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How We Manage Risk

MONITORING AND REPORTING
POLICIES AND DECISIONS
BOARD OVERSIGHT
MAIN BOARD
Audit Committee
Nomination Committee
Remuneration Committee
Placemaking and Sustainability Committee
OPERATIONAL MEETINGS
EXECUTIVE MANAGEMENT TEAM
Divisional Boards
Functional Seminars
Team Meetings
POLICIES FOR IDENTIFYING AND CONTROLLING RISKS
Budgeting & Forecasting
Price & Sales Monitoring
Cost Reviews
Land Bank Management
PROCEDURES AND INTERNAL CONTROLS
Business Policies and Procedures
Authorisation Processes
System Based Controls
Business Process Reviews
Site Completion Reviews
PEOPLE AND CULTURE
Professionalism
Clear Communication
Qualified Personnel
Pride and Achievement
Interests Aligned with Shareholders
Commitment to Training
Business Risks

Our Risk Management Process

Key Risk Management Objectives

  • To ensure our approach to risk meets the needs of our business and its key stakeholders;
  • To effectively communicate our risks and define responsibilities in order to manage risks; and
  • To continually evaluate and review the impacts of any potential new risks occurring within our business.
Main Board
  • The ultimate responsibility for the effective management of the risks we face in order to achieve our strategic and financial objectives lies with the Main Board;
  • Material risks and principal concerns are identified as part of our risk assessment framework, following a detailed review of the Company’s strategic objectives;
  • These headline risks are then approved by the Board to be included within our risk register;
  • The risk register is reviewed formally annually and updated for any new risks identified during our Risk Assessment processes; and
  • It is also presented to the Audit Committee for final review and consideration to ensure that it is appropriate and reflects our business risks.
Operational Divisions
  • All identified high level risks are then further broken down into components and sub level risks to be considered at the divisional levels and Group department level; and
  • Internal controls are implemented to mitigate, control and continuously monitor these risks.
Risk Owners and Executive Management Team
  • Any new risks identified at divisional level and Group department level are individually assessed and evaluated on their potential impact to the business and its likelihood of occurrence;
  • These risks are then communicated to the Risk Owners who will use this assessment to inform their formal view on these risks and all previously identified risks;
  • The probability and potential impact for each sub level risk is assessed by the Risk Owners;
  • It is then the Risk Owners responsibility to ensure key preventive and detective controls are designed and implemented to address these risks and ensure their inclusion in our risk register; and
  • Group Policies and Procedures are updated to reflect any new or improved key controls or processes.
Housing Market
Developing Thriving Communities
Developing Thriving Communities

Risk

The UK housing market conditions have a direct impact on our business performance.

Risk Owner

Chief Operating Officer

Key Controls

  • Market conditions and trends are being closely monitored allowing management to identify and respond to any sudden changes or movements.
  • With underlying build costs continuing to rise and house price inflation remaining subdued we maintain tight controls on costs and continue to build our relationships with key suppliers and broaden our supplier base.
  • Weekly review of sales at Group, divisional and site level.
  • Ensuring strong relationships with lenders and valuers to ensure they recognise our premium product.
  • Ongoing and regular monitoring of Government policy and lobbying as appropriate.
  • Risk has increased due to the continued uncertainty surrounding Brexit and the introduction of the regional price caps for Help to Buy in April 2021.

Risk Movement


Availability of Mortgage Finance
Developing Thriving Communities
Developing Thriving Communities

Risk

Availability of mortgage finance and increased lending criteria requirements are key factors in the current environment.

Risk Owner

Group Finance Director

Key Controls

  • Proactively engage with the Government, Lenders and Insurers to support the housing market.
  • Expert New Build Mortgage Specialists provide updates on and monitoring of regulatory change.
  • The threat of early withdrawal of Help to Buy dissipated in the year.

Risk Movement

Liquidity and Funding
Building Responsibly
Building Responsibly

Risk

The Group requires appropriate facilities for its short-term liquidity and long-term funding.

Risk Owner

Group Finance Director

Key Controls

  • Suitable committed banking facilities with covenants and headroom.
  • Regular communication with our investors and relationship banks, including visits to developments.
  • Regular review of our banking covenants and capital structure.
  • Ensuring our future cash flow is sustainable through detailed budgeting process and reviews.
  • Strong forecasting and budgeting process.

Risk Movement

Customer Service
Building Responsibly
Building Responsibly

Risk

Failure of our customer service could lead to relative under performance of our business.

Risk Owner

Group Customer and Marketing Director

Key Controls

  • My Redrow website to support our customers purchasing their new home.
  • Hard Hat Tours for customers of their new  home at an appropriate stage of production.
  • Regular review of our marketing and communications policy at both Group and divisional level.
  • Risk reduced due to improvements in build quality but this was more than offset by the increase in focus on quality and customer service by Government and the media.

Risk Movement

Land Procurement
Building Responsibly
Building Responsibly

Risk

The ability to purchase land suitable for our products and the timing of future land purchases are fundamental to the Group’s future performance.

Risk Owner

Group Development Director

Key Controls

  • Proactive monitoring of the market conditions to implement a clear defined strategy at both Group and divisional level. 
  • Experienced and knowledgeable personnel in our land, planning and technical teams.
  • Effective use of our Land Bank Management system to support the land acquisition process and monitor opportunities has led to the risk decreasing overall.
  • Peer review by Legal Directors and use of third party legal resources for larger site acquisitions to reduce risk.

Risk Movement

Planning and Regulatory Environment
Building Responsibly
Building Responsibly

Risk

The inability to adapt to changes within the planning and regulatory environment could adversely impact on our ability to comply with regulatory requirements.

Risk Owner

Group Development Director, Group Human Resources Director and Group Company Secretary

Key Controls

  • Close management and monitoring of planning expiry dates and CIL.
  • Well prepared planning submissions addressing local concern and deploying good design.
  • Careful monitoring of the regulatory environment and regular communication of proposed changes across the Group through the Executive Management Team.
  • Proactive approach to the introduction of GDPR with a broad based project team defining and implementing new policies and procedures.

Risk Movement

Appropriateness of Product
Developing Thriving Communities
Developing Thriving Communities

Risk

The failure to design and build a desirable product for our customers at the appropriate price may undermine our ability to fulfil our business objectives.

Risk Owner

Group Design and Technical Director

Key Controls

  • Regular review and product updates in response to the demand in the market and assessment of our customer needs.
  • Design focused on high quality build and flexibility to planning changes.
  • Regular site visits and implementation of product changes to respond to demands.
  • Introduction of Internal Product Review Panel.
  • Risk has reduced in the year due to improvements in build quality and the introduction of the Internal Product Review Panel.

Risk Movement

Attracting and Retaining Staff
Valuing People
Valuing People

Risk

The loss of key staff and/or our failure to attract high quality employees will inhibit our ability to achieve our business objectives.

Risk Owner

Group Human Resources Director

Key Controls

  • Personal Development Programmes supported by National training centres at four locations.
  • Graduate training, Undergraduate placements and Apprentice training programmes to aid succession planning.
  • Development of a bespoke housebuilding degree course in conjunction with Liverpool John Moores University and Coleg Cambria.
  • Remuneration strategy in order to attract and retain talent within the business is reviewed regularly and benchmarked.
  • Engagement Team and continued refinement of internal communications platform in addition to annual employee survey to create framework for strong, two-way communication.

Risk Movement

Health and Safety/Environment
Building Responsibly
Building Responsibly

Risk

Instances of non-compliance with Health & Safety standards and Environmental regulations could put our people and the environment at risk, ultimately damaging our reputation. Increased levels of scrutiny of the housebuilding industry heightens the risk environment.

Risk Owner

Group Health and Safety and Environmental Director

Key Controls

  • Dedicated in-house team operating across the Group to ensure compliance of appropriate Health and Safety standards supported by external professional expertise.
  • Separate focus on Assurance visits to site and proactive management support to develop planning and processes.
  • Monthly Divisional H,S&E Leadership meetings.
  • Tri-annual Group H,S&E Leadership meetings.
  • Internal and external training provided to all employees.
  • Divisional Construction (Design and Management) Regulation (CDM) inspections carried out to assess our compliance with our client duties under CDM.
  • Health and Safety discussion at both Group and divisional level board meetings.
  • CDM competency accreditation requirement as a minimum for contractor selection process.

Risk Movement

Key Supplier or Subcontractor Failure
Building Responsibly
Building Responsibly

Risk

The failure of a key component of our supply chain to perform due to financial failure or production issues could disrupt our ability to deliver our homes to programme and budgeted cost.

Risk Owner

Group Commercial Director

Key Controls

  • Use of reputable supply chain partners with relevant experience and proven track record.
  • Monitoring of subcontract supply chain to maintain appropriate number for each trade to identify potential shortage in skilled trades in the near future.
  • Subcontractor utilisation on sites monitored to align workload and capacity.
  • Materials forecast issued to suppliers and reviewed regularly.
  • Group Monthly Product Development meetings to identify and monitor changes in the regulatory environment.

Risk Movement

Cyber Security
Building Responsibly
Building Responsibly

Risk

Failure of the Group's IT systems and the security of our internal systems, data and our websites can have significant impact to our business. 

The introduction of GDPR has increased the requirements for the control of personal data.

Risk Owner

Chief Information Officer

Key Controls

  • Communication of IT policy and procedures to all employees.
  • Regular systems back up and storage of data offsite.
  • Internal IT security specialists.
  • Use of third party entity to test the Group's cyber security systems and other proactive approach for cyber security including Cyber Essentials Plus accreditation.
  • Compulsory GDPR and IT security online training to all employees within our business.

Risk Movement

Fraud/Uninsured Loss
Building Responsibly
Building Responsibly

Risk

A significant fraud or uninsured loss could damage the financial performance of our business..

Risk Owner

Group Finance Director

Key Controls

  • Systems, policies and procedures in place which are designed to segregate duties and minimise any opportunity for fraud.
  • Regular Business Process Reviews undertaken to ensure compliance with procedure and policies followed by formal action plans.
  • Timely management reporting.
  • Insurance strategy driven by business risks.
  • Fraud awareness training.

Risk Movement

Group Non-Financial Information Statement

The table below sets out where key non-financial information can be found within this report:

Reporting requirement Related policies available on our website Location in this Annual Report Page Ref.
Environment Purchasing of sustainable timber products policy  Directors’ Report - Greenhouse Gas Emissions  84
Environmental policy statement  Placemaking and Sustainability Committee Report - Main Activities During the Year  59
Health and safety policy statement  Chief Operating Officer’s Review - Health and Safety 11 & 12
Partnering with our supply chain 
Operating Review - Commercial and Systems   18 & 19
A responsible and sustainable developer Operating Review - Construction 20 to 23
Employees  Diversity and inclusion policy statement Operating Review - Commercial and Systems  
18 & 19
Corporate Governance Report - Workforce Engagement  48
Corporate Governance Report - Diversity
48
Directors’ Report - Employees 82 & 83
Directors’ Report - Diversity and Inclusion Policy 83
Social A responsible and sustainable developer Operating Review - Land, Planning and Design
14 to 17
Operating Review - Customer Service 26 & 27
Human rights Human rights policy statement   Directors’ Report - Human Rights  
85
Slavery and human trafficking statement  Directors’ Report - Supply Chain 85
Anti-corruption and anti-bribery Anti-bribery policy statement   Audit Committee Report - Bribery Act  
54
Whistleblowing policy statement Audit Committee Report - Whistleblowing 53 & 54
Business model A responsible and sustainable developer Our Strategy
4 & 5
Our Business Model 6 & 7
Non-financial KPIs Our Strategy 4 & 5
Health and safety policy statement 
Environmental policy statement

The above policies are applicable to all employees within the Group and are easily accessible both internally and externally. The principles which underpin each of the policies are embedded within the culture of the Group and any behaviour inconsistent with these policies will be investigated and disciplinary action will be taken where warranted.

Viability Statement

In accordance with provision C.2.2 of the UK Corporate Governance Code 2016, the Directors have assessed the prospects and viability of the Group.

The Group’s investment case, business model and strategy are key to understanding Redrow’s future prospects. The Directors’ assessment has made reference to our current position, our strategy, the potential impact of the principal risks facing the Group, and the Board’s appetite for risk which are to be found in this Report in the Strategic Report. The Group has committed banking facilities through to December 2022.

The Directors have selected a three year timeframe over which to assess the viability of the Group, from 1 July 2019 to 30 June 2022. This timeframe was chosen as it corresponds with the Board’s three year planning horizon. On an annual basis, the Directors review the financial forecasts for the Group constructed using a detailed bottom up process incorporating assumptions about the timing of legal completions of new homes and land purchases, selling prices, profitability, working capital requirements and cash flows. The Group also uses a top down model to give another perspective.

The three year plan is stress tested for robust downside scenarios. This involves flexing key assumptions including the impact of reduced average selling prices, sales rates and land prices which could arise from a deterioration in housing market conditions and mortgage availability.

The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period ending 30 June 2022.

Strategic Report Approval 

The Strategic Report outlined on pages 1 to 37 has been approved by the Board.

By order of the Board

GRAHAM COPE

Company Secretary

4 September 2019

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