REG - ITV PLC - Annual Report and Accounts 2014 <Origin Href="QuoteRef">ITV.L</Origin> - Part 3

ITVAnnouncement

26/03/2015 10:30

- Part 3: For the preceding part double click  ID:nRSZ5364Ib 

                                                                            Mitigating Factors                                                                                                                                                                                                                                              
 Financial                                                                                                                                                                                                                                                                                                                                                                                                                              
 ITV loses its credit status or lines of funding with existing lenders or there is a collapse of a major bank impacting financial arrangements/availability of credit.  ·     The business is cash generative and working capital management remains a key focus.·     ITV has £250 million of undrawn, financial covenant free facilities in addition to a £525 million Revolving Credit Facility with a number of core relationship   
                                                                                                                                                                        banks.·     The low gross debt levels that ITV now has should enable the Company to obtain debt from the marketplace if needed.·     We are rated investment grade by two ratings agencies.                                                                     
 There is a major collapse in investment values leading to a material impact on the pension scheme deficit.                                                             ·     There is regular communication between ITV and the pension trustees.·     The pension scheme's assets are invested in a diversified portfolio, with a significant amount of the fund held in bonds.·     ITV has worked with the pension trustees to limit 
                                                                                                                                                                        the potential deficit by a series of asset backed arrangements and taken risk out of the scheme with a longevity swap.                                                                                                                                          
 Operational                                                                                                                                                                                                                                                                                                                                                                                                                            
 A significant event removes a number of the key management team from the business on a long-term or permanent basis.                                                   ·     There is a business resilience plan in place which includes succession plans or nominated replacements for all key positions within the Company.                                                                                                          
 Reputation                                                                                                                                                                                                                                                                                                                                                                                                                             
 An event with public interest that causes significant reputational and brand damage.                                                                                   ·     ITV has a crisis management policy in place and is increasing emphasis on its development and application.                                                                                                                                                
 There is a major health and safety incident that results in a significant loss of human life.                                                                          ·     ITV has a central Health & Safety team and Health & Safety policies and procedures are in place, with appropriate training for employees where required. As we expand internationally these will be continually reviewed.·     Regular inspections are    
                                                                                                                                                                        undertaken at all sites, which are run alongside a programme of Health & Safety audits. This is subject to ongoing review.                                                                                                                                      
 A major incident results in ITV being unable to continue with scheduled broadcasting for a sustained period.                                                           ·     A risk register of broadcast operations, including key outsourced functions, is in place and reviewed on a regular basis.·     Major incident scenario testing performed in 2014.·     An incident management process has been agreed and disaster        
                                                                                                                                                                        recovery plans are in place.                                                                                                                                                                                                                                    
 There is a significant or unexpected change in regulation or legislation.                                                                                              ·     ITV regularly communicates with legislative groups, legal panels and Ofcom to monitor potential policy and regulatory developments.                                                                                                                       
 
 
 Strategic Risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 Strategic Risk                                                                                                                                                                                                                                                                                                  Mitigating Factors                                                                                                                                                        Strategic Priorities  
 The Market                                                                                                                                                                                                                                                                                                                                                                                                                                                                                1 2 3                 
 There is a major decline in advertising revenues and ITV does not build sufficient non-NAR revenue streams to offset the financial impact of this decline.                                                                                                                                                      ·     Growing non-advertising revenue in areas such as ITV Studios and Online, Pay & Interactive, remains a key part of the strategy.·     ITV continues to focus on cash 1 3                   
                                                                                                                                                                                                                                                                                                                 and costs, ensuring the Company has an adequate financial liquidity and balance sheet flexibility.                                                                                              
 The television market moves significantly towards pay television as a preferred model, negatively impacting ITV's free-to-air revenue.                                                                                                                                                                          ·     ITV continues to support free platforms, including YouView, to keep free-to-air strong.·     ITV looks at and evaluates the opportunities for expanding its existing 1 3                   
                                                                                                                                                                                                                                                                                                                 pay services and other pay offerings.·     ITV explores other platforms to understand viewing habits and what people are prepared to pay for.                                                   
 A faster than expected shift to Video on Demand (VOD) or other new technologies causes a sustained loss of advertising revenue.                                                                                                                                                                                 ·     The business continues to develop ITV Player VOD services, maximise the distribution of ITV Player and grow its VOD advertising business.·     ITV monitors the     1 2 3                 
                                                                                                                                                                                                                                                                                                                 market for new technology and where appropriate explores how ITV can participate.                                                                                                               
 People                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 ITV fails to evolve its organisational structure and culture to ensure that it is capable of delivering continued growth from the new businesses or revenue streams and fails to attract, develop and retain key creative, commercial and management talent with the skills required for the ongoing business.  ·     ITV constantly reassesses the business to create a fit-for-purpose organisation.·     Strategic focus on working across the business to embed and strengthen the    1 2 3                 
                                                                                                                                                                                                                                                                                                                 culture of 'One ITV' way of working.·     ITV invests in training and development for all key colleagues in the business.·     Succession plans are in place for all key                        
                                                                                                                                                                                                                                                                                                                 positions within the Company.                                                                                                                                                                   
 Organisation, Structure and Processes                                                                                                                                                                                                                                                                                                                                                                                                                                                     
 There is significant loss of programme rights or ITV fails to identify and obtain the optimal rights packages.                                                                                                                                                                                                  ·     ITV is focused on both protecting and exploiting existing rights and ensuring that future rights generated accrue to ITV.·     ITV has a detailed model to evaluate 1 2 3                 
                                                                                                                                                                                                                                                                                                                 the value of third party rights to ensure it only buys rights that make economic sense.                                                                                                         
 ITV fails to create and own a sufficient number of hit programmes/formats.                                                                                                                                                                                                                                      ·     ITV maximises opportunities for ITV Studios to create successful shows by investing in the creative pipeline and focusing on programmes and genres that can return  1 2 3                 
                                                                                                                                                                                                                                                                                                                 and travel internationally, i.e. drama, entertainment and factual entertainment, as evidenced by our increased investment in scripted content.·     ITV is focused on                           
                                                                                                                                                                                                                                                                                                                 hiring and retaining the right key creative talent.                                                                                                                                             
 ITV fails to properly resource, financially, creatively and operationally, the new growth businesses, in particular online and international content.                                                                                                                                                           ·     Talent management plans have been developed and reviewed to ensure adequate succession planning across ITV. ·     ITV continues to embed and strengthen the culture 1 2 3                 
                                                                                                                                                                                                                                                                                                                 of 'One ITV' way of working.·     Lessons from recent investments are captured through post acquisition reviews.                                                                                
 ITV loses a significant volume of personal or sensitive data.                                                                                                                                                                                                                                                   ·     A Management Board sponsored Operational Risk Steering Group is in place to ensure the appropriate management of information security.·     Mandatory online        1 2 3                 
                                                                                                                                                                                                                                                                                                                 training modules, awareness campaigns and simplified information security policies for employees. ·     Monitoring of information sharing outside of ITV.                                       
 ITV remains heavily reliant on legacy systems, which could potentially restrict the ability to grow the business. These systems and processes may not be appropriate for non-advertising revenue or international growth.                                                                                       ·     System requirements are kept under review with business growth and system modernisation projects implemented as appropriate.·     A modernisation plan is in place  2 3                   
                                                                                                                                                                                                                                                                                                                 for the legacy systems which remains under constant review and development to ensure technology systems meet the needs of the business