REG - Johnson Matthey PLC - Annual Financial Report <Origin Href="QuoteRef">JMAT.L</Origin> - Part 2

Johnson MattheyAnnouncement

16/06/2016 09:55

- Part 2: For the preceding part double click  ID:nRSP3886Ba 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 and exploit our production capabilities, warehousing and freight of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
 goods. It is also important to us that our supplies are sourced                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
 efficiently and ethically. A number of strategic materials, notably pgms,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 rare earth materials and narcotic raw materials, are available from a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 limited number of countries and suppliers, so ensuring the availability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 of these products is essential.The impact of this risk could affect our                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 ability to carry out manufacturing and satisfy customer requirements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 leading to reputational damage and loss of potential future business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 PeopleEffective recruitment and retention.                               
 Risk and impactThe group relies on its ability to recruit, retain and    Mitigation·      Employer brand and coordinated graduate recruitment.·      Remuneration strategy with clarity around market best practice and Johnson Matthey's position on base pay, annual and long term incentives, pensions and regional benefits.·      Talent management process.·      Transparency of policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Changes since 2015 annual reportA number of groupwide initiatives are underway to attract and retain talent, thus reducing the impact of this risk. Risk ratingLow                                                                                                                                                                                                                                                                                                                                                                      
 develop employees around the world with the necessary range of skills and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 experience. An inability to recruit and retain talent may result in a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 loss of critical knowledge in the business, delays in achieving targets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 and suboptimal innovation. This could lead to negative impacts on                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
 business performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 Security of assets                                                       
 Risk and impactOn any given day, the group has significant quantities of Mitigation·      Security management systems and site security systems.·      Assay and other process controls.·      Security awareness campaigns and training.·      Audits of site security systems.·      Stock takes to check inventories.·      Use of approved carriers for transit.·      Insurance coverage for losses from theft or fraud.·      Liaison with local law enforcement for high risk sites.                                                                                                                                                                                                                                                                                                                                                                                                           Changes since 2015 annual reportNo change. Risk ratingLow                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
 high value precious metals or highly regulated substances on site and in                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 transit, the security of which is critical. A material loss due to a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 breach, failure in security management systems, security controls or a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 loss during processing could lead to a number of impacts includingloss /                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 restriction of licence to operate, loss of goods and an inability to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
 supply customers, increased security costs and an impact on the group's                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 reputation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
 Intellectual capital                                                     
 Risk and impactWe operate in highly competitive markets in which         Mitigation·      Management of IP portfolio.·      Non-disclosure activities.·      Use of IP lawyers to provide specialist guidance.·      Training and awareness.·      Monitoring of third party IP.·      Ensuring that employee behaviours associated with intellectual capital are effective.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Changes since 2015 annual reportIncreased due to advances in technology and our competitor landscape. Risk ratingHigh                                                                                                                                                                                                                                                                                                                                                                                                                   
 innovative, competitively priced, fit for market products are essential.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 The generation and application of technology know-how and IP, together                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 with the monitoring of third party IP, is essential in maintaining our                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 competitive advantage.  Failure to identify and protect the group's IP or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 failure to identify and mitigate against third party IP rights could lead                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 to a loss in business advantage, loss of freedom to operate and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
 reputational damage associated with litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
 Failure of significant sites                                             
 Risk and impactWhile the group operates in a variety of locations,       Mitigation·      Assessment of critical sites.·      Business continuity plans in place.·      Inventory management to provide critical spares and inventories.·      Use of external suppliers for key activities and services including generators and utilities.·      IT disaster recovery capabilities.·      Insurance of sites.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Changes since 2015 annual reportNo change. Risk ratingMedium                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
 certain sites are critical to the group due to their scale or the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
 specific nature of their production activities. Potential risks include a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 disruptive event such as fire, flood or earthquake, a major incident at                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
 site level, such as an explosion, or other events such as geopolitical                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
 instability. The consequences associated with this risk include the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
 impact on our ability to manufacture goods and satisfy customer demands,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 potential loss of market confidence and impact on the overall performance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 of the group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 Ethics and complianceDoing the right thing                               
 Risk and impactDue to the markets in which we operate and the complexity Mitigation·      Code of ethics in place which has been rolled out to all employees with face to face training.·      Use of subject matter experts, internal and external, on legal compliance and risk mitigation matters.·      Group and local policies and procedures in place including full integration with business processes.·      Group control requirements such as supplier on-boarding, counterparty due diligence and payments approval.·      Independent confidential speak up hotline for employees, contractors and third parties.·      Oversight on contractual provisions and commercial arrangements by legal teams.·      Global network of ethics ambassadors.·      Emergency response procedures for events such as dawn raids.·      Investigation of incidents and allegations of misconduct.  Changes since 2015 annual reportCode of ethics and training for all employees rolled out this year. A speak up policy has been launched and enhanced reporting tools have improved oversight and management of concerns being raised. Rating has increased as a result of better visibility of reporting. Risk ratingHigh                                                                                                                                                                                                               
 of our supply chain, the group is exposed to a changing and increasingly                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
 stringent regulatory environment. Ethical misconduct by our employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
 inadvertently, knowingly or negligently or a legal non-compliance through                                                                                                                                                                                                                                                                                                                                                                                                                                                    

- More to follow, for following part double click  ID:nRSP3886Bc