Keller Regulatory News (KLR)

Risk

Description

Controls

Market cycles

The Group's broad base helps to mitigate against the risk of downturn in our markets

Whilst our business will always be subject to economic cycles, market risk is reduced by the diversity of our markets, both in terms of geography and market segment. It is also partially offset by opportunities for consolidation in our highly fragmented markets. Typically, even where we are the clear leader, we still have a relatively small share of the market. Our ability to exploit these opportunities through bolt-on acquisitions is reflected in our track record of growing sales, and doing so profitably, across market cycles.

• Strategy of geographic diversification:

- operations in over 30 countries

- growing presence in Australia and developing markets.

• Broad customer base.

• Services used across all industry segments: infrastructure, industrial, commercial, residential and environmental.

Tendering and management of projects. Project risk is managed throughout the life of a project from the tendering stage to completion

It is in the nature of our business that we continually assess and manage technical, and other operational, risks. Some of the controls we have in place, particularly at the crucial stage of tendering of contracts, are set out in the table opposite. Given the Group's relatively small average contract value (less than £200,000), it would be unusual for any one contract to materially affect the results of the Group. Our ability to manage technical risks will generally be reflected in our profitability.

• Risk-based tender approval process, with clear delegations of authority.

• Independent review of tenders.

• Formal and informal training for staff in the typical risk issues they may face when tendering for jobs, negotiating contracts and executing work.

• Legal review of unusual or onerous contract terms.

• Project staff selected on the basis of their skills, experience of a particular type of project and their workload.

• Establishment of 'centres of excellence'.

• Pre-job meetings undertaken on site.

• Formal daily reports generated and reviewed for each contract in progress. Weekly cost reports produced for all projects and reviewed by next level management.

• Periodic reviews of poorly performing contracts to establish lessons learned with the results communicated to all relevant staff.

Acquisitions

Our long-term growth track record is built on a combination of organic growth and acquisitions

We recognise the risks associated with acquisitions and our approach to buying businesses aims to manage these to acceptable levels. First, we try to get to know a target company, often working in joint venture, to understand the operational and cultural differences and potential synergies. This is followed by a robust due diligence process, most of which is undertaken by our own managers, and we then develop a clear integration plan which takes account of the unique character of the target company.

• Target companies are usually well known to Keller; and the operational and cultural differences and potential synergies are well understood.

• Robust due diligence process, mostly undertaken by own management.

• Clear integration plan, reflecting the unique character of the target company.

People

The accumulation of knowledge and experience is essential to helping our customers to find the best solution

The risk of losing, or not being able to attract, good people is key. We pride ourselves in having some of the best professional and skilled people in the industry, who are motivated by our culture and the opportunities for career growth.

• Excellent training and development opportunities.

• Opportunities for career growth.

• Good engagement and two-way communications.

• Employees treated with dignity and respect.

2011

£m

2010

£m

Short-term employee benefits

2.1

1.9

Post-employment benefits

0.2

0.2

2.3

2.1