REG - Weir Group PLC - Annual Financial Report <Origin Href="QuoteRef">WEIR.L</Origin> - Part 2
13/03/2017 16:05
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throughout the year to our SHE Board reporting and assurance activities and our key performance indicators in place to measure
our success in mitigating SHE risks continue to show improvement.
IT SECURITY AND CONTINUITY(Risk increasing)
Failure to maintain business systems or technical infrastructure that serves the business needs.Failure to successfully execute changes to these business systems or technical infrastructure; together with failure to minimise disruption and maintain business as usual activity during technical infrastructure or business system changes.Failure to adequately protect the business operations from cybercrime. Up-to-date data allows us to make informed decisions about our business. Therefore, we require reliable and efficient IT systems and infrastructure to provide our data requirements. Breaches of our IT security could have serious consequences for our business, including: interruption to business operations; and loss of intellectual property and other sensitive data.The Group is investing in a significant IT transformation programme. If this is not managed effectively, the consequences could include interruption to business operations if data is unavailable due to unsuccessful execution of change, impacting our ability to compete and our reputation in the market.At present, the Group's principal exposures to cybercrime relate to the misappropriation of cash and data. Our revenue streams are largely protected as our products are not currently electronic in nature and we do not, as a rule, transact over the internet. We continually review the effectiveness of our key IT security controls in consultation with external experts. There is regular reporting of unplanned outages and potential security breaches, with lessons learned across the Group.We have an IT Governance Framework with a focus on structured change management techniques, including setting project governance levels in line with risk.External assurance being obtained on the Tier 1 IT transformation projects.Policies, procedures and baseline standards in relation to cyber risk and IT security more generally are continuously updated and rolled out to operations. A programme of user training in relation to cyber risk is in place. IT security and continuity continues to be a matter of strategic priority for the Group in an environment of ever increasing
cyber security threats. Progress to strengthen the Group's defences in this respect is being made, including the Weir Cloud
programme which aims to rationalise our IT infrastructure and service.
SUPPLY CHAIN MANAGEMENT(Risk decreasing; Considered as part of Viability Statement assessment)
Failure to achieve supply chain management improvements and the associated reduction in costs and enhanced flexibility. If we fail to improve our supply chain management, we risk:• Losing the opportunity to invest capital into alternative value creating opportunities;• Damaging our reputation and as a consequence losing customers and market share;• Losing market position if the Group fails to demonstrate to customers the value of our products and services;• Incurring penalties as a result of late delivery contractual clauses;• Reducing margins by incurring unnecessary additional costs associated with late remedial actions taken to avoid missing delivery targets; and• Holding excess inventory in the event of a market downturn. Regular KPI monitoring of the supply chain throughout the organisation.The Group's operations are implementing Value Chain Excellence initiatives amongst other business improvement objectives.Established Centres of Excellence drive cost savings, efficiencies and enhance delivery standards whilst maintaining quality.The Group's forward purchase commitments are being closely monitored to manage inventories at levels appropriate to market conditions.Our credit risk management procedures are under continuous appraisal and review.We regularly monitor market activity to ensure we remain competitive. Supply chain remains an area of strategic focus for the Group. Supply chain improvements continue to be recognised year on year
as the Group realises benefits from its focused approach to these matters.A programme of Value Chain Excellence initiatives has
been operating throughout the Group to drive supply chain improvements.Initiatives to expand production in best-cost locations
are reviewed and the procurement function continues to drive cost and quality improvements through the Group's supply chain.
ETHICS AND GOVERNANCE(Risk increasing)
Interactions with our people, customers, suppliers and other stakeholders are not conducted with the highest standards of integrity which devalues our reputation. We are unwilling to accept dishonest or corrupt behaviour from our people, or external parties acting on our behalf, whilst conducting our business. If we fail to act with integrity, we are at risk of:• Reputational damage leading to a loss of customers;• Increased scrutiny from regulators;• Legal action from regulators including fines, penalties and imprisonment; and• Exclusion from markets important for our future growth.We expect all areas of the business to do the right thing and conduct business in compliance with procedures, applicable laws, Weir Group operating policies and the highest ethical standards. The Code of Conduct, supplemented with Group policies on related topics, provides a clear benchmark for how we expect our business will be conducted.Regular training is provided using a range of mechanisms including Town Hall style sessions, online and induction training.The financial control framework is continually monitored for effectiveness.Internal Audit's remit includes regular review of the anti-bribery and corruption and financial controls across the Group. The Group Legal team is responsible for monitoring compliance with the Code of Conduct. The governance and legislative environment in which the Group operates continues to evolve and become more complex. The Group
has further developed and grown its operations in geographies where ethical standards may not be as well established as in other
countries.The Group has reinforced its commitment to high standards of ethics and governance through the Code of Conduct and
completed a programme of training for key individuals.Compliance procedures adopted for Market Abuse Regulations with training
given to the Board and Group Executive. A new Disclosure Committee is now in place.A number of unprovided liabilities were
identified in the China business during the year. This followed an Internal Audit report in October 2016 and local management
reorganisation. Further information is set out in the Corporate Governance Report on page 72.
STAFF RECRUITMENT, DEVELOPMENT AND RETENTION(Risk unchanged)
Failure to recruit, develop or retain key management and staff may lead to disruption to the Group's operations, functions and processes. Our people represent our biggest asset and failure to attract, develop and retain key management and staff would have a detrimental impact on the Group's ability to deliver our key strategic objectives. Promotion of the Weir Group Values & Behaviours, Code of Conduct and HR Policies sets the standards and expectations for all our staff, reinforcing our stated commitment to attracting and retaining the very best people.High performer assessments are undertaken to identify and develop our very best talent.Succession plans are in place and periodically reviewed for all of our key management.Personal Development Plans are set and reviewed for the effective development of all of our staff.Continue to offer competitive compensation and benefits packages.Personal development programmes including Weir University and the Weir Leadership Programme are open to participation by high potential staff members and these continue to attract high calibre individuals. We continue to focus on these key areas including obtaining feedback through staff surveys and measuring the success of our
Leadership and Development Programmes. Recognising the importance of effective ongoing staff communication we continue to
provide information and updates through our Global Intranet, Town Hall meetings and team briefings.Recruitment of a Group Head
of Reward and Recognition complete.
CONTRACT RISK(Risk unchanged; Considered as part of Viability Statement assessment)
We fail to adequately manage contract risk and as a result commit to obligations which the Group is unable to meet without incurring significant unplanned costs.In addition, failure to follow Group policies and procedures may lead to commitments without the desired level of contractual protections. We operate in an increasingly complex and competitive environment where customers are not only highly focused on price and service but are also more challenging in contract negotiations.As we offer a broader range of products and services to our customers, including those that are more technologically advanced, we risk exposing the Group to reputational and financial loss should our contract acceptance, negotiation and approval processes fail to protect the Group accordingly. The Group has policies and procedures for contract acceptance and approval.These are under continuous review and improvement to ensure they are adequate for current and future circumstances.The tools and training available to employees responsible for contract management are similarly under continuous review. Contract management continues to be an area of focus for the Group, given the competitive environment. Group policies and
procedures continue to be reviewed and refreshed to provide employees with improved tools to assist them in their contract
management activities.
Appendix B: Directors' statement of responsibilities
The following statement is repeated here solely for the purpose of complying
with DTR 6.3.5. This statement relates to and is extracted from page 114 of
the 2016 Annual Report and is signed on behalf of the Board of Directors by
Charles Berry, Chairman and Jon Stanton, Chief Executive Officer.
Responsibility is for the full 2016 Annual Report and not the extracted
information presented in this announcement or the full year results
announcement.
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have prepared the Group
financial statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and the Company financial
statements in accordance with UK Accounting Standards and applicable law.
In preparing those financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently.
• Make judgements and estimates that are reasonable and prudent.
• State that the Group financial statements have complied with IFRS as
adopted by the European Union, subject to any material departures being
disclosed and explained.
• State for the Company financial statements whether the applicable UK
Accounting Standards have been followed, subject to any material departures
being disclosed and explained.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Group and enable them to ensure that the Group financial statements comply
with the 2006 Act and Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of accounts may differ from legislation in other
jurisdictions.
The Directors confirm that they have complied with the above requirements in
preparing the financial statements.
The Directors consider that 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 Group's position and performance,
business model and strategy.
Each of the Directors, as at the date of this report, confirms to the best of
their knowledge that:
• The financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group.
• The Strategic Report and the Directors' Report include a fair review of
the development and performance of the business and the position of the Group,
together with a description of the principal risks and uncertainties that it
faces.
This information is provided by RNS
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