk is increasing and warn that companies will continue to face more regular and sophisticated cyber-attacks. | ||||
Board's view
Controls to prevent an information security breach or cyber-attack are regularly enhanced however the rising number of cyber-attacks affecting organisations globally, the group's greater dependency on technology and the growing threat from cyber-crime are increasing this risk.
Reputational damage or legal/regulatory challenge arising from price, benchmark and index reporting activities | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Price discovery is an investment theme § Success of pricing, benchmark and index businesses is dependent on client confidence in integrity of products and brands § Journalists, researchers and analysts within commodity pricing and asset management divisions produce market sensitive data § Compliance risk increasing for information providers as price, benchmark and index reporting activities are coming into scope of new regulations being introduced as a result of the financial crisis of 2008 and LIBOR scandal § Risk of reputational damage as a result of errors in data collection or incorrect price assessments or benchmark and index calculation § Risk of reputational damage as a result of misconduct in relation to price discovery or benchmark and index calculation activities
| § Processes and methodologies for assessing commodity prices and calculating benchmarks and indices are clearly defined and documented § Compliance staff appointed in key positions § Code of conduct and other key policies in place for price assessment, benchmark and index reporting activities § Specialist training provided to relevant staff § New technology being introduced to provide enhanced monitoring and better exception reporting § External ethics and assurance reviews conducted § Company-wide speak up policy § Comprehensive legal disclaimers in place § External PR consultancy retained § Professional indemnity insurance
| Risk averse: becoming more averse |
| |
Prior years (relative position) 2015: Risk averse 2014: Risk averse | ||||
| Risk trend | ||||
| Ý | This risk is increasing | |||
| Description of risk change | ||||
| Information providers face increased compliance risks as a result of new financial laws and regulations being introduced worldwide. | ||||
Board's view
New financial regulation, including MiFID II, being introduced to improve market transparency under which prices, benchmarks and indices are provided, is likely to affect a number of the group's research and commodity pricing businesses. Legal and regulatory compliance risk for the group is therefore increasing.
Disruption to operations from a business continuity failure | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Significant reliance on third-party technology hosting services § Many products are dependent on specialist, technical and editorial expertise § A significant incident affecting one or more of the company's key offices (London, New York, Montreal, Hong Kong or Sofia) could lead to disruption to group operations and reputational damage § Divisional group structure with 40+ international offices makes regular testing of plans across the group challenging | § Crisis management and business continuity framework covers all businesses including disaster recovery planning for IT systems § Clear responsibilities for business continuity planning established across divisions § Substantial central investment in leading third-party specialist hosting services provider with multi-site failover § Risk assessments for new suppliers and technologies consider operational and financial resilience § External reviews of key dependencies | Risk averse: becoming more averse |
| |
Prior years (relative position) 2015: Risk averse 2014: Risk averse | ||||
| Risk trend | ||||
| Ü | This risk is unchanged | |||
| Description of risk change | ||||
| The group recognises that business continuity events will arise from time to time and remains committed to active management of this risk. | ||||
Board's view
The group's controls are regularly exposed to business continuity challenges. During 2016, group businesses were faced with terrorist incidents in Jakarta, extreme weather disruption in Asia and the US, and a system failure, with all businesses maintaining operations successfully throughout.
A new business continuity testing programme is being rolled out across the group during 2017.
Catastrophic or high impact risk affecting key events or wider business | ||||
Key factors | Mitigation | Risk appetite |
| |
§ The group has a number of large events which are subject to one-off risks including natural hazard and geo-political risks § Risk affects customers as well as staff and revenue § Prolonged interruption to business travel will harm event revenues and disrupt management and sales operations § Past incidents such as extreme weather including hurricanes, terrorist attacks, fears over SARS, Ebola and Zika virus, and natural disasters such as the disruption to airline schedules from volcanic ash in Europe, have all had a negative impact on the group's results, although none materially § Increased risk for events held in emerging markets | § Crisis management and business continuity framework requires all businesses to plan for high impact events § Specialist security and medical assistance services engaged to support all staff working away from the office § New venue risk assessment process being introduced in 2017 § Mandatory security and risk management training programme for events' staff § With sufficient notice, events can be moved to non-affected regions § Cancellation insurance for company's largest events
| Risk averse: becoming more averse |
| |
Prior years (relative position) 2015: Risk averse 2014: Risk neutral | ||||
| Risk trend | ||||
| Ü | This risk is unchanged | |||
| Description of risk change | ||||
| The group recognises that international events businesses are exposed to this risk. | ||||
Board's view
The group is investing in training and resources to keep staff safe when travelling and to improve event/conference resilience.
Acquisition or disposal fails to generate expected returns | ||||
Key factors | Mitigation | Risk appetite |
| |
§ Active portfolio management means the group continues to make strategic acquisitions and disposals § 75% of growth is M&A related split between acquired profit and growth in acquired businesses § Failure to integrate may mean acquired business does not generate the expected returns § Risk of impairment loss if an acquired business does not generate the expected returns § Disposal risks arise from failing to identify the time at which businesses should be sold or failing to achieve optimal price | § Active portfolio management with a clear framework and operating in line with agreed strategy § Board and CEO focus on investment and divestment plans. Formal reviews and approvals in place § Senior head of M&A in place § Detailed in-house due diligence undertaken on all potential acquisitions § Acquisition agreements are usually structured to retain key employees § Close monitoring of post-acquisition integration and performance § Expert external advice sought for acquisitions
| Risk neutral: becoming more tolerant |
| |
Prior years (relative position) 2015: Risk neutral 2014: Risk neutral | ||||
| Risk trend | ||||
| Ý | This risk is increasing | |||
| Description of risk change | ||||
| See Board's view. | ||||
Board's view
More M&A activity is expected as a result of the new strategy and therefore the group considers this risk as increasing.
Unforeseen tax liabilities or losses from treasury operations | ||||
Key factors | Mitigation | Risk appetite |
| |
§ The group operates within many tax jurisdictions § Increasingly complex international tax environment § Counterparty risk if bank fails § Foreign exchange rate exposure from international business portfolio | § Audit committee and tax and treasury committee oversight § Derivatives used to hedge market risks including exchange rate movements and when required, interest rate fluctuations § Appropriate policies define segregation of duties and strict authorisation limits § Tax and treasury advice provided by a mix of external tax experts and in-house specialists § Internal audit reviews | Risk averse |
| |
Prior years (relative position) 2015: Risk averse 2014: Risk averse | ||||
| Risk trend | ||||
| Ü | This risk is unchanged | |||
| Description of risk change | ||||
| The group is experienced at managing tax and treasury risks arising from its international business portfolio. | ||||
Board's view
Effective controls are in place but the group cannot eliminate this risk entirely due to the complexity of the group's structure and the number of jurisdictions in which it operates.
The other information required by DTR 6.3.5 (1) was contained within the unaudited preliminary announcement of Euromoney Institutional Investor PLC's results for the year ended September 30 2016, released to the market in unedited full text on Thursday November 24 2016.
END
For further information, please contact:
Euromoney Institutional Investor PLC
· Colin Jones, Finance Director: +44 20 7779 8666; cjones@euromoneyplc.com
· Tim Bratton, General Counsel & Company Secretary: +44 20 7779 8288; tim.bratton@euromoneyplc.com