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Risk management

Approach to risk management

The Board has overall responsibility for ensuring that risk is effectively managed across the Group. The primary method by which risks are monitored and managed is through the monthly Executive Committee meetings. The subject of risk is included on each monthly agenda and any significant new risks or change in status to existing significant risks is discussed and actions taken as appropriate.

On a bi-annual basis, risk is reviewed by operational management across each business area. This review includes a detailed assessment of identified risks, the likelihood of each risk occurring and the potential impact, together with controls and mitigating procedures in place. This information is combined to form a consolidated risk register which is reported to the Executive Committee for review and challenge, ahead of final review and approval by the Board. A nominated Director has responsibility for each risk. The Board reviewed the risk register at both the February 2016 and September 2016 Board meetings.

Risk management is reinforced by the Group’s continuous process to design and embed strong internal controls across the business as we grow, particularly in relation to smaller breadth business areas. The Audit Committee also receives and analyses regular reports from management and the outsourced internal audit function on matters related to risk and control and reviews the timeliness and effectiveness of corrective action taken by management. The Audit Committee on behalf of the Board also considers the findings and recommendations of its external auditor throughout the year to design and implement effective financial controls.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Approach to risk management

The Board has overall responsibility for ensuring that risk is effectively managed across the Group. The primary method by which risks are monitored and managed is through the monthly Executive Committee meetings. The subject of risk is included on each monthly agenda and any significant new risks or change in status to existing significant risks is discussed and actions taken as appropriate.

On a bi-annual basis, risk is reviewed across each business area. This review includes a detailed assessment of identified risks, the likelihood of each risk occurring and the potential impact, together with controls and mitigating procedures in place. This information is combined to form a consolidated risk register which is reported to the Executive Committee for review and challenge, ahead of final review and approval by the Board. A nominated Director has responsibility for each risk. The Board reviewed the risk register at the February 2015 and September 2015 Board meetings.

Key areas of focus

We continue to drive improvements to our risk management process and the quality of risk information generated, whilst at the same time maintaining a simple and practical approach. This year the risk management framework has been reviewed by Rightmove Assurance, our outsourced internal audit function, with a presentation to the Audit Committee on key findings including recommendations to enhance the risk management approach beyond the specific requirements of the 2014 UK Corporate Governance Code (the Code) and to implement principal risk dashboards.

Viability statement

In accordance with provision C.2.2. of the Code, the directors have assessed the viability of the Group over a three year period, taking into account the Group’s current position and the potential impact of the principal risks and uncertainties set out on pages 14 to 16. Based upon the robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity, the directors have a reasonable expectation that the Group and the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2018.

The directors have determined that a three year period to 31 December 2018 constitutes an appropriate period over which to provide its viability statement, being the period considered under the Group’s current three-year strategic plan. The three-year plan is reviewed by the directors at least annually and is developed on a segment by segment basis using a bottom up model. The three-year plan makes certain assumptions about Agency and New Homes customer numbers, ARPA growth and other ancillary revenue streams and considers the Group’s profitability, cash flows and dividend cover over the period.

The plan is subject to robust downside sensitivity analysis which involves flexing a number of the main assumptions underlying the plan. Where appropriate, analysis is carried out to evaluate the potential financial impact over the period of the Group’s principal risks actually occurring. Furthermore our business model is structured so that the Group is not overly reliant on a small customer base with no single customer constituting more than 3% of Group sales.

Also given our significant free cash flow, our ability to adjust our discretionary share buyback programme further provides long-term comfort around viability in the face of adverse economic or competitive conditions.

Whilst this review does not consider all the risks that the Group may face, the directors consider that this stress-testing based assessment of the Group’s prospects is reasonable in the circumstances of the inherent uncertainty involved.

Principal risks and uncertainties

A description of the principal risks and uncertainties faced by the Group in 2015, together with the potential impact and monitoring and mitigating activities is set out in the table below.

We recognise that the Group is exposed to risks wider than those listed, however we have disclosed those that we believe are likely to have the greatest impact on the Group delivering its strategic objectives and those that have been the subject of discussion at recent Board and Audit Committee meetings.