REG - easyJet PLC - Annual Report and Accounts 2016 <Origin Href="QuoteRef">EZJ.L</Origin> - Part 2
05/12/2016 12:10
- Part 2: For the preceding part double click ID:nRSE9806Qa
details The role of the Committee includes:· maintaining and implementing a treasury policy setting out Board-approved strategies for foreign exchange and fuel
hedging, along with liquidity, interest rate management, counterparties' limits; and· reviewing and reporting on compliance with Board treasury policies. The policy is
to hedge revenue and costs within a percentage band for a rolling 24-month period. Board policy is to maintain a liquidity buffer including cash and a $500 million five
year revolving credit facility provided by a group of 12 relationship banks. This allows the Group to better manage the impact of downturns in business or temporary
curtailment of activities. The basis for the liquidity policy was revised in 2016 to cover peak unearned revenue, with a minimum position of £2.6 million per 100 aircraft
seats. A strong balance sheet supports the business through fluctuations in the economic conditions and the Group has access to diverse sources of funding to support
liquidity requirements.
Delivery of projects supporting the business strategyThe business is undertaking a number of key projects and programmes to deliver key elements of the strategy. Failure to deliver the planned business benefits and cost savings from these projects may result in under achievement of easyJet's planned financial results. Link to strategy:1 2 3 4 5 6 The Executive Management Team meets monthly to review progress made on the portfolio of programmes and solve issues that require escalation. Key IT projects or programmes
have additional oversight through the IT Governance and Oversight Committee (a committee of the Board). Turn to page: 55 [of the Annual Report] for further details Each
project or programme has its own steering group which provides challenge to the project, monitors progress and ensures that decisions are made at the appropriate level. A
portfolio management office is in place to oversee delivery of projects andprogrammes, and track budgets and realisation of benefits. A project management framework,
which sets out governance requirements, key processes and controls, is followed by all projects and programmes. "Lessons learnt" reviews are undertaken to ensure
continuous improvement to this approach.
PEOPLE
Risk description Mitigation
Attraction and retention of talenteasyJet's current and future success is reliant on having the right people with the right capabilities. Increased competition in the recruitment market may impact easyJet's ability to attract and retain key talent. This could adversely affect the delivery of strategic objectives. Link to strategy:6 There is a recruitment strategy for pilots and cabin crew. This includes pilot sponsorship and the Amy Johnson Flying Initiative to attract more female pilots. In
addition, easyJet has developed a coherent employment brand to attract and retain top talent. An annual survey is undertaken to measure staff engagement and identify any
areas for further management attention. easyJet's aim is to develop talent from within. There are several talent development programmes in place for individuals who have
been identified for fast-tracking into more senior roles as vacancies arise. Alongside this there is an annual succession planning process to ensure there are clear
successors for all key business roles.
COMPLIANCE AND REGULATORY
Risk description Mitigation
Impact of EU exitFollowing the outcome of the UK referendum to leave the EU, there remains uncertainty as to how this will affect easyJet's current market access rights. If easyJet is unable to continue to fly its intra-EU network this would have a significant operational and financial impact. Link to strategy:1 2 3 4 5 6 V An internal working group has been established to review all aspects of easyJet's operations. easyJet is actively engaging with regulators, the UK Government and the EU
to secure European flying rights through the continuation of a liberalised and deregulated aviation market across Europe. As a mitigant, easyJet is in the process of
registering an Air Operator Certificate in an EU territory to enable access to the European aviation market in as similar a way as today in a post-Brexit landscape.
Legislative and regulatory risks The airline industry is heavily regulated and there is a continual need to keep well informed and adapt to (as required) any legislative or regulatory changes across the jurisdictions in which easyJet operates. Failure to comply with legislative and regulatory requirements (or interpretations thereof), such as local consumer laws, legal decisions or policy changes in relation to passenger compensation, environmental and airport regulation, in the jurisdictions in which easyJet operates, could have an adverse reputational and financial impact. Link to strategy:2 3 5 6 easyJet has an in-house legal team to advise on legal issues and developments, and to monitor compliance with formal regulatory requirements. It also has a panel of
external legal advisers both in the UK and in key easyJet markets, who are briefed to keep easyJet informed of any changes or new legislation and to assist easyJet in
developing appropriate responses to such legislation. In addition, a Head of Compliance has recently been appointed to develop and lead internal compliance programmes.
The Regulatory Affairs Group co-ordinates easyJet's role in influencing future and existing policy and regulations that affect the airline industry and will work with
industry bodies to assist in this, as appropriate. Country Review Boards are established for easyJet's main markets, raising awareness of in-country issues, and providing
a forum in which to highlight any potential legislative changes and impacts in the different countries.
REPUTATIONAL
Risk description Mitigation
Major shareholder and brand owner relationship easyJet has two major shareholders (easyGroup Holdings Limited and Polys Holdings Limited) which, as a concert party, control 33.73% of its ordinary shares. Shareholder activism on their part could adversely impact the reputation of easyJet and cause a distraction to management. easyJet does not own its company name or branding which is licensed from easyGroup Ltd. The licence includes certain minimum service levels that easyJet must meet in order to retain the right to use the name and brand. The easyJet brand could also be impacted through the actions of easyGroup or other easyGroup licensees. Link to strategy:2 5 easyJet has an active shareholder engagement programme led by its investor relations team. As part of that programme easyJet engages with easyGroup Holdings Limited on a
regular basis alongside its other major shareholders. In addition, the Company has a relationship agreement with easyGroup and Polys Holdings in line with the controlling
shareholder regime as set out in the Financial Conduct Authority's Listing Rules. Representatives from the Board and senior management take collective responsibility for
addressing issues arising from any activist approach adopted by the major shareholders. The objective is to address issues when they arise and anticipate and plan for
potential future activism. The brand licence agreement with easyGroup Ltd provides for the regular meeting of senior representatives from both sides to actively manage
brand-related issues as they arise. Such meetings occur on a quarterly basis and have proven effective. easyJet also monitors compliance with brand licence service levels
and has a right to take steps to remedy any instance of non-compliance.
Cyber threat and information security easyJet receives most of its revenue through credit card transactions and operates as an e-commerce business. It faces both external cyber threats and internal risks to its data and systems. A security breach could negatively impact easyJet's reputation and have an adverse operational and financial impact. Link to strategy:2 3 4 6 An Information Security Steering Group, chaired by the General Counsel, oversees any developments in data threats and controls and determines whether appropriate
responses are being taken to them. There are dedicated information security teams that monitor threats and ensure that the design, implementation and operation of easyJet
systems are secure. This is through the following:· achieving "secure by design" through a dedicated security architecture capability;· monitoring of secure systems
against unauthorised access;· reviewing the security of external and internal systems and easyJet.com through periodic vulnerability scanning;· considering
information security risks within procurement processes and the introduction of new systems and IT services;· reviewing and refreshing information acceptable use
policies; and· maintaining staff security awareness and education through a Security Champions network, online training materials and periodic awareness campaigns.
Given the nature of this risk the appropriateness of the controls is undercontinuous review.
End
5 December 2016
For further details please contact easyJet plc:
Institutional investors and sale side analysts:
Stuart Morgan Investor Relations +44 (0) 7989 665 484
Michael Barker Investor Relations +44 (0) 7985 890 939
Media:
Paul Moore Corporate Communications +44 (0) 7860 794 444
Edward Simpkins RLM Finsbury +44 (0) 207 251 3801
+44 (0) 7947 740 551
This information is provided by RNS
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