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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 Stakeholders
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 ensure that a robust assessment is made of emerging and principal risks;
  • To effectively communicate our risks and define responsibilities in order to manage risks;
  • To continually evaluate and review the impacts of any potential new risks occurring within our business; and
  • To develop and implement action plans to mitigate risks as appropriate.
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 and emerging risks and principal concerns are identified and robustly assessed 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;
  • Management responsibility to implement the Board’s policies on risk management and internal controls; and
  • Internal controls operated 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 robustly 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.

This year has seen the added risk of distortions in the housing market due to reaction to a global pandemic together with related economic uncertainty.

The UK's exit from the EU may also lead to increased economic uncertainty.

Risk Owners

Group Chief Executive

Key Controls and Mitigating Strategies

  • Close monitoring of Government guidance.
  • Delegated Crisis Committee established with Executive Board meetings a minimum of twice weekly in times of crisis.
  • Market conditions and trends are being closely monitored allowing management to identify and respond to any sudden changes or movements.
  • Weekly review of sales at Group, divisional and site level with monitoring of pricing trends and Help To Buy (HTB) levels.
  • 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 economic conditions, the COVID-19 pandemic and unknowns surrounding the UK leaving the EU, potentially without an agreed deal in place.

Risk Movement


Availability of Mortgage Finance
Developing Thriving Communities
Developing Thriving Communities

Risk

Availability of mortgage finance is a key factor in the current environment.

Risk Owners

Group Finance Director

Key Controls and Mitigating Strategies

  • 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.
  • Risk has increased this year due to the risk of the restriction of mortgage availability in particular for high LTV mortgages.

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 Owners

Group Finance Director

Key Controls and Mitigating Strategies

  • Medium term committed banking facilities sufficient for a major market breakdown.
  • Regular communication with our investors and relationship banks, including visits to developments as appropriate.
  • Regular review of our banking covenants appropriateness and design and capital structure.
  • Ensuring our future cash flow is sustainable through detailed budgeting process and reviews and scenario modelling.
  • Strong forecasting and budgeting process.
  • Risk has increased this year due to impact of development closures during COVID-19 lockdown on net debt and lack of bonding capacity in the surety market.

Risk Movement

Customer Service
Building Responsibly
Building Responsibly

Risk

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

This year has seen the added risk of customer technicians entering occupied homes at a time of global pandemic.

Risk Owners

Group Customer and Marketing Director

Key Controls and Mitigating Strategies

  • Customer and Quality Director appointed.
  • My Redrow website to support our customers purchasing their new home.
  • Increased use of digital and virtual communication tools.
  • Attention to customer feedback supported by a process at nine months post occupation to address root cause of customer fatigue and dissatisfaction.
  • Regular review of our marketing and communications policy at both Group and divisional level.
  • Risk has increased due to net risk of customer service technicians entering occupied homes in a pandemic and impact of potential delays as a result of COVID-19 safety protocols.

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 Owners

Group Development Director

Key Controls and Mitigating Strategies

  • 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.
  • Appropriate investment in strategic land programme supported by specialist Group team.
  • Effective use of our Land Bank Management system to support the land acquisition process.
  • Close monitoring of progress of relevant Local Plans.
  • 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 Owners

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

Key Controls and Mitigating Strategies

  • 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 managing data protection with multi-functional team meeting regularly.
  • Risk increased in year reflecting increase in the likelihood of not being able to maximise income from Housing Associations due to economic uncertainty.

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 Owners

Group Design and Technical Director

Key Controls and Mitigating Strategies

  • 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.
  • Focus on award winning Heritage Collection.

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 Owners

Group Human Resources Director

Key Controls and Mitigating Strategies

  • Personal Development Programmes supported by National training centres at four locations.
  • Graduate training, Undergraduate placements and Apprentice training programmes to aid succession planning.
  • 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.
  • Flexible Working Policy
  • This risk has reduced in the year due to market conditions and flexible working policy.

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 as does ensuring safe COVID-19 working practices are adhered to.

Risk Owners

Group Health and Safety and Environmental Director

Key Controls and Mitigating Strategies

  • 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.

The deadline for the UK's future trading relationship with the EU being finalised is December 2020. If an agreed deal is not in place, potential tariffs may increase material costs and customs arrangements may lead to delays in the delivery of imported components within the supply chain.

Risk Owners

Group Commercial Director

Key Controls and Mitigating Strategies

  • Use of reputable supply chain partners with relevant experience and proven track record and maintain regular contact.
  • 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.
  • Collaborate with Supply Chain Partners in development of updated Brexit supply continuity strategies.
  • Collaborate with Supply Chain Partners in development of return to work recovery plans.
  • Group Monthly Product Development meetings to identify and monitor changes in the regulatory environment.
  • The risk has increased this year due to the potential impact of the COVID-19 pandemic on the supply chain together with the risk of the UK leaving the EU without an agreed deal. 

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 Owners

Chief Information Officer

Key Controls and Mitigating Strategies

  • 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.
  • The systems have proved resilient to increased home working.
  • The risk has increased due to increased assessment of impact of third party potential data compromise.

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 Owners

Group Finance Director

Key Controls and Mitigating Strategies

  • 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.
  • The risk has increased this year as a result of reduced availability of insurance due to prevailing market conditions.

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. Related Principal Risks*
Environment Purchasing of sustainable timber products policy
Environmental policy statement
Health and safety policy statement
Partnering with our supply chain
A responsible and sustainable developer
Operating Review – Development that enhances Nature
15-16 Health and Safety/Environment
Key Supplier or Subcontractor Failure
Appropriateness of Product
Operating Review – Developing Healthy Places to Live 16-17
Operating Review – Corporate Responsibility 18-19
Operating Review – Managing our Resources Efficiently and Reducing our Carbon Impact 
23-25
Operating Review – Health and Safety 25
Directors’ Report – Environmental
104-105
Employees Diversity and inclusion policy statement Operating Review – Valuing and Developing and People and Partners 
19 Attracting and Retaining Staff
Directors’ Report – Workforce Engagement  106-107
Directors’ Report – Employee Wellness 
107
Directors’ Report – Diversity and Inclusion Policy  107
Directors’ Report – Learning and Developing  108
Social A responsible and sustainable developer 
Human rights policy statement 
Health and safety policy statement 
Partnering with our supply chain 
Operating Review - Bringing Benefits to the Wider Local Communities 17 Housing Market
Health and Safety/Environment
Attracting and Retaining Staff
Customer Service
Key Supplier or Subcontractor Failure
Operating Review – Partnering for Supply Chain Responsibility 19-20
Operating Review – Customer and Marketing 26-28
Directors’ Report – Social
105-109
Human rights Human rights policy statement 
Slavery and human trafficking statement 
Directors’ Report - Human Rights  
108 Attracting and Retaining Staff
Key Supplier or Subcontractor Failure
Directors’ Report - Modern Slavery 109-110
Anti-corruption and anti-bribery Anti-bribery policy statement 
Whistleblowing policy statement 
Audit Committee Report - Bribery Act  
69 Fraud/Uninsured Loss
Attracting and Retaining Staff
Cyber Security
Corporate Governance Report – Whistleblowing  56
Corporate Governance Report – Conflicts of Interest
56
Business model A responsible and sustainable developer Our Strategy
4-5 All
Our Business Model 6-7
Chairman’s Statement – Strategy 8-9
Corporate Governance Report – Strategy, Purpose, Values and Culture 55-56
Non-financial KPIs Our Strategy 4-5 Land Procurement
Customer Service
Attracting and Retaining Staff
Health and Safety/Environment
Planning and Regulatory Environment
Appropriateness of Product

* For a full description of related principal risks, see pages 40 to 45.

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.

Going Concern and Viability Statement

The COVID-19 pandemic has had a profound impact on the Group’s financial performance in the 52 weeks ended 28 June 2020. It has created economic uncertainty for the foreseeable future, disrupting many lives and industries, including housebuilding.

An assessment of going concern is included in the Basis of Preparation section of Accounting Policies on page 130.

viability

In accordance with Provision 31 of the UK Corporate Governance Code 2018, the Directors have assessed the prospects and viability of the Group.

The Directors’ assessment has made reference to our current position, the potential impact of the principal risks facing the Group, including the economic uncertainty arising from the COVID-19 global pandemic and the Group’s risk and risk management attitudes and processes.

The Directors have selected a three year timeframe over which to assess the viability of the Group from 29th June 2020 to 2 July 2023. This timeframe was selected as it corresponds with the Board’s three year planning horizon.

On an annual basis, the Directors formally review the financial forecasts for the Group. These incorporate assumptions about the timing of legal completions of new homes and land purchases, selling prices, profitability, working capital requirements and cashflows.

The three year plan has been stress tested including the robust downside scenario outlined in the going concern assessment above.

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 2 July 2023.

Strategic Report Approval 

The Strategic Report outlined on pages 1 to 48 has been approved by the Board.

By order of the Board

GRAHAM COPE

Company Secretary

15 September 2020

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