Picture of TP Icap logo

TCAP TP Icap News Story

0.000.00%
gb flag iconLast trade - 00:00
FinancialsAdventurousMid CapSuper Stock

REG - TP ICAP PLC - Annual Financial Report <Origin Href="QuoteRef">TCAPI.L</Origin>

RNS Number : 7992B
TP ICAP PLC
06 April 2017

6 April 2017

TP ICAP plc 2016 Annual Report

TP ICAP plc ("the Company") has today published its 2016 Annual Report and circular to shareholders incorporating the Notice of the 2017 Annual General Meeting. Both documents can be viewed at or downloaded from www.TPICAP.com/investors.

Copies of both these documents, together with the Form of Proxy, have been submitted to the UK Listing Authority's Document Viewing Facility via the National Storage Mechanism and will shortly be available for inspection atwww.morningstar.co.uk/uk/nsm.do.

The following disclosures comply with Disclosure and Transparency Rule 6.3.5. The Company's full year results announcement of 14 March 2017 contained a management report and condensed financial information derived from the Group's audited statutory accounts. A description of risks and uncertainties, details of related party transactions and the Directors' Responsibility Statement, extracted in full unedited text from the 2016 Annual Report, are set out below. This information should be read in conjunction with, and not as a substitute for, reading the full 2016 Annual Report. Page numbers and notes in the following appendices refer to page numbers and notes in the Company's 2016 Annual Report.

Principal Risks

The Board has conducted a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.

In undertaking this assessment on behalf of the Board, the Risk Committee has considered a wide range of information, including regulatory requirements, reports provided by the Risk function, presentations by senior management and the findings from the Group's 'bottom-up' and 'top-down' risk assessment processes conducted in 2016.

Risk

Adverse change toregulatory framework

Description

The Group is exposed to the risk of a fundamental change to the regulatory environment it operates within resulting in a reduced role for Interdealer brokers or restricted client trading activity, such as MiFID II.

Potential impact

Reduction in broking activity

Reduced earnings and profitability

Mitigation

Close monitoring of regulatory developments

Active involvement in consultation and rule setting processes
(including FCA consultations onMiFID II)

Key risk indicator

Key regulatory changes

Status of regulatory change initiatives

Related strategic objectives (as set out on page 8)

Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can becreated

Continuing to develop the Data & Analytics business where the product suiteand delivery channels can be expanded

Risk

Cyber-security and data protection

Description

The risk that the Group fails to adequately protect itself against cyber-attack and / or to adequately secure the data it holds, resulting in loss of operability, as well as potential loss of critical business or client data.

Potential impact

Loss of revenue

Remediation costs

Severe damage to reputation

Regulatory sanctions

Payment of damages/compensation

Mitigation

The Group continues to monitor and assess the evolving and increasingly sophisticated cyber-threat landscape to ensure that its control framework isappropriate to address the potential cyber-threats to which it isexposed

Key risk indicator

System outages

Data loss events

Cyber-security events/losses

Related strategic objectives (as set out on page 8)

Investing in technology and realigning the mix between owned and outsourced platforms to maximise the business's intellectual property to ensure that the business has the technology capabilities that customers seek

Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can becreated

Risk

Deterioration in the commercial environment

Description

The Group's performance would be adversely affected by a sustained period of suppressed market activity leading to reduced revenues. This could arise as a result of adverse macro-economic conditions or geopolitical developments, such as Brexit.

Potential impact

Reduction in broking activity

Reduced earnings and profitability

Mitigation

Adoption of a clearly defined business development strategy tomaintain geographic and product diversification

Establishment of working group to prepare the Group's response to Brexit

Key risk indicator

Operating profit

Revenues by region

Trade volumes

Revenue forecast

Stress testing scenariooutcomes

Related strategic objectives (as set out on page 8)

Seeking to improve the business's brand awareness and coverage

Extending the business's broking offering to service clients where the market is receptive to a broadening of the client base

Seeking to continue to build the business's activities
in energy and commodities products

Seeking to add brokers to maintain and grow presence in those products with high market attractiveness where the business has a high ability to compete,
and where its presence can be developed

Risk

Failure to respond to client requirements

Description

The markets in which the Group competes are characterised by rapidly changing technology and evolving customer requirements, including the demand for electronic broking solutions. The Group is exposed to the risk that it fails to respond to customer requirements in a timely manner.

Potential impact

Loss of market share

Reduced earnings and profitability

Mitigation

Proactive engagement with clients through customer relationship management process

Adoption of a clearly defined business development strategy which continues to enhance the Group's service offering

Key risk indicator

Trade volumes

Operating profit

New business initiatives

Client satisfaction surveys

Related strategic objectives (as set out on page 8)

Investing in technology and realigning the mix between owned and outsourced platforms to maximise the business's intellectual property
to ensure that the business has the technology capabilities that customers seek

Investing in client relationship management to bring focus and discipline to how the business targets and covers clients, to seek to broaden and institutionalise relationships

Risk

Failure to deliver integration

Description

The Group's business strategy is dependent on the successful integration of ICAP, and achieving the targeted operational efficiencies.

Potential impact

Double running costs leading to reducedprofitability

Lack of investor confidence

Reduced access to the capital markets

Mitigation

Adoption of clearly defined integration plan

Implementation of robust integration governance structure

Measurement of synergies realised and monitoring of costs of theintegration

Key risk indicator

Integration plan tracking (status)

Related strategic objectives (as set out on page 8)

Developing the business's capability tosource, execute and integrate acquisitions

Risk

Failure to retain and recruit talent

Description

The Group operates in a highly competitive market for talent, and is exposed to the risk that it fails to retain or recruit the employees required to deliver its strategy.

Potential impact

Potential loss of expertise and client relationships

Increase in employee costs as Group seeks to counter aggressive
competitor activity

Mitigation

Proactive management of brokercontracts

Competitive remuneration andperformance management

Operation of Early Careers Programme

Key risk indicator

Complaints and conductissues

Voluntary leavers

Performance appraisalratings

Trainings conducted

Related strategic objectives (as set out on page 8)

Developing the HR function and processes to hire and train staff and to manage compensation appropriately to encourage good long term behaviours

Risk

Operational failure

Description

The Group is exposed to operational risk in nearly every facet of its role as a hybrid voicebroker, including from its dependence on:

The accurate execution of a large numbers of processes, including those required to execute, clear and settle trades

A complex IT infrastructure.

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 intermediary in the
financial markets

Mitigation

Implementation of an appropriate control framework to ensure that operational risk exposure is managed within risk appetite

Reverse stress tests undertaken toidentify key risks which could undermine viability of the Group

Maintenance of effective business continuity plans and capability

Adoption of Incident and Crisis Management Plan to ensure all key stakeholders involved in the event of a major incident

Key risk indicator

Residual balances

Loss events

Crisis

Incidents

Settlement fails

Margin calls

Related strategic objectives (as set out on page 8)

Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can becreated

Investing in technology and realigning the mix between owned and outsourced platforms to maximise the business's intellectual property to ensure that the business has the technology capabilities that customers seek

Risk

Breach of regulatory requirements

Description

The Group operates in a highly regulated environment and is subject to the laws and regulatory frameworks of numerous jurisdictions. These include laws relating to conduct of business, financial crime, market abuse and anti-bribery and corruption.

Failure to comply with applicable regulatory requirements could result in enforcement action being taken.

See Note 33 to the Consolidated Financial Statements.

Potential impact

Regulatory fines

Potential loss of regulatory licence

Severe damage to reputation

Mitigation

The Group's Compliance function is responsible for ensuring that staff are made aware of all applicable regulatory requirements, and for monitoring compliance with theserequirements

Adoption of Cultural Framework which seeks to implement the Group's core values and principles throughout all areas of the business

Adoption of comprehensive Compliance training programme

Key risk indicator

Regulatory fines

Financial crime breaches

Market abuse breaches

Conflict of interest breaches

Related strategic objectives (as set out on page 8)

Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can becreated

Developing the HR function and processes to hire and train employees and to manage compensation appropriately to encourage good long term behaviours

Risk

Counterparty credit risk

Description

The Group is exposed to counterparty credit risk arising from brokerage receivables owed by clients, unsettled matched principal trades held with clients and from cash deposit counterparties.

Potential impact

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

Mitigation

Counterparty exposures managed against exposure reporting thresholds, calibrated to reflect client creditworthiness

Exposures subject to ongoing monitoring and reporting by independent
Credit function

Exposure concentration limits toprevent excessive exposure toone institution

Key risk indicator

Matched Principal tradeexposure

Name Passing receivables

Group cash peakexposure

Related strategic objectives (as set out on page 8)

Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can becreated

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 being required to fund matched principal trades which failto settle on settlement date.

Potential impact

Reduction in Group's liquidity resources which could, in extreme cases, impact
the Group's liquidity

Mitigation

Brokers subject to broking limits which restrict potential margin exposure

Group maintains significant cashresources in each operatingcentre to ensure immediate access to funds

Committed 250m revolving creditfacility

Key risk indicator

Unplanned intra-group funding calls

RCF draw-down

Tax issues

Credit reviews past due

Level of margin call

Related strategic objectives (as set out on page 8)

Working within a robust investment framework so that the business allocates capital and resources to areas where the most value can becreated

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 related parties and associates at 31 December 2016, which also represents the value of transactions during the year are set out below:

Amounts owed by related parties

Amounts owed to related parties

2016

m

2015

m

2016

m

2015

m

Associates

Joint Ventures

Related Parties

3.2

0.5

-

0.7

-

-

(0.2)

(1.8)

-

-

-

-

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.

Appendix C: Directors' Responsibility Statement

The Directors confirm that to the best of their knowledge:

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, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Enquiries

Media

Rebecca Shelley, Group Head of Corporate Affairs

TP ICAP plc

Direct: +44 (0)20 7200 7750

email: rebecca.shelley@tpicap.com

Jamie Dunkley, Group Media Relations Director

TP ICAP plc

Direct: +44 (0)20 7200 7524

email: jamie.dunkley@tpicap.com


This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSLIFVASVIRIID

Recent news on TP Icap

See all news