REG-Travis Perkins Travis Perkins: Publication of 2020 Annual Report
02/03/2021 20:00
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Travis Perkins (TPK)
Travis Perkins: Publication of 2020 Annual Report
02-March-2021 / 19:55 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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Publication of the Annual Report 2020
Further to the release of its results announcement this morning, Travis Perkins plc (the
"Company") announces that it has today published its Annual Report for the year ended 31
December 2020. The Company's Annual Report 2020 can be viewed on the Company's website -
1 https://www.travisperkinsplc.co.uk/investors/results-reports-and-presentations/year/2021
In accordance with rule 9.6.1 of the Listing Rules, copies of the following documents have
been submitted to the National Storage Mechanism and will shortly be available for
inspection at 2 https://data.fca.org.uk/#/nsm/nationalstoragemechanism
• Annual Report and Accounts 2020;
A condensed set of the Company's financial statements and information on important events
that have occurred during the year and their impact on the financial statements were
included in the Company's announcement. That information together with the information set
out below which is extracted from the Annual Report constitute the requirements of
Disclosure and Transparency Rule ("DTR") 6.3.5 which is to be communicated via a Regulatory
Information Service in unedited full text. This announcement is not a substitute for
reading the full Annual Report. Page and note references in the text below refer to page
numbers in the Annual Report. To view the preliminary announcement, visit the Company's
website: 3 www.travisperkinsplc.co.uk
Enquiries:
Matt Worster
4 Matt.worster@travisperkins.co.uk
+44 (0) 7990 088548
Robin Miller
5 Robin.miller@travisperkins.co.uk
+44 (0) 1604 592533
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
For the year ended 31 December 2020
In an exceptional year dominated by the global pandemic, we have demonstrated a clear
understanding of the risks we face and taken a proactive approach to risk management to
identify and pursue opportunities, drive better decision making and, most importantly,
prioritise the safety and well-being of the Group's colleagues and customers.
The pandemic has required an ongoing and agile assessment of risks, challenges and issues,
adjusting to the development of Covid-19 in real time. The pandemic and its wider economic
effects continue to bring uncertainty to our operations and the delivery of our strategic
objectives. Even with a mass vaccination programme, this uncertainty is likely to persist.
Risk management framework
We operate in an industry and markets which, by their nature, are subject to a number of
inherent risks. In common with most large organisations we are also subject to general
commercial, political and economic risks. We are able to mitigate those risks by adopting
different strategies and by maintaining a strong system of internal control which is
routinely tested and assured.
Our risk management framework has three pillars:
* Top down - activities at the Board and Group Leadership Team levels, focused on material
risks to the strategy and operations.
* Bottom up - activities across the Group that capture risk perspectives that are
significant at a business unit, programme or functional level.
* Emerging risk - new and emerging risks are considered through the regular risk activities
above, the results of assurance activities, and, at least twice a year, through a process
that assesses our risk set against external benchmarks.
The output from each pillar informs the process to determine our principal risks.
Responsibility and oversight
The Board has overall responsibility for risk management and internal controls, and for
reviewing their effectiveness at least annually. The Board is supported in its assessment
by the work of the Audit Committee, which regularly assesses the risk framework and the
results of key assurance processes, including the work of Internal Audit, to provide
assurance to the Board that risk is being effectively managed throughout the Group. Further
details on risk management responsibilities and oversight are given in the Corporate
Governance Report on page 79.
Risk appetite
The Board accepts that, in order to achieve its strategic objectives, and generate suitable
returns for shareholders, it must accept, and manage, a certain level of risk. It
undertakes an exercise, at least annually, to consider the nature and level of risk it is
prepared to accept to deliver the strategy. Risk appetite is set across a suite of risk
categories directly relevant to the Group, supported by high-level risk statements which
set out the expectations for the management and control of each category of risk. The
resulting assessment of risk appetite has been set to balance opportunities for growth and
business development in areas of potentially higher risk and return, whilst prioritising
safety and maintaining the Group's reputation, legal and regulatory compliance and the
desired high levels of customer service and satisfaction.
In addition to its annual review in September, earlier in the year the Board also assessed
whether the level of change prompted by Covid-19 might lead it to revise its risk appetite.
This review concluded that the Group's response to Covid-19 had not sought to take
additional risk and that its risk appetite in related risk categories was already, and
remained, one of low risk.
Risk assessment and reporting
Our risk management processes aim to identify and assess risks before they impact on
activities, position the businesses and support functions to effectively manage those risks
and leverage related opportunities.
The Board has developed a risk reporting framework that ensures it has visibility of key
risks, the potential impacts on the Group and how and to what extent those risks are
mitigated.
Our risk management activities continue to be developed to support management's assessments
of threats and opportunities that could materially impact strategic delivery, performance,
compliance and reputation. Whilst Covid-19 has dominated risk activities for much of 2020,
there has also been a focus on developing and delivering the risk assessments required by
the newly developed minimum standards that underpin our 12 material ESG focus areas. This
work will continue into 2021. In addition, a plan has been developed to further embed risk
assessment into key strategic and performance reviews in 2021, bringing an increased and
regular focus on risk and opportunity management at key decision points.
Risk assurance
We operate a "three lines of defence" model to obtain assurance that major risks are
adequately mitigated and controlled, as set out below. Oversight is provided by the Group
Leadership Team and the Audit and Stay Safe Committees, which includes review of progress
against agreed improvement actions. Regular updates on assurance activities are provided to
the Board.
Line of defence Source of assurance Nature of assurance
Business operations & Direct assurance - execution of policies and
operational management procedures, training completion, management
1st controls and monitoring, key performance indicators
Branches & distribution and self-assessments
centres
Central functions
Management assurance - risk management programme,
2nd Includes Safety, Fleet, compliance and monitoring activities, central
Legal, Finance, IT governance processes (including the setting of
policies, procedures and training)
and HR
Independent reviews
Independent assurance - internal audit activities
and third party audits and reviews that objectively
3rd Internal audit, assess the adequacy and effectiveness of
governance, risk management and controls and
external audit and support continuous improvement
other third parties
Principal risks
The Board and Group Leadership Team robustly assesses the Group's principal and emerging
risks at least twice a year. During 2020 the Board has considered principal risks at four
meetings, including detailed assessments of the impact of Covid-19 on the risk set. The
principal risks that we consider to have a potentially material impact on the Group's
operations and the achievement of its strategic objectives are set out below. They are
ordered by risk category rather than relative size of risk. The inherent risk (before the
operation of mitigating controls) is stated for each risk together with an indication of
the current trend for that risk and strategic objectives that are potentially impacted.
Further detail in respect of the potential impact of these risks and the mitigating actions
taken are explored on the following pages. The scope and potential impact of risks will
change over time. As such the risks set out below should not be regarded as a comprehensive
statement of all potential risks and uncertainties that may manifest in the future.
Additional risks and uncertainties that are not presently known to us, or which are
currently deemed immaterial, could also have an adverse effect on the Group's future
operating results, financial condition or prospects.
Risk category Strategic Risk Risk Inherent
objective Principal risks objective trend - trend - risk
2020 2019
Market conditions
Pandemic NEW
ABC N High
External Changing customer & competitor AE High
landscape ABC ABDE High Medium
Supplier risks
Medium
Portfolio management
Strategic Change management BCDE ACDE ABCE High
ESG NEW High
N
IT systems and infrastructure AD High
Technological Cyber threat and data security AE High
People
ABC Medium
Operational Health, safety & well-being Legal AE Medium
compliance ABCDE Medium
Key
A. Best-in-class services
B. Focus on trade
C. Advantaged businesses
D. Simplify the Group
E. Financial strength
N New
Increasing
Decreasing
Limited change year-on-year
Key disruptive risks that may impact the viability of a strategy or business model are also
identified and managed. Whilst several principal risks, including market conditions,
supplier risks and the changing customer and competitor landscape, include elements that
are considered disruptive in nature, they are categorised above according to the primary
driver of the risk.
Key changes in the year
The risk environment in which we operate does not remain static and the Board has made the
following changes to the principal risk set in 2020:
* Covid-19 was identified as an emerging risk in the 2019 report and has been the dominant
area of focus for our risk management activities throughout 2020. Pandemic risk,
specifically in relation to Covid-19, is now recognised as a new principal risk due to the
inherent uncertainty associated with it. A pandemic is one of the very few risks that could
result in the complete shutdown of our operations. Covid-19 has the potential to amplify or
accelerate the onset of certain of our other principal risks and this potential for risk
interdependencies has been kept under review during 2020, alongside the additional
mitigation measures implemented.
* Brexit risk assessment and contingency planning remained a focus in 2020. In preparation
for the end of the transition period, to offset potential disruption to the flow of goods
in the event of "no deal", the business units again built targeted contingency stocks in
the categories deemed most at risk, to ensure stock remained available to customers. To
date, there has been little Brexit-related impact to the flow of goods although Covid-19
related disruption at certain ports has impacted us in a limited way. The Board no longer
considers Brexit to be a principal risk.
Management have prepared for, and will continue to implement, the required changes to
customs procedures, product standards and the recruitment of EU citizens, which remain the
more significant areas of Brexit impact for the Group. Where relevant, Brexit-related risks
have been incorporated into our other principal risks, and the underlying "bottom up" risk
management processes.
* ESG is an area of increasing importance, as we recognise our impact and potential
influence on the environment, the construction industry and wider society. We are seeking
to take a leading position on ESG matters, which both addresses our responsibilities and an
increasing level of interest and expectations from our customers, investors and other
stakeholders. Accordingly ESG matters have been added as a principal risk.
* The risks in relation to Portfolio Management and Capital Allocation have been combined.
* In relation to principal risks brought forward from 2019, the Board considers that the
market conditions risk, supplier risks and the changing customer and competitor landscape
risk are increasing. All other risk trends are unchanged.
Emerging risks
As part of the overall risk assessment process, and in line with the requirements of the UK
Corporate Governance Code, we capture and monitor areas of uncertainty that do not
currently present a significant risk but which have the potential to adversely impact the
Group in the future. These emerging risks are identified from regular reviews of risk
research and other publications, alongside perspectives on emerging risks collated from
assessments made by the business unit and functional leadership teams and the results of
assurance activities. The emerging risks considered by the Board during 2020 included
sustainability and climate change matters, digital technologies and, as a result of the
pandemic, the impacts of changes to working locations and ways of working.
Market conditions
Impact Risk description Risk mitigation
Our markets are highly
fragmented and cyclical in
nature and performance is
affected by general economic
conditions and a number of
specific drivers of
construction, repairs,
maintenance and improvement and
DIY activity. These include the
volume of housing transactions,
driven by mortgage availability Our businesses all hold #1 or #2
and affordability, house- price positions in their chosen markets.
inflation, the timing and
nature of government activity
to stimulate activity, net
disposable income, consumer We maintain a comprehensive tracking
confidence, interest rates and system for lead indicators that
unemployment levels. influence the market for the
consumption of building materials in
the UK.
The fundamental long-term
market drivers remain robust
despite Covid-19 related The Board conducts an annual review
uncertainty in the short-term. of strategy, which includes an
Whilst a number of longer-term assessment of likely competitor
themes are beginning to impact activity, market forecasts and
the industry, these present us possible future trends in products,
with both opportunities and channels of distribution and
risks in responding to the customer behaviour.
• Adverse effect on changes:
financial results
• Loss of market • Traditional ways of working
share in the industry will Significant events that may affect
change, driven by the Group are monitored by the Group
technology and an Leadership Team and reported to the
increasing move to modern Board monthly by the Group CEO.
methods of construction. Should market conditions deteriorate
• There is a need to address then the Board has a range of
a growing productivity options dependent upon the severity
challenge in the of the change. Historically these
construction sector have included amending the Group's
alongside an increasing trading stance, cost reduction,
scarcity of technical changing the focus or lowering
knowledge, which will capital investment and reducing the
hinder industry growth if dividend.
unaddressed.
• There is a drive for
greater digitisation, which
has accelerated as a result We have established a number of
of the pandemic. partnerships to explore
• The ability to deliver and opportunities to work with companies
measure social value will involved in modern methods of
become fundamental to construction.
long-term success.
We must also manage the impacts
of changing building standards
and the UK Government's future
framework for heat in buildings
through the products and
services that we offer.
Pandemic
Impact Risk description Risk mitigation
The Covid-19 pandemic has
significantly impacted our
operations and results in 2020.
It is not clear how long the
pandemic will last, how much
more extensive it may yet
become, what impact further
virus variants could have, how We acted quickly to respond to the
quickly approved vaccines will challenges posed by Covid-19 with
be distributed and how the safety and well-being of
effective they prove to be, or colleagues and customers our
what further measures may be overriding priority in our continued
introduced by governments to response to the pandemic.
mitigate the associated health,
economic and societal impacts.
Tiered crisis response teams were
mobilised before the first UK
Central UK Government, and the lockdown to coordinate activity.
devolved authorities in other These teams continue to monitor the
parts of the UK, have deemed situation closely, with regular
the Group to be an essential oversight from the Board, and update
provider to ensure critical measures, advice and communications
national infrastructure remains as required.
operational and homes remain
warm and dry. Any change to
this status would significantly
impact our operations and Colleagues have been regularly
results. consulted with throughout the
pandemic and are empowered to call
out unsafe practices. Several
incidents in recent months suggest
The pandemic may lead to a that Covid-19 has been an
significant and prolonged influencing factor both in terms of
• Detrimental impact impact for the Group in respect the physical and mental impacts to
to health and of: colleagues of adapting to changed
well-being ways of working, and as a necessary
• Adverse effect on • Operational disruption area of focus which may divert
operations, resulting from high levels attention from more typical
financial of colleague absence, operational hazards.
condition and attempts to contain an Organisation-wide safety stand down
results outbreak at a Group briefings were run in 2020 for
location or further colleagues to reflect and consider
measures taken to contain individual and collective actions
virus peaks, whether that can be undertaken to take
localised or national. This responsibility for their own and
could impact our ability to each other's safety. Other major
operate our branch and response measures include:
distribution network, or
provide functional support • Rapid changes to the network to
to the business, if this enable contactless collections
cannot be delivered and socially distanced service.
remotely. • Enhanced hygiene routines and
• Pressure on colleagues to provision of PPE.
adapt to rapidly changing • Supporting all colleagues able
circumstances, ways of to work from home to do so,
working and resourcing which will continue for the
levels, which may impact foreseeable future.
their health and • Active, detailed management of
well-being. cost and cash flow, including
• Disruption to our supply the suspension of the 2019 final
chain, which operates dividend, a 20% reduction in
across multiple Board and Executive pay for
territories. In addition to three months and the deferral of
the proximate disruptive rates and VAT payments.
effects of the pandemic,
the supply chain may also Regular communications to colleagues
be impacted by business including a weekly pulse survey and
closures and consolidation extended well-being support.
activity.
Levels of consumer confidence
in an uncertain economic
environment, which may
adversely impact demand for our
products and services.
Changing customer & competitor landscape
Impact Risk description Risk mitigation
The evolution of customer
behaviours has accelerated
through the pandemic and this
is expected to continue. Forced
to move to more remote
transactions, customers looked
for digitally-enabled
solutions. Whilst this drove an The Board is cognisant of the risks
immediate focus on our digital presented by the changing customer
transaction capabilities, the and competitor landscape and
ability of these platforms to evaluates developments both in terms
meet customer demand and keep of threats and opportunities for the
pace with competitor Group. Competitor activity is
developments will impact closely monitored, including
longer-term growth and delivery potential consolidation activity.
of our strategy.
We have made significant progress in
The process of digitisation 2020 towards digitising key customer
introduces alternatives beyond journeys and building tools that
our traditional competitors complement our existing operations
and, through the move to more and enable customers to transact
online purchasing, there is with us through channels that best
increasing price transparency. suit their needs. Initially focused
This puts pressure on the on the General Merchant business,
margin that can be achieved on these tools build on the existing
distributed products in some high levels of digital engagement
instances. enjoyed by the Wickes and
Toolstation businesses.
The balance of delivered sales
has moved significantly during High quality fulfilment of customer
• Adverse effect on the pandemic and our ability to orders remains the main service
financial results develop this area and provide differentiator across Trade
• Loss of market innovative fulfilment solutions businesses. This is an area of
share will be a key differentiator. ongoing focus for us and will
Customers also increasingly combine with the digital enablement
value the ability to procure initiatives to give better
services that complement their visibility and more choice to
project, presenting us with customers. The Group appointed a
both an opportunity and risk to Fulfilment Director in 2020 to focus
meet that expectation. these efforts.
Increased focus on delivery and We are able to use our sites
fulfilment may draw other new flexibly to respond to changes.
entrants into the market who Alternative space utilisation models
operate business models which are possible, including maintaining
differ significantly from the smaller stores and implanting
traditional merchanting, retail additional services into existing
and online formats from which branches. The programme of
we currently operate. There is restructuring announced in June 2020
also an ongoing level of progressed our existing strategy to
portfolio change among our more operate from fewer, larger branches
established competitors. Both with a greater breadth and depth of
present potential threats to product range.
the leading market share
positions of our businesses.
Pricing strategies across the Group
are regularly reviewed and refined
These changes in the customer to ensure they remain competitive.
and competitor landscape,
individually or in combination,
may adversely impact the
profitability of branch-based
operations, impact pricing
perceptions and, as a result,
negatively impact our overall
performance.
Supplier risks
Impact Risk description Risk mitigation
Making decent returns is one of our
cornerstones and drives us to treat
both customers and suppliers fairly.
We face a number of risks in We have established strong
relation to key supplier relationships with our key suppliers
dependencies and relationships, and work closely with them to agree
overseas sourcing and contracts that are mutually
disintermediation, all of which beneficial. We conduct due diligence
could adversely impact upon in line with our commitment to
ranging and price. responsible sourcing, and to ensure
a continuous supply of quality
materials.
We are the largest customer to
a number of our suppliers. In
some cases, those suppliers are Where possible, contracts exist with
large enough to cause us more than one supplier for key
significant difficulties and products, to reduce the risks of
disruption if they are unable dependency on a sole supplier.
to meet their supply
obligations, whether due to
economic or operational
factors. Activities undertaken in preparation
for Brexit and the end of the
Alternative sourcing may be transition period, including
available, but the volumes increased supplier liaison, mapping
required and the time it may in-bound supply chains to identify
• Adverse effect on take those suppliers to potential exposures and holding
financial results increase production could buffer stocks in certain categories,
• Adverse effect on result in significant and has assisted in the understanding
reputation prolonged stock-outs, adversely and mitigation of our supplier
impacting customer service and, risks.
potentially, leading customers
to switch to a competitor in
the short- or long-term.
We have made a significant
investment in our Far East
infrastructure to support our direct
We source a number of products sourcing operation. This allows the
from overseas factories, which development of own brand products,
increases our exposure to thereby reducing the reliance on
quality, warranty, ethical and branded suppliers. We have also
currency issues. This again may adopted a conservative hedging
adversely impact customer policy to reduce our exposure to
service and choice. currency fluctuations.
Manufacturers of the materials Independent checks are undertaken on
and products that we sell may the factories producing products for
also look to sell directly to the Group, including the ethical,
end customers in the future, safety and environmental performance
diminishing the role of of the site and the quality and
distributors. suitability of products before they
are shipped to the UK. The results
of these checks are kept under
review with action taken as
necessary to address any concerns.
Portfolio management
Impact Risk description Risk mitigation
We manage a number of All merger, acquisition and disposal
businesses in the UK which activities are subject to a detailed
operate in different, but appraisal process and ultimate
complementary sectors. As the approval by the Board.
markets we serve continue to
develop, we are investing to
enhance our existing businesses
and also to develop new We put in place a formal programme
propositions to better serve of work, with dedicated resources,
our customers. for larger-scale transactions.
External expertise and advisors are
involved as required to support the
programme teams.
We undertake acquisition and
disposal activity to optimise
our portfolio of businesses and
drive shareholder returns. In All activity of this kind is
December 2018, we announced a supported by robust governance and
strategy to simplify the Group monitoring. The largest programmes
and concentrate on our are closely monitored by a programme
trade-focused businesses. Steering Committee, with sponsorship
Although the and representation from members of
the Group Leadership Team and, when
Covid-19 pandemic led us to appropriate based on the
pause the planned demerger of significance of a transaction, the
Wickes during 2020, we Board. Both the Group Leadership
completed the disposal of the Team and the Board receive regular
• Adverse effect on Tile Giant retail business in updates on all portfolio management
financial results September 2020. activities.
• Adverse effect on
shareholder value
• Adverse effect on
reputation Programmes to separate and Responsibility for identifying and
prepare businesses for sale or implementing opportunities to
demerger can be complex given expand, improve or modify our
the many linkages to our operations rests with each of the
systems and processes. More business unit leadership teams. We
generally, the projected deploy or redeploy capital through a
benefits, costs and timescale Group-level forum to
for portfolio management strategically-aligned projects
activities may deviate from expected to achieve the best return
those originally planned, which on capital. Projects are required to
could in turn impact the present a comprehensive business
progression of the process and case and, for the largest
the value realised or price investments, Board approval is
paid. sought.
Although we operate a Major projects are reviewed monthly
disciplined capital allocation by the Group Leadership Team.
process, there is a risk that
we over-invest in channels
which may decline or are
non-core. It is also possible Post implementation reviews are
that we may not allocate undertaken of all major projects and
sufficient capital to new returns are monitored on an on-going
propositions and advantaged basis to ensure that the expected
businesses resulting in returns are achieved, but also to
suboptimal returns on capital. allow us to modify the allocation of
capital when appropriate.
Change management
Impact Risk description Risk mitigation
All potentially significant projects
are subject to detailed
investigation, assessment and
approval prior to commencement.
We allocate dedicated teams,
We undertake a variety of including finance colleagues, to
projects throughout our each project, with additional
businesses in order to generate expertise being brought in to
returns for our shareholders. supplement existing resources when
These projects include the necessary. Regular communications
modernisation of the Group's are undertaken to keep colleagues
core IT systems and informed.
infrastructure and, in direct
response to the challenges of
the pandemic, changes to
methods of customer fulfilment All major programmes are supported
and a drive for process by an appropriate governance
simplification in relation to structure and are closely monitored
• Adverse effect on rebates and simplified pricing through the Group Leadership Team's
financial results templates. monthly programme review with
• Adverse effect on regular reporting to the Board. When
shareholder value projects do not deliver against
• Adverse effect on expectations, we undertake exercises
colleague By their nature, major change to capture the 'lessons learned'
engagement. programmes are often which are fed into future projects.
complicated, interlinked and
may require considerable
resource or specialist
expertise to deliver. As a Recent enhancements of the Group's
result, the expected benefits, digital capabilities have been
timescale for delivery and the delivered using a more agile,
costs of implementation of each incremental approach to change.
project may deviate from those
anticipated at the outset. Whilst we continue to embed the
Colleague engagement may be approach, it has been successful in
impacted during a period of supporting a more rapid development
significant change and of solutions which can be
cost-focus. ring-fenced, trialled and assessed
before wider deployment.
Although this approach is lighter on
formal project management and
governance in the earlier stages, we
have implemented robust gateways to
manage the risks of wider
deployment.
ESG
Impact Risk description Risk mitigation
Our operations are impacted by,
and impact upon, the
environment, society and the
economy and we are committed to
the promotion of sustainable, A Group Code of Conduct is in place,
ethical and inclusive business underpinned by policies, which cover
practices amongst our our ESG and ethical requirements.
customers, suppliers and
colleagues. This commitment
promotes a sustainable and
value-generating business Our Head of Sustainability
model, underpinning our undertakes regular materiality
strategy, and more assessments, consulting with broad
fundamentally recognises our stakeholder groups, to determine the
responsibility to take action most material ESG risks and
and influence the wider opportunities facing the Group.
industry now, to mitigate the These are agreed by the Group
• Adverse effect on significant threats to the Leadership Team and the Board. We
reputation planet posed by climate change. have determined accountabilities
• Competitive throughout our businesses to manage
disadvantage ESG material focus areas, including
• Adverse effect on Group Leadership Team sponsorship of
financial and Growing risks in relation to each topic. A suite of Minimum
operational Environmental, Social and Standards is being implemented to
performance Governance ("ESG'') matters maintain a strong core.
• Less attractive as require us to regularly
an investment identify our most material
proposition responsibilities and challenges
• Potential legal in order to target investment We have set commitments for each
action, fines and and manage them well. This focus area including an
penalties includes investment in the industry-leading commitment on
decarbonisation of the fleet carbon reduction. We allocate budget
and estate, and engagement with to meet the stated commitments and
the wider construction products progress on key strategic
industry to reduce supply-chain initiatives is regularly monitored
and product carbon, taking by the Group Leadership Team.
action to prevent the worst
impacts of climate change.
We have put in place a programme of
independent audits to assure
In addition, ESG matters are compliance with our most significant
increasingly of interest to our regulatory requirements in relation
customers, investors and other to ESG matters.
stakeholders, driving changes
to demand and expectations,
which we must identify and
respond to.
IT systems and infrastructure
Impact Risk description Risk mitigation
Whilst we are currently reliant on
older infrastructure and
applications, adequate resources and
processes are in place to keep the
current state well maintained and
In our day-to-day operations we operational.
are dependent on a wide range
of IT systems and supporting
infrastructure and technology
plays a significant role in our To mitigate the risk of disruption
strategic ambitions. in the event of a system failure, an
IT disaster recovery plan is in
place, together with broader
business continuity plans.
Our current IT landscape is Arrangements are in place for
complex and includes legacy alternative data sites. Off-site
systems that lack the back-up routines are in place. Plans
functionality of modern are regularly tested and the results
software and where expertise is assessed to drive further
diminishing. improvements. Our incident
management process is designed to
prioritise and respond to any
incident quickly and effectively,
Whilst older systems present an with escalation and communication
increasing risk of failures or protocols. Recovery targets are in
• Adverse effect on outages and require more effort place and are designed to minimise
financial and to maintain, of greater the operational and customer impact.
operational significance is the risk that
performance our current systems hinder the
• Adverse effect on delivery of the strategy,
delivery of whether technologically or in We have an evolving modernisation
strategy diverting resources. plan that will drive business
• Competitive benefits and lead to the replacement
disadvantage of a number of legacy systems. This
will bring greater capability and
In adopting a more agile, longevity to our systems and
incremental approach to infrastructure.
business change, enabled by
technology, we will need to
manage an extended period of
change where old and new A governance structure is in place
technologies must successfully for IT change programmes from idea
co-exist. There is significant generation through to deployment.
risk associated with IT-enabled This includes protocols, to ensure
business change programmes that upgrades and improvements are
including risks in relation to delivered to the business in a
prioritisation and sequencing, controlled manner that limits the
resource allocation, cost and potential for disruption. The Group
time overruns, testing and Leadership Team receives regular
business acceptance. These progress reports and larger
risks, alone or in combination, programmes are reported to the
could impact our short-term Board.
performance and achievement of
our longer-term strategy.
Every programme is assessed at
completion as to the lessons
learned. Insights are rolled into
future change programmes.
Cyber threat & data security
Impact Risk description Risk mitigation
Incidents of sophisticated
cyber-crime represent a We take our responsibilities and
significant and increasing legal obligations in respect of data
threat to all businesses security and protection seriously
including the Group. As we seek and continue to focus on a
to meet our customers' combination of people, process and
increasing digital expectations technology to help minimise the
and drive competitive advantage likelihood and impact of cyber
in this area, the underlying incidents.
data is attractive to external
attackers whose methods and
global footprint are rapidly
evolving. There is therefore a Alongside user awareness and
balance to be struck between education, best of breed security
increased digitisation and controls and technologies are key to
availability of data against reducing the likelihood of an attack
the risks that such activities and are regularly tested. These
introduce. include firewalls, virus protection,
email threat protection, intrusion
detection and vulnerability
scanning. All changes to technology
Incidents impacting the solutions require Information
confidentiality, integrity and Security review and approval.
availability of our data and
systems could result in
disruption to customer-facing,
supplier-facing and financial Action was taken this year to
systems through theft and further develop our security profile
• Operational misuse of confidential data, and maturity against the
disruption damage to or manipulation of internationally recognised National
• Adverse effect on operationally critical data or Institute of Standards and
reputation interruption to our IT Technology - Cyber Security
• Potential legal services, any of which may have Framework. During 2020 we
action, fines and serious consequential impacts successfully introduced a 24/7
penalties on our reputation, ability to security operations centre
trade and compliance with capability to monitor for suspicious
regulations including GDPR. activity and behaviours and work
with resolver teams as required.
We assess our main risk of
attack to be from opportunistic We have a cyber-incident response
criminals seeking financial protocol, which is updated with
gain from the theft and sale of lessons learned from responses to
personal data. attempted attacks on the Group and
external cases. Third party forensic
During 2020, the Covid-19 capability is in place, should it be
pandemic appears to have needed, to support our ability to
heightened this risk and we respond rapidly and effectively to
have seen an increase in the an incident, restore systems and
volume, frequency and demonstrate compliance.
sophistication of attempted
cyber-attacks during this
period, which is expected to
continue. We also face internal We will prioritise a number of
risks of data loss or leakage security focused programmes in 2021
as a result of actions taken by to further minimise the risk
colleagues, whether accidental profile. This includes programmes
or deliberate. Our strategy to focused on maintaining GDPR
modernise and digitise compliance and the optimisation of
capabilities also presents a security technology.
further dimension to cyber and
data security risk.
People
Impact Risk description Risk mitigation
People are key to our success.
Our ability to recruit,
develop, retain and motivate
suitably qualified and Strategic initiatives are in place
experienced staff is an in relation to diversity and
important driver of our overall inclusion and knowledge management.
performance. Further information on progress made
during the year can be found in the
Diversity and inclusion report on
page 62.
The strength of our customer
proposition is underpinned by
the quality of our people,
particularly those in branch The Group's employment policies and
and other customer facing practices are kept under regular
roles. Many colleagues have review.
worked for us for many years,
during which time they have
amassed valuable product and
customer knowledge and Staff engagement and turnover by job
expertise. Retaining those type is reported regularly to the
colleagues is key to continuing Group Leadership Team and the Board.
high levels of customer service
and maintaining our competitive
advantage.
An established talent and succession
process is in place, which will be
reviewed and refreshed in 2021. The
• Adverse effect on Ensuring the retention and process is run annually with plans
delivery of development of our employees, for the most senior and critical
strategy and that robust succession roles reviewed by the Board.
• Competitive plans exist for key positions,
disadvantage is important for us to ensure
• Adverse effect on that we have the right skills
reputation and experience to deliver on The Group's reward and recognition
our strategic objectives. systems are actively managed to
ensure high levels of employee
engagement. Salaries and other
benefits are benchmarked regularly
We are exposed to skills to ensure that the Group offering
shortages in certain areas remains competitive and the Group
which can result in salary cost operates incentive structures to
pressures. In particular, the ensure that high performing
availability of suitably colleagues are adequately rewarded
qualified commercial drivers and encouraged to remain with the
remains an area of ongoing Group.
focus, which is critical to the
operation of our fleet to meet
customer delivery expectations.
A wide range of training programmes
are in place to encourage staff
development. Management development
We recognise the benefits of a programmes are available to those
diverse workforce and an identified for more senior
inclusive workplace, to ensure positions. The Group's award-winning
that everyone feels welcome, "Learn and Earn" Apprenticeship
valued for their contribution Programme ("LEAP") has been in place
and able to perform at their for a number of years and has a
best. Making progress in this track record of successful delivery
area will take time and there of apprenticeships in both branch-
is a risk that we are unable to based and functional roles.
move quickly enough to capture
the benefits or meet colleague
and customer expectations.
Health, safety & well-being
Impact Risk description Risk mitigation
Health, safety and well-being is one
of our fundamental values. We
continue to challenge our thinking
and approach to improving safety
performance through our well
established "Stay Safe" brand. Steps
have been taken in 2020 to build on
our reporting programme and empower
colleagues to "Call It Out" if they
see anything that they consider to
be unsafe. Guidance has been issued
to support colleagues through
difficult customer conversations.
Regular communications highlight
examples where "calling it out" has
avoided a safety issue, which is
helping to generate an even more
Keeping our colleagues, open reporting culture around
customers, suppliers and the safety.
public safe is a cornerstone of
the business and at the heart
of how we operate. We expect
everyone to go home to their Governance of Stay Safe is well
families safely every day. established and designed to promote
a continual focus on health and
safety. Stay Safe performance is
reviewed at all Board meetings, by
We operate a large estate, with the Group Leadership Team, by every
many sites running complex and business leadership team and by the
busy yards. We also operate one dedicated Stay Safe Committee, which
of the largest vehicle fleets is chaired by a Non-executive
• Harm to our in the UK, distributing heavy Director. In these forums we also
colleagues, and bulky materials. Certain monitor the
customers or the products that we sell pose
public health and safety risks. Poorly achievement of transport compliance
• Potential legal implemented safety practices on requirements. The Fleet team has
action, fines and site, on the road and at recently been restructured and is in
penalties delivery locations could result the process of delivering
• Adverse effect on in significant harm to our improvements against a Fleet and
reputation colleagues, customers and the Driver roadmap, continuing into
wider community. 2021.
The Covid-19 pandemic has had a Incidents are monitored,
profound impact on the Group investigated and corrective action
and presents new risks to the taken to address the root cause. For
health and well-being of our more significant incidents, an
colleagues and the safe Incident Review Board is held, with
operation of our businesses. the lessons shared across the Group.
The tactical steps we have
taken to respond to the
challenges of the pandemic are
set out in the separate We have increased our focus on
Pandemic risk. mental health and well-being in
2020, introducing a range of
resources to colleagues and
supporting the wider construction
industry's "Stop. Make a Change"
campaign in October.
De-risking our operations and
improving health, safety and
well-being awareness are at the
forefront of our activities. Further
information on progress made during
the year can be found in the Safety
and well-being Report on pages 56 to
57
Legal compliance
Impact Risk description Risk mitigation
The General Counsel's Office is
responsible for monitoring changes
to laws and regulations that affect
the business and is supported by
external advisors. The Group
Leadership Team and the Board
regularly monitor compliance with
laws and regulations.
We have implemented a new Code of
Conduct that sets out our
requirements for doing business in
the right way. This is underpinned
by a comprehensive framework of
policies. Those expectations are
disseminated using a range of
methods to ensure that our
colleagues understand their
responsibilities to comply with the
law and other regulations affecting
the Group at all times. We share
Supplier Commitments with our
suppliers to articulate our
expectations and higher risk
suppliers are assessed against these
requirements using an Online Risk
Assessment.
We appointed a Corporate &
Regulatory Risk Business Partner in
late 2019 to support the business in
We are subject to a broad range meeting new requirements and to
of existing and evolving continue to develop and improve the
governance requirements, existing framework.
• Adverse effect on environmental, health and
reputation safety and other laws,
• Adverse effect on regulations, standards and best
financial and practices which affect the way Our new Code of Conduct is the first
operational that we operate and give rise phase in our strategy to deliver an
performance to significant compliance enhanced assurance framework to
• Potential legal costs, potential legal further support regulatory
action, fines and liability exposure for compliance across the Group. Areas
penalties non-compliance and potential of initial focus include Money
limitations on the development Laundering, Competition Law,
of our operations and strategy. Anti-Bribery and Corruption and
Corporate Criminal Offences. The
second phase, already underway, is
to implement a suite of Minimum
Standards that support policy
adherence. Crucially this will also
assist in our assessment of the
maturity of Group-wide processes and
controls across the 12
ESG material focus areas identified
by the Board, of which Legal
Compliance is one.
We provide online training to
colleagues in key areas of legal and
regulatory compliance, including
mandatory modules for those joining
the Group.
We operate a speaking up process
that allows anonymous reporting,
through an independent hotline, of
any suspected wrongdoing, unethical
behaviour or instances of
non-compliance with laws and
regulations. All reported cases are
investigated. This is being updated
following the implementation of our
new Code of Conduct in order to
further improve awareness and access
across our businesses and supply
chain in all relevant countries.
═══════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB0007739609
Category Code: MSCH
TIDM: TPK
LEI Code: 2138001I27OUBAF22K83
OAM Categories: 1.1. Annual financial and audit reports
Sequence No.: 94683
EQS News ID: 1172606
End of Announcement EQS News Service
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