REG - LSL Property ServPLC - PRELIMINARY ANNOUNCEMENT <Origin Href="QuoteRef">LSL.L</Origin> - Part 2

LSL Property ServicesAnnouncement

07/03/2017 07:06

- Part 2: For the preceding part double click  ID:nRSG6739Ya 

determination of risk appetite and management or mitigation of risks in
line with risk appetite tolerances; 
 
c.     assessment of prospects and viability; 
 
d.     review of effectiveness of the risk management and internal control
systems; and 
 
e.     going concern confirmation (for LSL's going concern disclosure see the
Report of the Directors). 
 
During the year, the Directors carried out a robust assessment of the
principal risks facing the Group, including those that threaten the business
model, future performance, solvency or liquidity. The Directors believe that
the assessment which has been completed is appropriate to the complexity, size
and circumstances of the Group, which is a matter of judgmentof the Board and
has been supported by the Management Teams. 
 
The Directors also carried out a risk appetite assessment exercise which
involved the evaluation of continually evolving aspects of risk management.
During 2016, this included the capturing of anticipated impacts following the
EU referendum on the residential housing market and the articulation of
established 'conduct risk' routines used to support the delivery of
appropriate customer outcomes.  These aspects are included in the principal
risks and uncertainties summarised in this Report. 
 
The identified risks may change over time due to changes in business models,
performance, strategy, operational processes and the stage of development of
the Group in its business cycle as well as with changes in the external
environment. This robust assessment is focused on the principal risks and it
differs from the review of the effectiveness of the systems of risk management
and internal controls. 
 
In accordance with the requirements of the Code this Report includes
descriptions of principal risks together with a high level explanation of how
they are being managed or mitigated. This includes clear descriptions of the
risks together with an evaluation of the likelihood of a typical risk event
crystallising and its possible impact. Mitigating steps and any significant
changes to specific areas of risk are also referred to within the tabular
summary. 
 
As noted above, this robust analysis of principal risks has also contributed
to the Group's viability statement which is set included the Report of the
Directors. The Directors have also considered the impact if risks coincide,
namely a combination of non-principal risks could potentially represent a
single compound principal risk. 
 
The Group also faces other risks which, although important and subject to
regular review, have been assessed as less significant and are not listed in
this statement. This may include some risks which are not currently known to
the Group or that LSL currently deems as immaterial, or were included in
previous Annual Report and Accounts and through changes in external factors
and careful management, are no longer deemed to be as material to the Group as
a whole. 
 
However, these risks may individually or cumulatively also have a material
adverse effect together with other risk factors which are beyond the direct
control of LSL, and may have a material adverse impact on LSL's business,
results of operations and/or financial condition. The risk management
framework and procedures in place can only provide reasonable but not absolute
assurance that the principal risks and uncertainties are managed to an
acceptable level. 
 
Further information relating to how LSL managed these risks and uncertainties
during 2016 is set out in the Audit Committee Report (Internal Controls). 
 
Principal Risk and Uncertainties 
 
     Risk                                   Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Mitigation                                                                           
     Strategic:                             
 1   UK housing market                      Groupperformanceisintrinsicallylinkedtothe overallperformanceoftheUKhousingmarket (includingsubsets - e.g. primeCentralLondon). The market is also impacted by changes in the global political and economic environments (e.g. EU Referendum outcome).                                                                                                                                                                                                                                                                                                                                                                                                                           •  Daily, weekly andmonthlymonitoringof tradingandmarket performancedata.•           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Marketshare,productmixandsegmentationinitiatives.•  Development of counter-cyclical  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             income and recurring revenue streams.•  Responsive investment and cost control       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             measures during the housing market cycle.•  Investment in teams to delivery strategic 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             projects.•  BalancedUK-widegeographicalspread.•  Monitoringofwidermacro-economic and 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             political developments.                                                              
 2   New UK housing market entrants         Traditionalbusinessmodelsforproperty servicesareexposedincreasinglytonew businessmodelsandtechnological advancements(e.g.online/hybrid estate agents,AutomatedValuationModels and automated financial services operating models).                                                                                                                                                                                                                                                                                                                                                                                                                                                •  Competitor and industrybenchmarking.•  Development of strategies in response to   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             market disrupters.•  Externalconsultativesupportasnecessary.•  Monitoring of         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             potential acquisitions and joint   venture opportunities.•                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Servicedeliveryenhancementsandexperimentation.•  Infrastructure investment, upgrading 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             and consolidation of core operating systems.•  Marketinginitiatives.•                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Staffincentiveschemes.                                                               
 3   Acquisitions and growth initiatives    Realisingappropriatetargetsforacquisitionand majorprojectinitiatives,includingdeliveryof appraisals,duediligenceand integration/implementationrequirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      •  Definedpreand post-acquisition reportingto theBoard and Audit Committee.•         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Structuredauthoritylevels.•  Responsive flexing of risk appetite during the housing  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             market cycle.•  Flexible resource pool to support acquisition and integration        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             activities teams.•  Externalconsultativesupportasnecessary.•                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Establishedintegrationplanningmethodology.•  Post-acquisitionandpost-implementation   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             reviews.•  RiskandInternal Auditengagements.                                         
     Sales/distribution:                    
 4   Professional services                  Exposureto major PI claimsarising from any lapsesinsurveyingandvaluation practices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              • Robustframeworkandmonitoringroutinestomaintain valuationaccuracy.•                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Dedicatedsurveyingriskteam.• Timelydatacaptureofallclaimsandassociatedtrends.•       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Utilisationoftechnologytomonitorvaluationtrendsand triggeralerts.• RiskandInternal   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Auditreviews.• Experiencedclaimshandlingpersonnelsupportedbylegal experts.•          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Culturepromotingeffectivesalesconductandopenlinesof communicationwithclients.• Board 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             -levelauthoritiesforPIclaimssettlementpayments                                       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             andgovernanceofunderlyingclaimshandlingand accountingprocesses.                      
 5   Client Contracts                       Theperformanceofthe Estate Agency and Surveyingbusinessesare dependent on securingandretainingkeycontracts (e.g. lenders, portfolio landlords and house builders).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               •  Customeroutcomefocusedforumsandinitiatives.•                                      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Designatedseniormembersofstaffwithresponsibilityfor relationshipmanagement.•  Ongoing 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             investment in resources, technology and service standardsto ensure LSL has the       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             capacitytomeetserviceleveldemands.•  Targetedmarketing and training events.•         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Monitoring of client dependency and compliance with contractual requirements.•       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Robust control framework supporting the risk profiling of prospective clients,       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             contract renewals and the quality of professional services.•  Dedicatedin-houseLegal 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Services and Claims Management teams•  Risk&InternalAudit reviews.                   
     Operations:                            
 6.  Information technology infrastructure  TheGrouphasvariedoperationswhichrequire arobustITinfrastructure.TheITenvironment needstoremainadaptabletosupportgrowth initiatives,harnesstechnologicaladvancements andcounterbusinesscontinuitythreats, includingmaliciousandcyberrelatedattacks.                                                                                                                                                                                                                                                                                                                                                                                                                               •   BoardlevelIT governance,policiesandinitiatives.•   Focus on innovation within the   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Group's strategy.•   Dedicatedin-houseITteams.•                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Maintenanceofinfrastructuretomaintaineffectiveservice delivery.•   On                  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             -goingITinvestment and development programme.•   Implementable business continuity     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             and disaster recovery solutions.•   Monitoring of compliance with relevant             
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             contractual and regulatoryrequirements.•   Inter-GroupITforums.•                       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Externalconsultativesupportasnecessary.•   RiskandInternal Auditreviews.               
 7.  Information security                   Groupoperationsinvolvetheprocessingofhigh volumesofpersonaldata,withpotentialfor unintended data lossand exposureto increasing levelsofexternalcyber-crime.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      •     LSLInformationSecurity and Governance Group and Group IT Director in place. •     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               DedicatedLSLInformationSecuritypersonnel.•     Groupdata protectionpolicies in       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             place andtraining delivered.•     Advice obtained from In house legal and external     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             advisers as appropriate.•     Trackingofdataassets/datasharing,inlinewithauthority     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             levels.•     Penetrationtestingprogramme.•     Benchmarking versus best practice       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             standards - e.g. ISO27001.•     Implementation of regulatory changes - e.g. General    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Data Protection Regulation.•    Secondandthird-linerisk-basedreviews.                  
 8.  Regulatory and compliance              Relationshipswithregulatorsandcompliance withlegalandregulatoryrequirements. Any compliance breaches could result in sanctions and reputational damage (e.g. prosecutions or fines). Regulatory and compliance risk extends to oversightofstandardsadoptedby businesspartners (e.g.franchises, appointed representatives,joint ventures and minority investments).  The market and business operations are also impacted by regulatory reforms (e.g. Housing White Paper) which may have an effect on Group revenue and expenditures. Regulatory costs, fees and charges continue to grow due to the rising funding requirements of the Financial Services Compensation Scheme.  •   Top-down culture focused on fairness, transparency and                             
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             successfulcustomeroutcomes.•   Opendialoguewithregulatorsandmonitoringofemerging       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             developments and regulatory reforms.•   Groupriskframeworkpolicyincorporatinga'three   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             -linesof defence'model totrackcompliancewithregulations.•   Grouppolicies including    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             ethics (e.g.whistleblowingstructuresand anti-fraud and anti-bribery policies) and      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             employee welfare.•   Group-wide health and safety arrangements to ensure the welfare   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             of employees and visitors to Group premises.•   Group-levelforumswithregulatoryfocus   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             and oversight (e.g. FSMC, FSRC and Information Security and Governance Group).•        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Dedicated compliance teams in higher risk/regulated functions.•   EvolutionofIT        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             systemsto strengthenoversightroutines.•                                                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Responsivecomplaintstrackingofanyemergingthemes.•   In-house Legal Services team,      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             with external consultativesupportwhenneeded.•   GroupRiskandInternal Auditreviews.     
     People:                                
 9.  Employees                              Securingandretainingkeystrategicpopulation and controlling attrition in key business critical areas, ensuringtheeffectivemanagementof personnelstandardsacrossvariedGroup businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            • OversightbyLSLRemunerationandNominations Committees.•                                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Groupremunerationpoliciesandincentiveschemesto retainkeystrategicpopulation.• Regular   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             benchmarkingandappraisalsof senior management.• Successionplanningreviews and          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             targeted reviews in some areas.• Dedicatedin-houserecruitmentteam.• Targeted           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             retention and recruitment initiatives.• StaffsurveysandGroupHRinitiativesto focus on   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             attrition,improvestaff morale,relieveareasofpressureandimproveoperational              
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             efficiencies.• Group-wideHRITsystems.•                                                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Monitoringofstatutoryrequirementsanddevelopments.• Employee policies and monitoring    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             framework (e.g. health and safety).• Cultureoftransparency,clearGrouppoliciesand       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             whistleblowingproceduresto enable staffto confidentiallyraiseconcerns.                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

- More to follow, for following part double click  ID:nRSG6739Yc