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TP IcapAnnouncement

05/04/2022 11:15

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RNS Number : 3245H  TP ICAP Group PLC  05 April 2022

TP ICAP Group plc

LEI: 2138006YAA7IRVKKGE63

5 April 2022

 

TP ICAP Group plc 2021 Annual Report and Notice of 2022 Annual General Meeting

TP ICAP Group plc (the 'Company') announces that the following documents have
now been published:

·      Annual Report and Accounts of the Company for the year ended 31
December 2021 ('2021 Annual Report'); and

·      circular to shareholders incorporating the Notice of the 2022
Annual General Meeting.

In compliance with Listing Rule 9.6.1, copies of both of these documents will
be available as soon as practicable for inspection via the National Storage
Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . These documents can
also be viewed at or downloaded from our website at www.tpicap.com/investors
(http://www.tpicap.com/investors) .

The 2022 Annual General Meeting ('AGM') will take place at 2.15pm (BST) on
Wednesday 11 May 2022 at the offices of Allen & Overy LLP, One Bishops
Square, London, E1 6AD. If shareholders are either unable or disinclined to
attend the AGM, shareholders should vote by appointing the chair of the
meeting as their proxy by submitting the Form of Proxy online. Details of how
to do this are included in the Notice of the 2022 AGM and on the Company's
website at www.tpicap.com/investors (http://www.tpicap.com/investors) .

In relation to COVID-19, the Board continues to monitor the Government's
advice on meetings and congregations. Any changes to the AGM, including any
change to the location of the AGM, will be communicated to shareholders before
the meeting through our website at www.tpicap.com/investors
(http://www.tpicap.com/investors) , which shareholders are advised to check
for updates, and, where appropriate, by RNS announcement.

The following disclosures comply with Disclosure and Transparency Rule 6.3.5.
The Company's full year results announcement on 15 March 2022 contained a
management report and condensed financial information derived from the 2021
Annual Report. A description of risks and uncertainties, details of related
party transactions and the Directors' Responsibility Statement, extracted in
full unedited text from the Company's 2021 Annual Report, are set out below.
This information should be read in conjunction with, and not as a substitute
for, reading the Company's 2021 Annual Report. Page numbers and notes in the
following appendices refer to page numbers and notes in the Company's 2021
Annual Report.

 

Appendix A: Principal Risks

The Board has conducted a robust assessment of the principal risks facing the
Group, defined for the purposes of this Annual Report as those risks that
could have a material impact on its business model,

future performance, solvency, liquidity or reputation.

 

The Board has considered a wide range of information as part of this
assessment, including reports provided by the Group Risk function and senior
management and the key findings from the Group's various risk identification
and assessment processes described below.

 

The Group records all its identified risks within its Risk Register and
periodically assesses the risk profile of each risk against the target
residual risk profile defined in the Group's risk appetite framework.

 

The Group formally reviews and assesses its risk profile on a quarterly basis
as part of the Group's Risk Committee governance cycle. In addition to the
formal reviews noted above, the Group monitors its risk profile against risk
appetite on an ongoing basis as part of its day-to-day business management and
will update its risk framework outside of the formal review and assessment
cycle where required to reflect any material changes to risk profile. This
includes any changes to risk profile identified through the Group's change
management framework.

 

The Group undertakes stress testing and scenario analyses to model its
potential risk exposure at the more extreme 'stressed loss' levels of
severity. The Group also conducts reverse stress tests to identify

those risk scenarios that could threaten the viability of the Group and
evaluate its ability to withstand or recover from such scenarios.

 

Finally, the Group also reviews its emerging risk profile as part of the risk
identification and assessment process. An emerging risk, for these purposes,
is defined as any new type of risk that may pose a material threat to the
Group in the future, and which the Group should monitor so that it is in a
position to actively manage the risk if, and when, it becomes a more immediate
threat to the Group. Each emerging risk is recorded in the Group's Emerging
Risk Register, along with an assessment of its potential impact and an
estimate of the timeframe within which it is likely to materialise.

 

The Board has considered the findings of all of the above assessment types in
identifying its principal risks which are set out in the table overleaf. The
table includes an assessment of the impact of each risk by reference to the
potential impact that each risk could have on the Group's business model,
future performance, solvency or liquidity, or reputation. It should be noted
that the impact stated for each risk is the potential impact in stressed
conditions, net of any risk mitigation adopted by the Group, as opposed to the
'expected' impact at higher levels of probability.

 

 Rating  Risk Impact
 1       A risk that could fundamentally threaten the Group's business model, future
         performance, solvency, liquidity, or reputation.
 2       A risk that could significantly impact the Group's business model, future
         performance, solvency, liquidity, or reputation.
 3       A risk that could materially impact the Group's business model, future
         performance, solvency, liquidity, or reputation.

 

 

 

1.   Strategic and Business Risk

 

 

Risk

Adverse change to regulatory framework

 

Description

The risk of a fundamental change to the regulatory framework which has a
material adverse impact on the Group's business and economic model.

 

Impact rating

1

 

Potential impact

 >       Reduction in broking activity
 >       Reduced earnings and profitability
 >       Increases in regulatory capital requirements

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Monitoring of regulatory developments
 >       Involvement in consultation and rule setting processes

 

Key risk indicator

 >       Status of regulatory change initiatives

 

Link to our strategic priorities and legal obligations

 >       Electronification
 >       Aggregation
 >       Diversification

 

 

Risk

Deterioration in the commercial environment

 

Description

The risk that due to adverse macro-economic conditions or geopolitical
developments, market activity is suppressed leading to reduced trading
volumes.

 

This would include any deterioration in the macroeconomic conditions arising
from the current situation with Russia and Ukraine.

 

Impact rating

1

 

Potential impact

 >       Reduction in broking activity
 >       Pressure on brokerage rates
 >       Reduced earnings and profitability

 

Change in risk exposure since 2020

Increase

 

Mitigation

 >       Defined business development strategy that seeks to maintain client,
         geographical and product diversification
 >       Stress test process (which includes reverse stress tests) to assess the
         Group's ability to absorb significant reductions in business performance and
         any changes to business model or risk mitigations required

 

Key risk indicator

 >       Trade volumes
 >       Revenues by region
 >       Operating profit
 >       Stress test results

 

Link to our strategic priorities and legal obligations

 >        Electronification

 >        Aggregation

 >        Diversification

 

 

Risk

Failure to respond to client requirements

 

Description

The risk that the Group fails to respond to evolving customer requirements,
including the demand for enhanced electronic broking solutions for certain
asset classes.

 

Impact rating

2

 

Potential impact

 >       Loss of market share
 >       Reduced earnings and profitability

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Proactive engagement with clients through customer relationship management
         process
 >       Clearly defined business development strategy which seeks to anticipate and
         respond to its clients' evolving requirements

 

Key risk indicator

 >       Performance against strategy implementation plans
 >       New business initiatives
 >       Results of client engagement surveys

 

Link to our strategic priorities and legal obligations

 >       Electronification
 >       Aggregation
 >       Diversification

 

 

Risk

The impact of Brexit

 

Description

The risk that Brexit leads to a deterioration in the commercial environment
and consequential reduction

in trading volumes.

 

The risk that the operating model implemented by the Group to comply with the
loss of EU passporting rights results in a fragmentation of liquidity between
UK and EU liquidity pools.

 

Impact rating

3

 

Potential impact

 >       Loss of market share
 >       Reduction in broking activity
 >       Reduced earnings and profitability

 

Change in risk exposure since 2020

Decrease

 

Mitigation

 >       Scaling-up of EU trading subsidiary to act as the trading hub for EU-based
         business
 >       Changes to operating model to maintain UK-EU liquidity
 >       Proactive engagement with European regulators and clients

 

Key risk indicator

 >       Brexit revenue-at-risk
 >       Performance against Brexit response plans

 

Link to our strategic priorities and legal obligations

 >       Aggregation
 >       Diversification

 

 

Risk

Global health pandemic

 

Description

The risk that the Group experiences a significant deterioration in business
performance due to a global pandemic (such as COVID-19).

 

Impact rating

2

 

Potential impact

 >       Reduction in broking activity
 >       Loss of market share
 >       Reduced earnings and profitability

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Incident and Crisis Management Framework

 >       Enhanced remote working capability and protocols developed in response to
         COVID-19

 

Key risk indicator

 >       Trade volumes
 >       Revenues by region
 >       Operating profit
 >       Risk events due to remote working

 

Related principal strategic objectives

 >       Diversification

 

 

Risk

Integration of Liquidnet

 

Description

The Group is exposed to the risk that it fails to successfully integrate the
acquired Liquidnet business

into the wider TP ICAP Group or that the Group fails to achieve the financial
growth targets underpinning the transaction.

 

Impact rating

2

 

Potential impact

 >       Failure to achieve financial targets
 >       Damage to reputation
 >       Increased volatility in share price
 >       Reduced ability to access capital markets

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Integration managed through a formal programme management structure
 >       Action taken to secure key personnel

 

Key risk indicator

 >       Performance against Liquidnet integration plans
 >       Performance against financial targets

 

Related principal strategic objectives

 >       Electronification
 >       Aggregation
 >       Diversification

 

 

 

2.   Operational Risk

 

 

Risk

Cyber-security and data protection

 

Description

The risk that the Group fails to adequately protect itself against
cyber-attack or to adequately secure the data it holds, resulting in potential
financial loss (including through cyber-enabled fraud), a loss of operability,
or the potential loss of critical business or client data.

 

Impact rating

1

 

Potential impact

 >        Loss of revenue
 >        Remediation costs

 >        Damage to reputation

 >        Regulatory sanctions

 >        Payment of damages/compensation

 

Change in risk exposure since 2020

Increase

 

Mitigation

 >       Ongoing monitoring and assessment of the cyber-threat landscape
 >       Appropriate framework of systems and controls to prevent, identify and contain
         cyber threats

Key risk indicator

 >        Cyber-security events/losses

 >        Vulnerability testing and monitoring

 >        Data loss events

 

Related principal strategic objectives

 >       Electronification
 >       People, conduct and compliance

 

 

 

Risk

Legal, Compliance and Conduct Risk

 

Description

The Group operates in a highly regulated environment and is subject to the
legal and regulatory frameworks of numerous jurisdictions.

 

Failure to comply with applicable legal and regulatory requirements could
result in enforcement action being taken against the Group, including the
incurring of significant fines.

 

Impact rating

2

 

Potential impact

 >       Regulatory and legal enforcement action including censure, fines or loss of
         operating licence

 >       Severe damage to reputation

 

Change in risk exposure since 2020

No change

 

Mitigation

 >        Compliance function to oversee compliance with regulatory obligations

 >        Compliance monitoring and surveillance activity
 >        Compliance training programme to ensure that staff are aware of the regulatory

        requirements
 >

          Adoption of compliance culture to engender high standards of employee conduct

 

Key risk indicator

 >       Internal Compliance policy breaches
 >       Employee conduct metrics
 >       Regulatory breaches

 

Related principal strategic objectives

 >       People, conduct and compliance

 

 

Risk

Broking process

 

Description

The Group is exposed to operational risk at every stage of the broking
process, from the execution and

arrangement of transactions (with the associated risk of loss arising through
closing out error positions

or compensating clients) through to the clearing, settlement and invoicing of
transactions.

 

Impact rating

3

 

Potential impact

 >       Financial Loss
 >       Damage to the Group's reputation as a reliable market intermediary

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       On-desk supervision of broking activity

 >       Issuing of trade recaps and confirmations
 >       Order and position limits on electronic order books
 >       Ongoing monitoring to identify potential error trades and any clearing or
         settlement issues

 

Key risk indicator

 >       Risk events
 >       Settlement fails
 >       Margin calls

 

Related principal strategic objectives

 >       Electronification
 >       People, conduct and compliance

 

 

Risk

Infrastructure

 

Description

The Group is heavily reliant on the effective and resilient operation of a
range of infrastructure components, including:

> A complex IT architecture;

> A range of office locations; and

> Key third-party suppliers and market infrastructure providers.

 

A failure of the Group's infrastructure could result in a material loss of
business.

 

Impact rating

3

 

Potential impact

 >       Financial loss which could, in extreme cases, impact the Group's solvency and
         liquidity

 >       Damage to the Group's reputation as a reliable market intermediary

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Framework of systems and controls to minimise the risk of operational failure

 >       Incident and Crisis Management Framework
 >       Business continuity plans and capability

 

Key risk indicator

 >       System outages
 >       Stress test results

 Related principal strategic objectives

 >       Electronification
 >       People, conduct and compliance

 

 

Risk

Human capital

 

Description

The Group operates in a highly competitive recruitment market and is exposed
to the risk of losing key front office, support or control staff who are
essential to the effective operation of the business.

 

Impact rating

3

 

Potential impact

 >       Increased staff turnover impacting the Group's ability to operate a profitable
         and resilient business

 

Change in risk exposure since 2020

Increase

 

Mitigation

 >       Fixed term front office contracts with staggered renewal dates
 >       Performance management process linked to remuneration
 >       Introduction of new flexible working arrangement

 

Key risk indicator

 >       Staff turnover rates
 >       Loss of key personnel

 Related principal strategic objectives

 >       People, conduct and compliance

 

 

3.   Financial Risk

 

 

Risk

FX exposure

 

Description

The risk that the Group suffers loss as a result of a movement in FX rates,
whether through transaction risk or translation risk.

 

Impact rating

3

 

Potential impact

 >       Financial loss which could, in extreme cases, impact the Group's solvency and
         liquidity

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Ongoing monitoring of Group's FX positions

 

Key risk indicator

 >       FX translation exposure
 >       FX transaction exposure

 

Related principal strategic objectives

 >       Diversification

 

 

Risk

Liquidity risk

 

Description

The Group is exposed to potential margin calls from clearing houses and
correspondent clearers.

 

The Group also faces liquidity risk through its requirement to fund matched
principal trades which fail to settle on settlement date.

 

Impact rating

3

 

Potential impact

 >       Reduction in the Group's liquidity resources which could, in extreme cases,
         impact the Group's cash-flow

 

Change in risk exposure since 2020

No change

 

Mitigation

 >        Margin call and trade funding profile monitored against defined limits
 >        Group maintains liquidity resources in each operating centre to provide

        immediate access to funds

        Committed £270m revolving credit facility ('RCF')
 >
 >        Diversification of funding sources
 >        Overdraft facilities provided by primary settlement institutions

 

Key risk indicator

 >        Margin call profile
 >        Settlement fail - funding requirements
 >        Unplanned intra-Group funding calls

 >        RCF draw-down

 

Related principal strategic objectives

 >       Diversification

 

 

Risk

Counterparty credit risk

 

Description

The counterparty credit risk arising from outstanding brokerage receivables,
unsettled trades and cash deposits.

 

Impact rating

3

 

Potential impact

 >       Financial loss which could, in extreme cases, impact the Group's solvency and
         liquidity

Change in risk exposure since 2020

No change

 

Mitigation

 >       Counterparty exposures managed against credit thresholds that are calibrated
         to reflect counterparty creditworthiness

 

Key risk indicator

 >        Portfolio exposure
 >        Exposure concentration

 >        Aged debt

 

Related principal strategic objectives

 >       Diversification

 

 

4.   Emerging Risks

 

 

Risk

Technology expertise

 

Description

The financial markets in which the Group operates will become increasingly
based on complex technology and the use of sophisticated data and analytics.
The Group's ability to retain its position as a leading market infrastructure
provider will be dependent on its ability to develop and implement a
technology strategy which keeps pace with technological enhancements and to
attract the required data scientists and technology specialists in an
increasingly competitive recruitment market.

 

Impact rating

2

 

Potential impact

 >       Reduction in broking activity
 >       Reduced earnings and profitability

 

Change in risk exposure since 2020

No change

 

Mitigation

 >       Ongoing review of the Group's strategy in the context of broader market
         developments and assessment of the IT expertise and resourcing required to
         deliver it

 

Time to materialisation

5 to 10 years

 

Related principal strategic objectives

 >       Electronification
 >       Aggregation
 >       Diversification

 

 

Risk

Climate change - transition to net zero

 

Description

The risk that the Group fails to address any adverse impact on its business
arising from the transition to a net zero global economy.

 

Impact rating

3

 

Potential impact

 >       Reduction in broking activity
 >       Reduced earnings and profitability

 

Change in risk exposure since 2020

Increased

 

Mitigation

 >       Ongoing monitoring of the impact of net zero policies on client and broader
         market activity, to ensure that the Group can adjust its business strategy to
         respond effectively if required

 

Time to materialisation

< 5 years

 

Related principal strategic objectives

 >       Diversification

 

 

Risk

Deglobalisation

 

Description

The risk that the global economy becomes increasingly fragmented (as per the
UK's recent departure from the EU) resulting in increasing divergence in
regulatory regimes and the associated fragmentation of liquidity in the
financial markets.

 

Impact rating

3

 

Potential impact

 >       Reduction in broking activity
 >       Reduced earnings and profitability

Change in risk exposure since 2020

No change

 

Mitigation

 >       Ongoing horizon scanning to identify potential changes to the geopolitical
         landscape and associated changes to the regulatory frameworks governing
         financial markets

 

Time to materialisation

< 5 years

 

Related principal strategic objectives

 >       Aggregation

 

 

Appendix B: Related party transactions

 

Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
Note.

 

The total amounts owed to and from associates and joint ventures at 31
December 2021, which also represent the value of transactions during the year.
The total amounts owed to and from related parties at 31 December 2021 are set
out below:

 

                                Amounts owed by related parties     Amounts owed to related parties
                                2021              2020              2021              2020

                                £m                £m                £m                £m
 Associates                     5                 5                 -                 -

 Joint ventures                 -                 -                 (2)               (3)

 Loans from related parties      -                 -                 (51)              (28)

 

In August 2020, the Group entered into a Yen 10 bn committed facility with the
Tokyo Tanshi Co., Ltd, a related party, that matures in February 2024. The
loan for related parties is conducted on an arm's length basis. At 31 December
2021, Yen 8 bn (£51m) of the facility was drawn.

 

The amounts outstanding are unsecured and will be settled in cash. No
guarantees have been given or received. No provisions have been made for
doubtful debts in respect of the amounts owed by related parties.

 

During the year, £1m of interest was paid on loans from related parties.

 

Directors

Costs in respect of the Directors who were the key management personnel of the
Group during the year are set out below in aggregate for each of the
categories specified in IAS 24 'Related Party Disclosures'. Further
information about the individual Directors is provided in the audited part of
the Report on Directors' Remuneration on pages 135 to 145.

 

                        2021  2020

                        £m    £m
 Short term benefits    4     5
 Social security costs  1     1
 Total                  5     6

 

 

Appendix C: Directors' Responsibility Statement

 

The Directors confirm that to the best of their knowledge that:

 

 >       the Financial Statements, prepared in accordance with the relevant financial
         reporting framework, give a true and fair view of the assets, liabilities,
         financial position and profit or loss of the Company and the undertakings
         included in the consolidation taken as a whole;
 >       the Strategic report includes a fair review of the development and performance
         of the business and the position of the Company and the undertakings included
         in the consolidation taken as a whole, together with a description of the
         principal risks and uncertainties that they face; and
 >       the Annual Report and Financial Statements, taken as a whole, are fair,
         balanced and understandable and provide the information necessary for
         shareholders to assess the Company's position, performance, business model and
         strategy.

 

ENDS

 

Enquiries:

 

Andrew Eames

Group Company Secretary

Phone: +44 (0) 20 7200 7000

Email: Andrew.Eames@tpicap.com (mailto:Andrew.Eames@tpicap.com)

 

For media enquiries please contact:

 

Richard Newman

Group Head of Marketing and Communications

Direct: +44 (0) 7469 039 307

Email: richard.newman@tpicap.com

 

For investor enquiries please contact:

 

Dominic Lagan

Head of Investor Relations

Direct: +44 (0) 20 3933 3040

Email: dominic.lagan@tpicap.com (mailto:dominic.lagan@tpicap.com)

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