Risk Management, Control and Compliance
The Group has an established risk management methodology which seeks to identify, quantify, manage and mitigate both existing and emerging risks, underpinned by a 'three lines of defence' model comprising of a comprehensive internal control framework, monitoring and independent assurance processes. The Board considers that risk management and internal control are fundamental to achieving the Group aim of creating long-term sustainable shareholder value.
Risks are identified both 'top down' and 'site up' through the Group's businesses and are quantified by assessing their inherent impact and mitigated probability to ensure that residual risk exposures are fully understood and prioritised for control throughout the Group. The day-to-day management of risk sits within the Group's internal control framework at the level where the impact would materialise, with the effectiveness of the controls and mitigating actions being monitored and assessed through a Group-wide review process which considers the ongoing appropriateness and effectiveness of the controls and monitoring and assurance outcomes in respect of these risks. Senior executives are responsible for the strategic management of the Group's principal risks, including related policy, guidelines and process, subject to Board oversight.
The Board/Audit Committee regularly reviews the status of all principal risks and business specific risks with a notable potential impact at both Group and Divisional levels, together with the controls, monitoring and assurance processes established to mitigate those risks. As a result of these reviews, actions are identified to improve controls and the mitigation of risk. In 2015, the Group's risk management methodology and related processes were reviewed to ensure alignment with the requirements of the revised UK Corporate Governance Code, with enhanced risk assessment tools and internal reporting mechanisms being implemented. The risks which feature here are those that the Board feels could have the most serious effect on achieving our strategy of building a sustainable business for the long term and delivering strong returns to our stakeholders.