The Main Board has the ultimate responsibility over the effective management of the risks we face in order to achieve our strategic and financial objectives.
As part of our risk assessment framework, a detailed review is carried out of the Company’s strategic objectives and identifies the principal risks and material concerns we face as a business. These headline risks are then approved and compiled into a risk register.
The risks and material concerns are then further broken down into components and sub level risks. These sub level risks are reviewed by each Divisional Board, individually assessing the probability and impact of each risk. In order to mitigate, control and continually monitor these risks, appropriate internal controls are implemented.
Any new risks identified are assessed one at a time, evaluating any potential impact to our business and the likelihood of its occurrence. These new risks are then fed back to the risk owners who use this assessment to inform their formal review, ensuring there are preventive and detective controls in place and included in the risk register.
We have reviewed the risks pertinent to our business in the six months to 31 December 2018 and which we believe to be relevant for the remaining six months to 30 June 2019. The only material changes from those outlined in our Annual Report 2018 are that economic uncertainty has increased with the possibility of a 'no-deal Brexit' and the risk of the withdrawal of the Help To Buy Scheme has receeded with the extension of the scheme having been announced by the Government.
Risk
The UK housing market conditions have a direct impact on our business performance.
Economic uncertainty has increased with the possibility of a 'no-deal Brexit' increasing market risk and the likelihood of slower sales rates and downward pressure on house prices.
Risk Owner
Group Chief Executive
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 moderating over the year 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
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.
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
Failure of our customer service could lead to relative under performance of our business.
Risk Owner
Group Communications Director
Key Controls
- My Redrow website to support our customers purchasing their new home.
- Introduction of 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 has increased following the introduction of GDPR. We mitigate this by ensuring that we are fully compliant with the new GDPR regulations in our marketing activities by taking a proactive approach to GDPR with detailed project team defining and implementing new Policies & Procedures and training for staff.
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
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
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.
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 three 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.
- Introduction of a new Engagement Team and development of a new internal communications platform in addition to annual employee survey to create framework for strong, two-way communication.
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 restructured team operating across the Group to ensure compliance of appropriate Health and Safety standards.
- Separate focus on Assurance visits to site and proactive management support to develop planning and processes.
- 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
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
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
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.