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Risk: Reduction in US infrastructure
spending
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Trend
No
change
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Description and potential impact
Our growth is supported by
multi-year planned government spending to upgrade US infrastructure
(e.g. IIJA and the Chips Act), technology change and private
investment from US manufacturers and producers to onshore vital
components. Changes to these plans could have a detrimental impact
on Group revenues.
We remain confident that
infrastructure investment will continue to form part of national
spending plans in the US despite ongoing macro-economic
uncertainty.
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Mitigation
· Cross-party support for infrastructure investment
plans.
· Our
portfolio covers diverse products, markets and
territories.
· Market
and product development initiatives.
· Strategic planning process overseen by the Exec and Board to
anticipate and mitigate potential downside risks.
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Risk: Changes in global economic outlook and geopolitical
environment
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Trend
Slightly higher
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Description and potential impact
Material adverse changes in the
political and economic environments in the end-user markets in
which we operate, have the potential to put at risk our ability to
execute our strategy.
2023 has seen escalating
geopolitical tensions. While this had limited impact on our supply
chains and end markets, we continue to monitor the risk.
During 2023 central banks in both
the US and UK raised interest rates in an attempt to control
inflation. While this is a concern for the cost of living, an
increase in interest rates has had a limited impact on the Group's
ability to grow given our cash generative model. Alongside this our
businesses operate in resilient, less discretionary infrastructure
markets.
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Mitigation
·
The Group has a diverse portfolio of operating
companies with exposure to a range of markets and geographies,
limiting exposure to any one country or market sector.
· Strong
balance sheet with low leverage and mix of fixed and floating rate
debt.
· Current and future financial performance is continuously
monitored, facilitating rapid response to changes in market
conditions.
· In
line with our entrepreneurial model, our decisions are made close
to our markets and our businesses are agile and responsive to
changes in their external competitive landscape.
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Risk: Increase in competitive pressure
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Trend
No change
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Description and potential impact
Increased volatility, uncertainty
and slowdown in our markets could result in increased competition,
leading to a loss of customers and/or pricing pressure and
consequently a loss of sales and reduced profits.
|
Mitigation
· The
Group holds leading positions in niche infrastructure markets with
high barriers to entry.
· In
line with our entrepreneurial model, our decisions are made close
to our markets and our businesses are agile and responsive to
changes in their competitive landscape.
· Our
operating companies strive to provide superior products and high
service levels to customers, while aiming to ensure there is no
dependency on any one customer.
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Risk: Product failure
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Trend
No change
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Description and potential impact
The Group operates in infrastructure
markets where it is critical that its products meet customer and
legislative requirements and where the consequences of product
failure are potentially significant.
Product failure arising from
component defects or warranty issues may require remediation
including the replacement of defective components or complete
products, resulting in direct financial costs to the Group and/or
wider reputational risk.
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Mitigation
· Products tested, approved and accredited by regulatory
bodies.
· Quality control protocols fully implemented and continuously
monitored.
· Contractual controls in place to minimise economic
impacts.
· Product liability insurance cover maintained
globally.
· Litigation supported/managed by external legal
specialists.
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Risk: Climate Change
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Trend
New
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Description and potential impact
Failure to adapt to and manage the
threats and opportunities from climate change could have
significant reputational, financial and operational impacts on the
Group. Chronic changes in climate and extreme weather events may
disrupt our operations.
Global warming could place further
stress on our supply chain, with extreme weather events impacting
supply becoming more likely and chronic changes to heat / rainfall
averages potentially impacting where we source certain
materials.
Transitioning to a low-carbon
economy presents technological challenges and the high energy
demand of some of our operations could incur carbon
taxes.
Climate change does present
opportunity for the Group through our sustainable products and
products to improve infrastructure resilience to increasingly
extreme weather hazards.
Climate change has been added as a
Principal Risk for 2023.
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Mitigation
· Sustainability Committee to oversee and govern our carbon
reduction plans and initiatives.
· TCFD
analysis to understand our risks and opportunities arising from
climate change.
· Climate scenario modelling to evaluate the threat from climate
hazards such as extreme heat, flooding, and extreme winds, both now
and in 2040, for our operational sites.
· Costed
plan established to set out how we will achieve net-zero (for
scopes 1 and 2) by 2040, reducing our exposure to transition
risks.
· Insurance cover, continuity planning and extreme weather
protocols in place to mitigate our exposure from physical
risks.
See Our Approach to Sustainability
(including our TCFD report) for further details, see pages 36 to
55.
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Risk: Supply chain failure
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Trend
No change
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Description and potential impact
The Group's businesses depend on the
availability and timely delivery of raw materials and components,
which could be affected by disruption in its supply chain. Supply
chain failures because of performance, cost inflation, quality
and/or insolvency may have an adverse impact on the Group's
production capacity and lead to an inability to meet customer
requirements, resulting in a reduction in revenues, potential loss
of market share and possible reputational damage.
Climate change transition costs
could also inflate the price of the goods we purchase.
During the year, our operating
companies continued to take appropriate action to manage supply
chain headwinds. Actions taken included implementing price
increases to offset input cost inflation and securing supply of raw
materials.
|
Mitigation
· Group
procurement standards, including robust due diligence of supply
chain partners and the requirement for dual sourcing where
available.
· Regular interaction and assessment of performance/ financial
status of key suppliers.
· Group
oversight of material procurement contracts ensuring robust
contractual protections.
· Contingency plans in place throughout the supply chain, such
as purchasing additional stock of key raw materials, and securing
additional supply chain capacity.
· Group
wide thematic Internal Audit review of Supply Chain completed
during 2022 with recommendations implemented during
2023.
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Risk: IT systems failure
|
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Trend
Slightly higher
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Description and potential impact
The Group relies on the information
technology systems used in the daily operations of its operating
companies. A failure of those systems or poor implementation of new
systems could have a significant operational impact on the Group,
impacting customer service, revenue and margins.
Poor security controls and
procedures could lead to our operating companies being susceptible
to cyber attack, potentially resulting in significant IT failure
and associated disruption.
During the year the global cyber
threat has continued to evolve, with increasing numbers of
organised criminal groups undertaking increasingly sophisticated
ransomware and other cyber attacks. The UK's National Cyber
Security Centre (‛NCSC') has warned of heightened cyber risk from
the rise of artificial intelligence and due to increasingly
strained geopolitical tensions.
While there has been a continued
enhancement of the Group's IT security controls during 2023, the
Board considers the risk to be heightened due to the increasing
sophistication and frequency of cyber threats across the
world.
|
Mitigation
·
The Board maintains a watching brief on IT and
cyber risk, and has overseen significant investment across the
Group to enhance IT security controls.
·
Wholesale network security improvements completed
during 2023.
·
IT controls manual mandating a robust set of
information security controls covering basic cyber hygiene, system
back-up procedures and hardware / software protection.
·
Ongoing program of IT controls compliance reviews
completed by Internal Audit.
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Risk: Portfolio management
|
|
Trend
No change
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Description and potential impact
The Group's growth strategies
include the acquisition of businesses around the world that
complement or supplement its existing activities. Failure to
execute an effective acquisition and integration programme would
have a significant impact on the Group's ability to generate
sustainable profitable growth for shareholders.
|
Mitigation
·
All potential acquisitions are tightly evaluated
to ensure they fit within our purpose and core strategic
goals.
·
Due diligence protocols deployed in relation to
assessment of target businesses, including financial, commercial,
and legal etc.
·
Contractual protections and assurances sought from
sellers to mitigate subsequent identification of risks.
·
Board approval required for Group acquisitions, in
line with its Schedule of Matters Reserved.
·
Post-acquisition integration plans established for
all acquisitions with regular performance monitoring and reporting
to the Board.
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|
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Risk: Failure to take advantage of product development and
innovation
|
|
Trend
No change
|
Description and potential impact
The Group operates in global
infrastructure markets where continuous innovation is integral to
the Group's product offering and where a failure to innovate could
result in product obsolescence, the entry of new competitors and/or
loss of market share. The development of new products and
technologies carries risk including the failure to develop a
commercially viable offering within an acceptable
timeframe.
|
Mitigation
·
Entrepreneurial culture and autonomous structure
to encourage innovation and enable agile response to a changing
competitive landscape.
·
Our acquisitions strategy brings innovative
products and technology to our portfolio.
·
Board monitoring of emerging risks alongside
external specialist support, where both the risks identified and
the potential opportunities arising are considered.
·
Group wide Innovation Framework with two workshops
conducted during 2023 to encourage and stimulate increased
innovation.
·
Active Intellectual Property management within
individual operating companies overseen by Group.
|
|
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Risk: Failure to attract, retain and develop an appropriately
diverse, skilled and experienced workforce
|
|
Trend
Slightly lower
|
Description and potential impact
Talented employees are fundamental
to the success of the Group. We aim to employ the best people for
the job, and we know we can only do this by considering talented
people from the whole community.
Failure to attract, develop and
retain high-quality individuals may impact our ability to deliver
against our strategic goals.
During 2023 we experienced some
easing in labour market conditions, albeit certain skillsets, e.g.
welders and maintenance technicians remain challenging to recruit.
This is being partly addressed through apprenticeships.
|
Mitigation
· Board level review of succession planning for senior
leaders.
· Training and development programme in place for supervisors
and line managers.
· New training and development programme for high potential
talent to be launched in 2024.
· Bespoke coaching and mentoring for identified MD successors to
support development.
· Continued use of internships and apprenticeships and other
vocational courses for specialist and technical roles.
· Appropriate remuneration and benefits, together with bonus
opportunities and incentive plans offered to employees
· Annual engagement survey results inform local operating action
plans to improve engagement.
· Women's network established in 2023, to attract, retain, and
develop female employees.
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|
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Risk: Prevention of harm or injury to people
|
|
Trend
No change
|
Description and potential impact
The Group is committed to ensuring
the health, safety and wellbeing of all employees and third
parties. The Group operates multiple manufacturing facilities
around the world, a failure in the Group's health and safety
procedures could lead to injury or to the death of employees or
third parties.
LTIR has reduced from 1.1 in 2022 to
0.43 in 2023. Further improvement is required to reach the 2030
Health and Safety target of 0.25 and health and safety remains a
key focus area for the Group. In our efforts to continuously
improve our proactive approach to health and safety,
we have changed the group structure
from a global to a regional one to allow the group health and
safety resources to be closer to individual operating companies
within their region.
|
Mitigation
·
Culture of zero tolerance in respect of health and
safety violations promoted by the Board and disseminated throughout
Group businesses with clear targets and improvement
metrics.
·
Appointment of UK and US Heads of Health and
Safety.
·
Monthly Health and Safety reporting for all
operating companies facilitated via online tools.
·
Monitoring and review of LTI rates with all LTI
incidents investigated and findings presented to the
Executive
·
Board. Improvement recommendations are implemented
and shared across the Group to minimise any
reoccurrence.
·
Improvement made in our incident investigation to
enhance the focus on root cause analysis to prevent further
incidents.
·
Regular health and safety site audits.
·
Health and safety forums to monitor performance
and share best practice.
·
External health and safety accreditations and
relationships maintained with regulatory bodies.
·
Health and safety is a priority area of focus for
new acquisitions.
|
|
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Risk: Violation of applicable laws and
regulations
|
|
Trend
No change
|
Description and potential impact
The Group's operations must comply
with a range of national and international laws and regulations
including those related to modern slavery, anti-bribery and
corruption, human rights, and employment, GDPR, trade/ export
compliance and competition/anti-trust.
A failure to comply with applicable
laws and regulations could result in civil or criminal liabilities
and/or individual or corporate fines and could also result in
debarment from Government-related contracts, restrictions on
ability to trade or rejection by financial counterparties as well
as reputational damage.
|
Mitigation
·
Group Code of Conduct sets out required approach
for all staff.
·
Staff training provided on Modern Slavery red
flags, Anti-Bribery and Corruption and Competition
compliance.
·
Programme of audits undertaken on a cyclical basis
to review operating companies' compliance with regulatory
requirements.
·
Software solutions implemented globally to ensure
compliance with trade and export legislation.
·
Externally hosted whistleblowing hotline available
to all employees to allow them to raise concerns in confidence or
anonymously, if preferred.
·
Modern Slavery compliance programme continued
through 2023.
·
Toolkits issued to all UK operating companies to
aid compliance with GDPR.
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