TP ICAP Regulatory News (TCAP)

6 April 2017 

TP ICAP plc 2016 Annual Report

TP ICAP plc ("the Company") has today published its 2016 Annual Report and circular to shareholders incorporating the Notice of the 2017 Annual General Meeting. Both documents can be viewed at or downloaded from www.TPICAP.com/investors.

Copies of both these documents, together with the Form of Proxy, have been submitted to the UK Listing Authority's Document Viewing Facility via the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm.do.

The following disclosures comply with Disclosure and Transparency Rule 6.3.5. The Company's full year results announcement of 14 March 2017 contained a management report and condensed financial information derived from the Group's audited statutory accounts. A description of risks and uncertainties, details of related party transactions and the Directors' Responsibility Statement, extracted in full unedited text from the 2016 Annual Report, are set out below. This information should be read in conjunction with, and not as a substitute for, reading the full 2016 Annual Report. Page numbers and notes in the following appendices refer to page numbers and notes in the Company's 2016 Annual Report.

Principal Risks

The Board has conducted a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.

In undertaking this assessment on behalf of the Board, the Risk Committee has considered a wide range of information, including regulatory requirements, reports provided by the Risk function, presentations by senior management and the findings from the Group's 'bottom-up' and 'top-down' risk assessment processes conducted in 2016.

Risk

Adverse change to regulatory framework

Description

The Group is exposed to the risk of a fundamental change to the regulatory environment it operates within resulting in a reduced role for Interdealer brokers or restricted client trading activity, such as MiFID II.

Potential impact

· Reduction in broking activity

· Reduced earnings and profitability

Mitigation

· Close monitoring of regulatory developments

· Active involvement in consultation and rule setting processes(including FCA consultations on MiFID II)

Key risk indicator

· Key regulatory changes

· Status of regulatory change initiatives

Related strategic objectives (as set out on page 8)

· Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can be created

· Continuing to develop the Data & Analytics business where the product suite and delivery channels can be expanded

Risk

Cyber-security and data protection

Description

The risk that the Group fails to adequately protect itself against cyber-attack and / or to adequately secure the data it holds, resulting in loss of operability, as well as potential loss of critical business or client data.

Potential impact

· Loss of revenue

· Remediation costs

· Severe damage to reputation

· Regulatory sanctions

· Payment of damages/compensation

Mitigation

· The Group continues to monitor and assess the evolving and increasingly sophisticated cyber-threat landscape to ensure that its control framework is appropriate to address the potential cyber-threats to which it is exposed

Key risk indicator

· System outages

· Data loss events

· Cyber-security events/losses

Related strategic objectives (as set out on page 8)

· Investing in technology and realigning the mix between owned and outsourced platforms to maximise the business's intellectual property to ensure that the business has the technology capabilities that customers seek

· Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can be created

Risk

Deterioration in the commercial environment

Description

The Group's performance would be adversely affected by a sustained period of suppressed market activity leading to reduced revenues. This could arise as a result of adverse macro-economic conditions or geopolitical developments, such as Brexit.

Potential impact

· Reduction in broking activity

· Reduced earnings and profitability

Mitigation

· Adoption of a clearly defined business development strategy to maintain geographic and product diversification

· Establishment of working group to prepare the Group's response to Brexit

Key risk indicator

· Operating profit

· Revenues by region

· Trade volumes

· Revenue forecast

· Stress testing scenario outcomes

Related strategic objectives (as set out on page 8)

· Seeking to improve the business's brand awareness and coverage

· Extending the business's broking offering to service clients where the market is receptive to a broadening of the client base

· Seeking to continue to build the business's activitiesin energy and commodities products

· Seeking to add brokers to maintain and grow presence in those products with high market attractiveness where the business has a high ability to compete,and where its presence can be developed

Risk

Failure to respond to client requirements

Description

The markets in which the Group competes are characterised by rapidly changing technology and evolving customer requirements, including the demand for electronic broking solutions. The Group is exposed to the risk that it fails to respond to customer requirements in a timely manner.

Potential impact

· Loss of market share

· Reduced earnings and profitability

Mitigation

· Proactive engagement with clients through customer relationship management process

· Adoption of a clearly defined business development strategy which continues to enhance the Group's service offering

Key risk indicator

· Trade volumes

· Operating profit

· New business initiatives

· Client satisfaction surveys

Related strategic objectives (as set out on page 8)

· Investing in technology and realigning the mix between owned and outsourced platforms to maximise the business's intellectual propertyto ensure that the business has the technology capabilities that customers seek

· Investing in client relationship management to bring focus and discipline to how the business targets and covers clients, to seek to broaden and institutionalise relationships

Risk

Failure to deliver integration

Description

The Group's business strategy is dependent on the successful integration of ICAP, and achieving the targeted operational efficiencies.

Potential impact

· Double running costs leading to reduced profitability

· Lack of investor confidence

· Reduced access to the capital markets

Mitigation

· Adoption of clearly defined integration plan

· Implementation of robust integration governance structure

· Measurement of synergies realised and monitoring of costs of the integration

Key risk indicator

· Integration plan tracking (status)

Related strategic objectives (as set out on page 8)

· Developing the business's capability to source, execute and integrate acquisitions

Risk

Failure to retain and recruit talent

Description

The Group operates in a highly competitive market for talent, and is exposed to the risk that it fails to retain or recruit the employees required to deliver its strategy.

Potential impact

· Potential loss of expertise and client relationships

· Increase in employee costs as Group seeks to counter aggressivecompetitor activity

Mitigation

· Proactive management of broker contracts

· Competitive remuneration and performance management

· Operation of Early Careers Programme

Key risk indicator

· Complaints and conduct issues

· Voluntary leavers

· Performance appraisal ratings

· Trainings conducted

Related strategic objectives (as set out on page 8)

· Developing the HR function and processes to hire and train staff and to manage compensation appropriately to encourage good long term behaviours

Risk

Operational failure

Description

The Group is exposed to operational risk in nearly every facet of its role as a hybrid voicebroker, including from its dependence on:

· The accurate execution of a large numbers of processes, including those required to execute, clear and settle trades

· A complex IT infrastructure.

Potential impact

· Financial loss which could, in extreme cases, impact the Group's solvencyand liquidity

· Damage to the Group's reputation as a reliable intermediary in thefinancial markets

Mitigation

· Implementation of an appropriate control framework to ensure that operational risk exposure is managed within risk appetite

· Reverse stress tests undertaken to identify key risks which could undermine viability of the Group

· Maintenance of effective business continuity plans and capability

· Adoption of Incident and Crisis Management Plan to ensure all key stakeholders involved in the event of a major incident

Key risk indicator

· Residual balances

· Loss events

· Crisis

· Incidents

· Settlement fails

· Margin calls

Related strategic objectives (as set out on page 8)

· Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can be created

· Investing in technology and realigning the mix between owned and outsourced platforms to maximise the business's intellectual property to ensure that the business has the technology capabilities that customers seek

Risk

Breach of regulatory requirements

Description

The Group operates in a highly regulated environment and is subject to the laws and regulatory frameworks of numerous jurisdictions. These include laws relating to conduct of business, financial crime, market abuse and anti-bribery and corruption.

Failure to comply with applicable regulatory requirements could result in enforcement action being taken.

See Note 33 to the Consolidated Financial Statements.

Potential impact

· Regulatory fines

· Potential loss of regulatory licence

· Severe damage to reputation

Mitigation

· The Group's Compliance function is responsible for ensuring that staff are made aware of all applicable regulatory requirements, and for monitoring compliance with these requirements

· Adoption of Cultural Framework which seeks to implement the Group's core values and principles throughout all areas of the business

· Adoption of comprehensive Compliance training programme

Key risk indicator

· Regulatory fines

· Financial crime breaches

· Market abuse breaches

· Conflict of interest breaches

Related strategic objectives (as set out on page 8)

· Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can be created

· Developing the HR function and processes to hire and train employees and to manage compensation appropriately to encourage good long term behaviours

Risk

Counterparty credit risk

Description

The Group is exposed to counterparty credit risk arising from brokerage receivables owed by clients, unsettled matched principal trades held with clients and from cash deposit counterparties.

Potential impact

· Financial loss which could, in extreme cases, impact the Group's solvencyand liquidity

Mitigation

· Counterparty exposures managed against exposure reporting thresholds, calibrated to reflect client creditworthiness

· Exposures subject to ongoing monitoring and reporting by independentCredit function

· Exposure concentration limits to prevent excessive exposure to one institution

Key risk indicator

· Matched Principal trade exposure

· Name Passing receivables

· Group cash peak exposure

Related strategic objectives (as set out on page 8)

· Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can be created

Risk

Liquidity risk

Description

The Group is exposed to potential margin calls from clearing houses and correspondent clearers. The Group also faces liquidity risk through being required to fund matched principal trades which fail to settle on settlement date.

Potential impact

· Reduction in Group's liquidity resources which could, in extreme cases, impactthe Group's liquidity

Mitigation

· Brokers subject to broking limits which restrict potential margin exposure

· Group maintains significant cash resources in each operating centre to ensure immediate access to funds

· Committed £250m revolving credit facility

Key risk indicator

· Unplanned intra-group funding calls

· RCF draw-down

· Tax issues

· Credit reviews past due

· Level of margin call

Related strategic objectives (as set out on page 8)

· Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can be created

Appendix B: Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The total amounts owed to and from related parties and associates at 31 December 2016, which also represents the value of transactions during the year are set out below:

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

Appendix C: Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the Strategic Report includes a fair review 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; and

· the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Enquiries

Media

Rebecca Shelley, Group Head of Corporate Affairs

TP ICAP plc

Direct: +44 (0)20 7200 7750

email: rebecca.shelley@tpicap.com

Jamie Dunkley, Group Media Relations Director

TP ICAP plc

Direct: +44 (0)20 7200 7524

email: jamie.dunkley@tpicap.com