Full Annual Report - Inchcape

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Business review Strategy Principal risks The Group applies an effective system of risk management which identifies, monitors and mitigates risks. Further details of the Group’s risk management process can be found on pages 60-61. Risk is a part of doing business; the risk management system aims to provide assurance to all stakeholders of the effectiveness of our control framework in managing risk against a background of highly diverse and competitive markets. The key benefits of the system include maximised resource efficiency through controlled prioritisation of issues, benchmarking between business units, sharing best practice and effective crisis management. The following provides an overview of the principal business risk areas facing the Group along with the mitigating actions in place. Strategy Description of risk Failure to deliver on our five key areas of strategic focus: growing market share; growing aftersales; reducing costs; managing working capital and controlling capital expenditure Impact We do not increase our profits, revenues and margins. There may be an impact on our relationships with the brand partners whom we represent Mitigation • The Group is investing in its Inchcape Advantage and Customer 1st programmes to ensure that we win new customers and retain existing ones – with particular emphasis upon retaining customer loyalty in respect of older vehicles • Group-wide focus on working capital (particularly aged stock) reduction • Obtaining favourable credit terms and making improvements in supply chain management • Thorough reviews of all proposed capital expenditure Brand partners and key relationships Description of risk Not sustaining current relationships with brand partners Impact Impact on our ability to retain existing businesses on contract renewal and to take on new opportunities Mitigation • Constant focus on performance, effective communication and ensuring that our objectives are closely linked to those of our brand partners People Description of risk Failure to attract, develop and retain talent Impact Unable to develop business Employees who lack motivation Mitigation • Talent review process • Internal annual employee engagement survey • External benchmarking of remuneration • Succession plans in place for key positions Reputation Description of risk Corporate responsibility risk Impact Loss of reputation as a good corporate citizen Mitigation • Global corporate responsibility programme 38 Inchcape plc ¦ Annual Report and Accounts 2009
Section One Business review Treasury Description of risk Funding and liquidity risk Impact Unable to meet obligations within available committed facilities Mitigation • The Group maintains sufficient committed facilities to meet forecast debt requirements and ensure adequate headroom is maintained Description of risk Currency risk Impact Transactional foreign exchange exposures Mitigation • A significant proportion of Group trading is denominated in local currency • Where possible, foreign exchange exposures are matched internally before hedging externally • Where businesses are billed in a foreign currency, committed transactional exposures are hedged back to the reporting currency Description of risk Interest rate risk Impact Increase in net interest Mitigation • Continuous monitoring of short and long term rates • Group policy permits the fixing of gross borrowings at fixed interest rates if deemed appropriate by management Description of risk Counterparty risk Impact Credit losses Mitigation • Approved credit parties and limits with regular review Legal and regulatory Description of risk Litigation and regulatory risk Impact Litigation or breaching the laws or regulations of the countries in which we operate could have a financial and/or reputational impact Mitigation • The Group ensures that it obtains timely information about forthcoming changes in legislation and that it has robust procedures in place to minimise any risk of detriment or non-compliance • Processes are in place which are aimed at reducing the potential for litigation and for escalating any problems which do arise with a view to managing the exposure appropriately Pensions Description of risk Risk arising out of the Group’s defined benefit pension funds Impact Increase in contributions in the event of adverse change in the schemes’ financial position or to fund increases in future benefits Mitigation • The Group maintains an open dialogue between the Company and Trustees • The Group employs specialist staff that manage the ongoing compliance and financial health of the schemes • The schemes’ funding position is monitored quarterly www.inchcape.com 39
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Section Four Shareholder informatio
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Full Annual Report - Inchcape

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