29 Mar 2018 15:58
29 March 2018
Sanne Group plc
("Sanne" or "the Company")
Posting of Annual Report and Financial Statements and Notice of Annual General Meeting
Sanne, a leading global provider of alternative asset and corporate administration services, has posted its Annual Report and Financial Statements for the year ended 31 December 2017 together with the Notice of Annual General Meeting (AGM) and Proxy Form to its shareholders. The Annual Report & Financial Statements and Notice of AGM can also be downloaded from the Company's website at www.sannegroup.com.
Copies of the documents listed below have been submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM.
· Annual Report and Financial Statements for the year ended 31 December 2017;
· Notice of the Annual General Meeting; and
· Proxy Form
Information required under Disclosure and Transparency Rule 6.3.5
This announcement should be read in conjunction with the Company's preliminary results announcement issued on 22 March 2018. Together, these announcements constitute the material required by Disclosure Guidance and Transparency Rule 6.3.5 to be communicated to the media in full unedited text through a Regulatory Information Service. A description of the principal risks and uncertainties and the Directors' Responsibility Statement, extracted in full unedited text from the 2017 Annual Report and Financial Statements, are set out below. This information should be read in conjunction with, and not as a substitute for, reading the full 2017 Annual Report and Financial Statements. Page numbers and notes in the following appendices refer to page numbers and notes in the Company's 2017 Annual Report and Financial Statements.
Appendix A: Principal risks and uncertainties
Risk assessment
The Group reviews and monitors risk exposures closely, considering the potential impact and any management actions required to mitigate the impact of emerging issues and potential future events. The Group Risk Register is the principal tool for monitoring risks which are classified in a strict hierarchy (see table on the next page). The highest level (Level 1) identifies five risk categories: Business Model & Strategy, Operational, People, Regulatory and Financial. The next level (Level 2) contains 27 risk categories and the final level (Level 3) carries the detailed risks themselves which are captured and maintained across the Group.
Each Level 3 risk is rated by assessing the likelihood of its occurrence over the next three years and the associated impact. A scoring of 1 to 4 is given to each risk which is then used in conjunction with an assessment of the internal control environment or other mitigations to derive a residual risk score.
Risk appetite
In determining its risk appetite, the Group has defined the levels of risk it is willing to take in the pursuit of its strategic objectives.
This has been articulated as a Risk Appetite Statement with appetite set for each of the Level 2 categories within the Group Risk Register. For each Level 2 risk category, the risk appetite is compared against the associated residual risk to identify areas of focus.
Principal risks
The risks from the Group Risk Register are discussed, debated and challenged, firstly by senior management and Executive Directors, and then by the Risk Committee, with a view to presenting the key risks to the Board. The Board has agreed that the top risks will be presented in the Annual Report and Accounts as the Principal Risks.
Assessment of principal risks
Using the described approach, the Board is able to confirm that they have carried out a robust assessment of the principal risks facing the Group including those that would threaten its business model, future performance, solvency or liquidity. Included on page 56 is the viability statement, which has been prepared with the assessment of these principal risks in mind.
Level 1 Risk Category | Level 2 Risk Category | Principal Risk |
BusinessModel & Strategy | Acquisition | Yes |
Competitor | Yes | |
Strategic | Yes | |
Governance Structures | ||
Client Concentration | ||
Risk Management | ||
Vicarious | ||
Operational | Business Change | Yes |
Data Security | Yes | |
Process | Yes | |
Business Continuity | ||
Counterparty | ||
Insurance | ||
Legal | ||
Outsourcing | ||
Physical Assets | ||
Technology | ||
People | Staff Resource | Yes |
Staff Conduct | ||
Regulatory | Political/Regulatory Change | Yes |
Regulatory Compliance | Yes | |
Data Protection | ||
Listing Rules | ||
Financial | Intangible Assets | Yes |
Foreign Exchange | Yes | |
Accounting Error | ||
Working Capital |
Risk Description | Key Mitigants |
Business Model & Strategy Direction of change: During the period the Group has seen steady progress with the integration of more recent acquisitions. Recognising that SANNE has experienced a number of years of strong growth, both organically and inorganically, a number of projects (including strengthening the three lines of defence as mentioned on page 22) were initiated to enhance the business model and build stronger foundations for future sustainable growth. | |
Acquisition Risk The risk that inadequate due diligence of future acquisitions madeby the Group give rise to unidentified liabilities or unintended consequences and/or acquisitions made by the Group are poorly integrated, due to inadequate planning, lack of management oversight or lack of resources.
| · Robust due diligence process including 3rd party assessments by top accounting and law firms, prior to recommendations to the Board· Governance and challenge from independent Non-executive Directors· Integration strategy in place prior to acquisition· Integration Committees set up to manage integration processes |
Competitor Risk Failure to innovate and invest in appropriate systems increases the risk that we fall behind key competitors and do not meet the expectations of clients and other stakeholders. Digital developments are rapidly evolving meaning that we must keep pace with the expectations of clients, especially with our strategic objective of delivering services to institutional clients. | · Divisional responsibility for identifyingforthcoming requirements in respect of digital / business systems investment· COO responsible for prioritising and monitoring investment in digital / business systems· Board oversight of current and planned digital /business systems |
Strategic Risk The risk that the business model responds inadequately to changing market conditions or that strategic objectives are incorrectly set, such that sustainable growth, market share or profitability is affected. This is particularly the case due to ongoing changes within the outsourced administration industry, whereby asset classes are evolving and new asset classes are being created | · Strategy regularly reviewed and challenged by Executive Committee and Board respectively· Strategy drives annual business planning process and performance based targets· Operations Committee ensures matters escalated are aligned with strategy and risk appetite |
Operational Direction of change: Continued acquisitions and strong growth in customer numbers and staffing has led to increases in inherent operational risk exposures for the Group, as anticipated in the 2016 Annual Report. These risks have been mitigated accordingly, and a number of operational projects have been instigated to further strengthen the control environment in this respect. | |
Business Change Risk The risk that the planning and implementation of change is ineffective or fails to deliver desired outcomes or results in resources being stretched to the detriment of business as usual activities. | · Documented business plans and IT strategy to mitigate risk· Monitoring adherence to IT and non IT business plans and assurance on its delivery· Over-arching governance of business critical change programmes provided by the Executive Committee andthe Board |
Data Security Risk The risk of a security breach (including cyber-attacks) leading to loss of confidentiality, integrity and/or availability of data. | · Defined IT security procedures· Penetration testing· System access controls and encryption· Physical security at all locations· Training and employee awareness· Review of selected data security procedures and controls as part of the annual ISAE 3402 Type II report |
Process Risk The risk that general policies, procedures and processes are ineffective and/or inefficient leading to operational losses, poor client service and employee frustration. | · Continual development of procedures and controls with ongoing training· Allocated responsibility for continual maintenance and enhancement of policies and procedures· Three lines of defence assurance and controls testing |
People Direction of change: In key jurisdictions in which the Group operates, the fund and corporate administration employment market is increasingly competitive, which, along with the Group's continuing organic growth, leads to difficulties in attracting and retaining the best resources. A centres of excellence initiative has commenced to centralise relevant processes in certain jurisdictions, which will help to mitigate this risk over the medium term. The continued growth of the Group has also provided the opportunity to introduce new members into the senior leadership team. | |
Staff Resourcing Risk Failure to attract, retain, develop and motivate the best people with the right capabilities across all levels and jurisdictions. | · Recruitment strategy to bolster teams, succession planning in place and employee value proposition· Established Remuneration Committee for Executive Directors· Set objectives over talent management and people development· Regular remuneration benchmarking· Established ACCA, ICAEW and ICSA training schemes· Management and monitoring of capacity and work loads.
|
Regulatory Direction of change: The Group remains exposed to the political/regulatory risks arising from Brexit and will continue to monitor the political negotiations as they progress, along with the possible implications arising. Regulatory Compliance risk is in part correlated to business model, operational and staff risk, recognising that as the Group becomes larger and more diverse, the risk of an omission or error increases leading to possible regulatory sanction. This increasing risk is being mitigated by various projects, in particular the strengthening of the three lines of defence model.
| |
Political / Regulatory Change Risk The risk that SANNE's business model is materially impacted by legal, political or regulatory changes which restrict access to markets or services.
| · Brexit committee in place to consider specific risks arising· Product / jurisdictional diversification strategy reduces impact· Jurisdictional oversight by Compliance· Horizon scanning by the Second Line Committee forpotential changes· Strategy to ensure the business model remains flexible and responsive to change and is regularly reviewed· Active dialogue with regulators, governmental andindustry bodies |
Regulatory Licence (Compliance) Risk The risk that Sanne is exposed to regulatory sanction and subsequent reputational damage given a failure to follow regulatory laws, orders and codes of practice requirements. | · Promoting a strong risk and compliance culture across all staff· Continued strengthening of the three lines of defence· Appropriate compliance resources in each jurisdiction reporting to the Group Compliance Officer· Defined and updated regulatory policies and procedures· Compliance Monitoring programme |
Financial Direction of change: Given a significant number of acquisitions made by the Group in the last two years, there are significant intangible assets (including goodwill) on the balance sheet and the Group is further exposed to volatility arising from movements in currency exchange rates. | |
Intangible Asset Risk The risk that events arise, foreseen or unforeseen, which result in an impairment of the intangible assets, including goodwill, held on the balance sheet. | · Robust due diligence process including 3rd party assessments by Top 4 accountancy firms, prior to acquisitions being completed· Regular impairment testing as per accounting rules· Ongoing management and monitoring against performance assumptions |
Foreign Exchange Risk The risk that the Group's earnings are volatile as a result of movements in foreign currency exchange rates. The Group's exposure comes primarily from the Group's operating activities outside of its reporting currency. | · Cash management procedures are in place to reduce the impact of foreign exchange gains and losses through profit and loss as a result of short-term fluctuations in foreign currency exchange rates· Matching of cash flows where possible· Permanent changes to foreign currency exchange rates will have an impact on the future earnings of the Group and whilst this is not mitigated further it is monitored and reported |
Appendix B: Directors' Responsibility Statement
We confirm that to the best of our knowledge:
· The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the parent Company and its undertakings included in the consolidation taken as a whole; and
· The Strategic Report and Directors' Report include a fair view of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Enquiries:
Sanne Group plc Helen Ashton, Company Secretary | +44 (0) 2039 111 048 |