Last checked at 24 Mar 2016 12:02
Morgan Sindall Group plc ('the Company')
Annual Financial Report
Further to the release of the Company's Preliminary Results announcement on 23 February 2016, the Company announces that it has today posted the following documents on its website at www.corporate.morgansindall.comwww.investors.morgansindall.com:
· 2015 Annual Report
· Circular containing the notice of the 2016 annual general meeting
The Company will hold its annual general meeting at 10.00am on Thursday 5 May 2016 at the offices of Jefferies Hoare Govett, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ.
A copy of each of the documents listed above has been submitted to the Financial Conduct Authority's national storage mechanism ('NSM') and can be accessed via the NSM website at www.hemscott.com/nsm.do.
In accordance with the requirements of Rules 4.1 and 6.3.5 of the Disclosure and Transparency Rules, a description of the principal risks and uncertainties affecting the Group is set out in appendix 1 to this announcement. The Company's Preliminary Results announcement released on 23 February 2016 contained all other information required by DTR 6.3.5.
ENQUIRIES:
Morgan Sindall Group plc Tel: 020 7307 9200
Clare Sheridan, Company Secretary
End
24 March 2016
Appendix 1
The Board recognises the importance of risk in the running of its business. It recognises that circumstances are continuously changing and that the risks need to remain under regular review. This review should be read in conjunction with the viability statement below.
Overview
Operating in the construction industry, risk is at the heart of everything we do. We therefore have well-embedded risk and control processes in place to manage both material and day-to-day circumstances.
The Group's risk and governance model is designed so that the Board maintains overall responsibility for risk. Each division identifies controls and mitigates threats within their operations. The reporting structure ensures that once the risk appetite is determined by the Board, risks are managed within acceptable tolerance levels.
Senior managers within the divisions take ownership of specific business risks. The likely causes and consequences of each risk are recorded and each risk is evaluated (both before and after the effect of mitigation) on its likelihood of occurrence and severity of impact on strategy. This approach allows the identification and consistent evaluation of principal risks, as well as consideration of the effect of the current lines of defence in mitigation.
Process
Risk is managed across the Group in the following way:
· The Group and its divisions undertake a comprehensive annual business planning process to identify objectives and set strategies to achieve their goals taking account of the risk appetite set by the Board.
· The executive directors meet with the divisions regularly throughout the year and with an established agenda and reporting format covering a range of matters. This allows the executive directors to ensure that they maintain oversight and control over the material aspects of strategic, financial, operational and risk issues.
· The risk environment is further underpinned by a clear set of Group and divisional delegated authorities (DELAPS) that define processes and procedures for approving material decisions, particularly with regard to project selectivity, tender pricing, risk, bid submissions and capital requirements. This ensures that projects are approved at the appropriate level of management, with the largest and most complex projects being approved at Board level.
· Twice yearly each division carries out a detailed risk review which identifies mitigations or proposed actions for each significant risk. Risk registers document these together with any timescale by which actions are targeted for completion. In conjunction with the divisional risk reviews the Group's executive directors compile their own assessment thus ensuring that a top down, bottom up approach is undertaken when considering the Group-wide environment. These risks are then considered at the monthly divisional board meetings, to ensure that they remain under continuous review.
· The Group risk committee meets three times a year. Its purpose is to assist the Board in assessing and monitoring risk management across the Group. The committee's role is to ensure that inherent and emerging risks in the business are identified and managed in a timely manner and at an appropriate level. The committee reviews the response of the Group to specific areas of risk, and approves standards and processes where weaknesses are considered to exist.
· The Group's audit committee is responsible for monitoring and approving the work undertaken by the internal audit function and for ensuring that the internal audit process remains efficient and effective. The committee annually approves the internal audit which covers both project and corporate level risks. The plan is developed by focusing upon the principal risks identified from the risk review process and feedback from current divisional performance. The internal audit team reports regularly to the Board and the audit committee on its findings. This process has been strengthened by divisional audit committees established separately for Construction & Infrastructure and Affordable Housing, which have larger and more complex operations than other divisions.
Principal risks
The Board has carried out a robust assessment of the principal risks that may threaten the Group's strategic priorities. The risks represent a snapshot of the Company's current risk profile. This is not an exhaustive list of all the risks the Company faces. As the global economic environment changes and industry circumstances evolve, new risks may arise or existing risks may recede or the ranking of these risks may change.
Our principal risks are set out below:
Strategic Priority | Principal risk |
Win in targeted markets | Macroeconomics - new opportunities |
Market capacity | |
Exposure to UK housing market | |
Poor contract selection | |
Develop and retain talented people | Safety or environmental incident |
Failing to attract and retain talented people | |
Disciplined use of capital | Insolvency of key client, subcontractor or supplier |
Treasury and funding | |
Management of working capital | |
Maximise efficiency of resources | Misprice contracts |
Managing changes to contracts and disputes | |
Poor project delivery | |
Pursuing innovation | Innovation |
Information technology |
In general terms there is a continuing decrease in the overall risk perceived by the Group, due partly to the completion of a small number of contracts in London and the South which had experienced timetable slippages and increased costs. Other factors reducing risk are the more favourable project procurement routes that prevail and the sustained UK economy and housing market. However global economic effects could impact UK investor confidence and there remains some uncertainty ahead of the EU referendum and the effect this may have on the market.
Construction: Contract terms, procurement routes and entry margins are all more favourable,, which, added to improvements in project controls, means the Group will operate in a more favourable risk and opportunity environment than in recent years.
Regeneration: The Group's schemes are subject to economic viability tests, are non-speculative and have robust risk and capital controls, which allows us to take advantage of the current prevailing UK economy but at the same time limiting any possible negative fluctuations in the future markets.
Capital and cash: The Group has committed banking facilities until 2018, which together with our robust cash and capital controls allow us to confidently manage our investment portfolio into the foreseeable future.
Resource: The People Promise initiated to address the Group's future talent requirement is gathering momentum. This investment has already begun to secure and develop the talent required to enable our longer-term growth plans.
Viability statement
As required by provision C.2.2 of the Code, the directors have assessed the prospects of the Group and have concluded that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of the assessment. This assessment took account of the Group's current position and principal risks and has been made using a period of three years commencing on 1 January 2016, which is consistent with the Group's budgeting cycle.
The directors have considered the Group's solvency and liquidity using cash flow projections. These are compiled on a bottom up basis incorporating each division's detailed business plans. At Group level, the base case financial projections assume modest revenue growth and an improvement in gross margin back to more normal levels for the Group as the problem contracts that impacted 2015 do not recur and procurement routes become more favourable with less single stage, competitive tendering. Overheads are expected to increase ahead of inflation to support the expected growth in volumes and activity. Operating cash flows are assumed to broadly follow forecast profitability in the Group's construction activities, but are much more independently variable in regeneration, driven by the timing of construction spend and programmed completions on schemes.
The Group's main committed facility matures in September 2018. The directors draw attention to the key assumption that there is a reasonable expectation that this will be renewed at the appropriate time or the term extended and that there will not be a material reduction in the level of facilities available to the Group or a material change in the pricing.
The impact of a number of downside scenarios on the Group's headroom against its committed facilities and the financial covenants thereon has been modelled based on the Group's principal risks. The scenarios are focused on the risks that are scored as most likely to occur or that would have the greatest potential severity should they occur and include lower revenue growth, failure to improve gross margin from current levels, a decline in gross margin and deterioration in working capital, specifically client receivables.
The Board has also considered a range of potential mitigating actions that may be available if one or more of the scenarios arose.
Strategic priority - Win in targeted markets
The markets in which we operate are affected to varying degrees by general global economic conditions.
We welcome the sustained improvements in the UK economy and in turn the quality of our related pipeline in Construction and Regeneration markets. Unsettled world-wide conditions, such as the impact of the EU referendum, interest rates and crude oil prices, remain a concern in their ability to influence investor confidence that could impact on the Group's longer-term strategy.
Principal risk
|
Mitigation
|
Key monitor / metric / instrument Frequency |
Risk change in reporting period1
|
Macroeconomic - new opportunities
Failure to anticipate and respond to global economic changes could result in the inappropriate allocation of resources and capital. This could affect the Group's profitability and cash generation.
We have identified the markets and sectors in which we anticipate future growth. Within those areas we remain focused on selecting opportunities that will provide sustainable margins and repeat business. We seek to anticipate and appropriately respond to changes in the global economic environment that may negatively impact on these chosen markets and sectors. | · Strategic focus on market spread, geographical capability and diversification offer measured protection against the cyclical effect of individual markets. · Business planning processes focus on future markets and those opportunities that are consistent with our risk appetite. · Scale adds resilience by enabling the Group to compete and work in areas with higher barriers to entry. · Added value can be offered to clients when our divisions work together. · Regular monitoring and reporting of financial performance, work won, prospects and pipeline of opportunities. · Market intelligence helps detect potential shifts in spending and allows us to adapt our strategy if necessary.
| Business planning process Annual
Board reporting Monthly
Pipeline and order book reporting Weekly
Sales and marketing report Weekly
Controls over delegated authorities (DELAPS) Ongoing | Decrease
· We continue to enjoy sustained levels of opportunity in our Construction and Regeneration markets and high levels of demand for its development schemes. · This is partially tempered by levels of competition in the Construction market, albeit procurement routes, margins and terms continue to be favourable. · Development schemes are sensitive to market and consumer confidence. Our strategy continues to be geared to commit only if schemes prove economically viable. This means we can maximise our residential portfolio whilst being able to respond quickly to any future negative market fluctuations. · Construction & Infrastructure has been reshaped in order to take advantage of the current UK economy, be more selective to minimise risk and maximise opportunities for sustainable growth. · Group strategic reviews have been refocused by the appointment of a group strategy director who is validating strategy and business planning in line with UK economic indicators and our growth aspirations |
Market capacity
Failure to rigorously review internal and third party resource levels against anticipated workloads as a result of sustained levels of activity. Current positive market conditions continue to create a risk of potential overtrading and, we, together with our supply chain, are facing increasing pressure on cost and skills availability. | • Rigorous DELAPS process requires teams at bid stage to verify that appropriate levels of qualified resource are available. • Our operational resource levels are regularly reviewed against anticipated workload. • We monitor and report on supply chain utilisation with a continued focus on initiatives within each division. • We seeks to differentiate ourselves by being the customer of choice to our partners through the development and management of effective supply chain relationships. • The business planning process identifies future resource requirements and supply chain strategies.
| Resource planning reviews Weekly
Supply chain feedback reporting Ongoing/ Quarterly
DELAPS Ongoing
Tender review boards Ongoing | No Change
· The industry continues to experience skills and cost inflation pressures that we are managing through disciplined bid and project selection processes. • Construction & Infrastructure's supply chain leadership team continues to drive initiatives, which include the promotion of supply chain partners and increasing engagement to align the business with the 'Customer of Choice' strategy. Moving forward our reporting will include monitoring of progress and improvements in performance throughout the year. This will help us secure the best supply chain partners to meet our future needs whilst in return offering attractive terms. • The People Promise initiative to help secure and develop talent has now been deployed into each of our divisions. |
Exposure to UK housing market
The UK housing sector is strongly influenced by Government stimulus and consumer confidence. If mortgage availability and affordability become less favourable this could make existing schemes difficult to sell and future developments unviable, reducing profitability and tying up capital. | • Key UK statistics are monitored, including unemployment, lending and affordability. • Commitments to development schemes are carefully controlled via a rigorous three-stage development approval process. • Development structures limit speculative development to minimise the impact of negative market fluctuations. • Where possible, the forward purchase of land is subject to economic viability prior to commitment. • When feasible sections of large scale residential schemes are forward sold to institutional investors. | Business planning process Annually
Board reporting Monthly
Sales and marketing report Weekly
Development forecasting Monthly/ quarterly | No Change
• The industry continues to experience skills and cost inflation pressures that we are managing through disciplined bid and project selection processes. • Construction & Infrastructure's supply chain leadership team continues to drive initiatives, which include the promotion of supply chain partners and increasing engagement to align the business with the 'Customer of Choice' strategy. Moving forward our reporting will include monitoring of progress and improvements in performance throughout the year. This will help us secure the best supply chain partners to meet our future needs whilst in return offering attractive terms. • The People Promise initiative to help secure and develop talent has now been deployed into each of our divisions. |
Poor contract selection
There is a risk that a division would accept a contract outside its core competencies or for which it has insufficient resources. This can become a greater risk in a rising market when there are more opportunities but of varying quality, coupled with a limit on the availability of the appropriate skills and resources. Failure to understand project risks may lead to poor project delivery and ultimately result in contract losses and reputational damage. | · Business planning identifies the markets, sectors and clients that we will target. · Plans for specific types of work, contract size and risk profile are agreed by individual divisions. · A system of DELAPS governs bid selectivity and the acceptance of work. · Staff planning ensures appropriate levels of qualified resource. · Initiatives are in place to select supply chain partners that match our expectations in terms of quality, sustainability and availability. | Pipeline and order book reporting Weekly
Tender review boards Ongoing
Board reportingMonthly
DELAPS Ongoing
Sales and marketing report Weekly
Supply chain feedback reporting Ongoing/quarterly | Decrease
· The majority of our material projects continue to be secured with repeat clients with strong relationships. · The current market allows the divisions to be more selective in respect of which contracts to bid for. · The development within Construction & Infrastructure of enhanced pipeline and opportunity selectivity tools means we can identify work that has a higher probability of success. · Greater visibility of medium-term pipeline quality and the ability to give an early indication of longer term trends mean we are better able to reshape the business in response. · As market conditions continue to be favourable we have experienced a greater use of more attractive procurement routes (negotiated and two-stage) and in addition have been able to negotiate more favourable terms. |
Strategic priority - Develop and retain talented people
Our performance and business conduct affects employees, subcontractors and the public and, in turn, can affect our reputation and commercial performance. We pride ourselves on our industry-leading practices and our work in some high profile and technically challenging markets.
Increased market activity has resulted in higher levels of employee turnover across the sector. If we do not succeed in attracting and retaining the right talent for our future needs we will not be able to develop the business as anticipated.
Principal risk
|
Mitigation |
Key monitor / metric / instrument Frequency |
Risk change in reporting period1 |
Safety or environmental incident
With increased pressure on employees and the supply chain there is an increasing risk that an accident or incident occurs causing harm to an individual or community. This could result in legal proceedings, financial penalties, insurance claims, reputational damage and project delays.
Consequently we fail to pre-qualify in our markets due to a poor HSE track record and ultimately fails to deliver our targets. | · Key executives with specific responsibility for HSE are identified in each division and on the Board. · HSE policy frameworks are widely communicated and senior managers appointed to manage them in each division and at project level. · A Group-wide HSE forum operates to share learning, best practice and emerging risks. · Established safety systems, site visits, monitoring and reporting, procedures including near miss and potential hazard reporting, are in place across the Group. · Investigation and root cause analysis of accidents or incidents and near misses are undertaken. · Regular HSE training includes behavioural training and update courses are provided. · Major incident management plans and business continuity plans are in place and periodically reviewed and tested. | HSE Board report Monthly
Group HSE forum Quarterly
HSE project audit and HSE training schedules and ratios Ongoing/monthly
HSE incident investigation report Ongoing/monthly | No Change
· We monitor comparable industry-leading statistics. A significant proportion of work is carried out in highly complex and public environments which require strict observation of the highest levels of Health and Safety Executive standards. · Safety innovations in Construction & Infrastructure this year have included: i) a 'human performance' approach to leadership, supporting focus on influential and current HSE trends and themes; ii) a cultural development programme and the development of a behavioural model for supervisors; iii) improvements in our engagement with the supply chain; iv) the introduction of High Potential Incident measures to improve intelligence; v) safety improvement plans in place for each business unit. · A Board HSE committee was established in 2015 to oversee health and safety performance. |
Failing to attract and retain talented people
In the current economic environment, it has become increasingly difficult to attract and retain the best people. Without talent, it becomes very difficult to maintain the highest levels of customer service and technical excellence that we strive for. | • The People Promise has been deployed in all divisions aiming to build the Group's talent pool, identify people with high potential for future leadership, offer exciting career opportunities and recognise achievement. • Future skills and capability requirements are monitored. • An annual employee appraisal process is in place, providing a two-way feedback on performance. • Training and development plans seek to maximise relevant skills and experience. • Succession plans are in place across the Group. • Staff leaver and joining feedback is obtained to understand reasons for change. • Remuneration packages are benchmarked where possible. | Divisional 'people boards' to review talent Twice a year
HR Board reporting Monthly
Employee joiners and leavers report Weekly/monthly
Recruitment monitoring Weekly/monthly
Annual appraisal process Annually
| No Change
· Although the industry continues to suffer from a lack of skilled talent that will remain an issue for the foreseeable future, our investment in the People Promise and associated initiatives is helping us to retain our talented teams. · Continued investment is made in graduate, trainee and apprenticeship schemes to secure an annual inflow of new talent. · A new leadership development programme was launched in 2016 with the aim of training 400 leaders over the next two years. |
Strategic priority - Disciplined use of capital
Without sufficient liquidity, our ability to meet our liabilities as they fall due would be compromised, which could ultimately lead to our failure to continue as a going concern. In a rising market there is an increased risk that the Group's counterparties overtrade, which could affect their liquidity. The heightened market that prevails could mean that a client or supply chain partner inadvertently over stresses their -finances, so we need to remain vigilant.
Principal risk
|
Mitigation |
Key monitor / metric / instrument Frequency |
Risk change in reporting period1 |
Insolvency of key client, subcontractor or supplier Insolvency of a client may result in significant financial loss due to a bad debt, whilst insolvency of a subcontractor or supplier may disrupt a contract's programme of work and lead to increased costs in finding replacements for their services. There is also a risk that, given the wider global economic climate, historical credit checks are relied upon that have subsequently been overtaken by events. | · Work is only carried out for financially sound clients, established through rigorous due diligence and credit checks. · Financial security is sought and obtained where required including specific commercial terms and payment terms, with escrow accounts used as appropriate. · Contracts with clients, subcontractors or suppliers are only entered into after review at the appropriate level of delegated authority. · Work with approved suppliers wherever possible · Regular meetings are held with key supply chain members to give and receive feedback and maintain the quality of the relationship. · Business strategy is largely focused on public and commercial clients based in sound market sectors, reducing the risk of failure. | Pipeline and order book reporting Weekly
Tender review boards Ongoing
WIP/debt/retention monitoring Daily/weekly
Supply chain feedback reporting Ongoing/quarterly
Supply chain prequalification Ongoing
DELAPS Ongoing | No Change
· Increasing emphasis on project selectivity ensures that we optimise our focus on sectors and clients that have secure covenants. · Construction & Infrastructure have a greater focus on securing long-term supply chain relationships with financially sound subcontractors. |
Treasury and funding
A lack of liquidity could impact our ability to continue to trade or restrict our ability to invest in regeneration schemes or growth markets. | • We have committed banking facilities of £140m maturing in 2018, (of total facilities £175m). These will enable us to fund our planned investment portfolio. • A three-stage process for approving development and investment-related schemes gives an early indication of potential long-term balance sheet commitments. • We have a disciplined allocation process for significant project related capital which considers all future requirements and return on investment. • Daily monitoring of cash levels and regular forecasting of future cash balances and facility headroom are conducted. • Long-term cash forecasts are regularly stress tested. • Group DELAPS ensure prior approval is sought for significant project related capital. | Management accounts Monthly
Monitoring of cash levels Daily
DELAPS Ongoing
Cash forecast report Weekly/monthly | Decrease
· Debt availability and terms continue to improve for the Group, our clients and our supply chain. |
Management of working capital
Poor management of working capital leads to inadequate liquidity and funding problems. | · Working capital is monitored and managed as appropriate, with acute focus on any overdue work in progress, debtors or retentions. · Ongoing cash management focus continues to improve. · Cash profiling of key opportunities is undertaken at an early stage to ensure they meet the Group's expectations. | Monitoring of cash levels Daily
Cash forecast report Weekly | Decrease
· Working capital continues to improve as aged projects unwind and general market terms improve. · Continued cash optimisation focus and controls are realising benefits. |
Strategic priority - Maximise efficiency of resources
The Group undertakes several hundred contracts each year. It is important that contractual terms reflect risks arising from the nature and complexity of the works and the duration of the contracts and that these risks are effectively managed.
Having identified the markets in which we will operate, we must ensure that we select opportunities which we can successfully deliver by employing capable and available resources. We must actively manage these resources to ensure our clients receive exceptional levels of service.
Principal risk
|
Mitigation
| Key monitor / metric / instrument Frequency |
Risk change in reporting period1 |
Mispricing a contract
If contracts are not costed correctly this could lead to loss of profitability on a contract that reduces overall gross margin. It may also result in damaged client and project team relationships. | · Robust DELAPS govern the selection of all bids and the acceptance of work at key stages. · We have a well-established bidding process and experienced bidding teams. · Robust pre-selection, due diligence and risk assessment of individual bids take place. · Contract tender reviews are conducted at three key stages: pre-qualification, pre-tender and final tender submission. Each stage is approved by an appropriate level of senior management via tender review boards. | Tender review boards Ongoing
Board reporting Monthly
DELAPS Ongoing | No Change
· We continue to secure improved contract procurement routes and terms. · The development within Construction & Infrastructure of enhanced pipeline and opportunity selectivity tools means we can identify work that has a higher probability of success. Greater visibility of medium-term pipeline quality and the ability to give an early indication of longer term trends better enable us to reshape the business in response. |
Managing changes to contracts and contract disputes
Changes to contracts and contract disputes could lead to costs being incurred that are not recovered and loss of profitability on a contract and delayed cash. Ultimately we may need to resort to legal action to resolve disputes which can prove costly with uncertain outcomes, and can adversely affect our client relationships.
| · Work is carried out under standard terms wherever possible. · Contract terms are reviewed at tender stage and any variations approved by the appropriate level of management. · We have well-established systems of measuring and reporting project progress and estimated outturns, including contract variations. · Enhanced project management systems have lead indicators that assist in the early identification of potential issues. · Increasing building information management ('BIM') adoption is helping us overcome potential design and constructability issues before they become too costly or time consuming. · Regularised project review process including peer reviews ensures rigour is applied in core processes to facilitate early warning and subsequent mitigation strategies. · A decision to take legal action is based on appropriate legal advice and suitable provision made for legal costs. | Project financial performance Monthly
Project operational performance Monthly
Electronic project management tool dashboard Ongoing | Decrease
· Contract procurement routes and terms are improved with an increasing two-stage and negotiated approach. · Further enhancements have been made to contract early warning techniques. · The BIM strategy has been fully developed to provide more efficient asset management across the whole lifecycle. |
Poor project delivery
The quality of workmanship or poor commercial and operational delivery of a contract, whether by the Group or a joint venture partner or subcontractor does not meet the expectations of clients. Project failures could incur additional costs that erode profit margins and lead to the withholding of Interim cash payments impacting on working capital. It is also possible that client experiences will fall short of the standards we set by the Group, potentially leading to a reduction in repeat business or in client referrals. | · A project review process facilitates early warning and subsequent mitigation strategies. · Electronic project management workbooks enhance functionality, client experience and efficiency with the ability for 'live' reporting of key project aspects such as programme and change control. · An escalation process ensures senior management intervention at early stage. · Formal internal peer reviews highlight areas of improvement, risk and/or best practice. · Client feedback is collated and reviewed using customer satisfaction questionnaires ('CSQs') and the Perfect Delivery process. · Lessons learned exercises are carried out on projects. · Teams are incentivised on Perfect Delivery outcomes to achieve high levels of client satisfaction. · Strategic supply chain trading arrangements are in place to help ensure consistent quality. | Electronic project management tool Ongoing
CSQ and Perfect Delivery performance monitoring Ongoing/monthly
Project financial performance Monthly
Project operational performance Monthly
| Decrease
· New enhanced project related electronic early warning 'Lead Indicator' tool monitors programme, margin, change and cash, allowing early identification of issues. · The improving market and terms under which we contract reduce the probability of disputes. However the upward pressure on skills and commodities needs careful management to avoid surprises. · The development within Construction & Infrastructure of an enhanced opportunity selectivity process affords greater visibility of both project and portfolio risk. This means we select projects that have a higher probability of success. · A significant BIM capability means we are ready to meet the government's 2016 mandate and overcome potential design and constructability issues before they become too costly or time consuming. · The Perfect Delivery philosophy and culture is embedded in each division and differentiates the Group's offering. · Advanced client experience developments are under way in the Fit Out division. |
Strategic priority - Pursuing innovation
We are committed to offering clients innovative and cost-effective solutions. If we fail to encourage an innovative approach across the Group we will lose our competitive edge and suffer reputational damage.
This is coupled with the risk that our systems will not provide appropriate security levels or resilience needed to ensure reliable levels of business continuity.
The ever evolving technology environment and persistent cyber security threat will remain a challenge for the foreseeable future.
Principal risk |
Mitigation
|
Key monitor / metric / instrument Frequency
|
Risk change in reporting period1 |
Innovation
A failure to adopt appropriate innovations in new products or techniques could result in the Group being less effective than our competitors and unable to secure best value for, or offer the best solutions to, our clients. If new technologies and innovation are not promoted into the business environment we may become a less attractive proposition to new and existing talent. | • A culture of innovation is encouraged and relevant ideas, sourced via employees, supply chain, clients and external sources, are promoted into the business environment. • Reviews are undertaken to promote elimination of waste of both resources and processes, adopting lean methodology where appropriate. • Business improvement and IT forum structures are in place to review, sponsor and promote new innovations into the business. | IT budget forecasting Annual/monthly
Annual business planning Annual
Work winning Ongoing
Project operational performance monitoring Ongoing | Decrease
· We are progressively adopting new technologies in order to work more efficiently and sustainability, attract and retain talent, and ultimately attain greater returns. · Recent innovation examples include Lync, BIM, a careers website, upgraded electronic site management tools, smart device facilitation, cost value reconciliation online recruitment and applicant tracking system metrics, management information systems, enhanced enterprise finance tools and a web-enabled housing stock system. · In the near future our largest division, Construction & Infrastructure, plans to introduce a new electronic work winning tool designed to provide workflow management of our tender pipeline and enhanced live business information tools. |
Information technology
If we fail to manage and invest in our IT environment we will not meet the future needs of the business in terms of expected growth, security and innovation, ultimately meaning that we will fail to maintain a sustainable business | · Our Group-wide IT strategy has been remodelled to encompass an optimised shared services approach, direction and investment. · A co-ordinated services approach drives optimisation, efficiency and performance across the whole technology environment. · A Group-wide IT forum structure is in place ensuring focused strategic development and day-to-day running of our technology environment. · Progressive IT investment continues to yield Infrastructure, application and service delivery improvements. · Group-wide risk and security strategies are enacted, creating awareness, threat alert, risk and vulnerability prioritisation and response. | Group and divisional IT forums Monthly
IT monitoring and performance reporting Ongoing/monthly | No Change
· Our progressive investment and focus on our IT strategy and programme is maturing, but at the same time needs to remain focused. · We continue to make significant headway in the centralisation of our IT capability and as a result have enhanced levels of resilience across the network that include our data and security environments. |
1 Risk change in reporting period - signifies the Board's opinion of pre-mitigation risk movement.