Key risk register

The Key Risk Register (KRR) identifies those risks that could materially threaten our business model, future performance or prospects, solvency, liquidity or reputation, or which could prevent us from delivering our strategic objectives.

The Board treats such risks as principal risks.

The KRR is the means by which the Group’s principal risks are reported to the Audit Committee and the Board for their review. It includes business, financial, hazard and operational risks, together with external factors over which we may have little or no direct control.

The KRR is updated quarterly and looks forward over a three-year time horizon to identify the:

  • Nature and extent of the risks facing the Group
  • Impact of any new or emerging risks, and to review our ability to manage these
  • Likelihood of the risks materialising and their potential impact on the achievement of business plan objectives
  • Means of mitigation to reduce or control the incidence or impact on the business of risks that do crystallise
  • Aggregate enterprise risk profile (and associated key risk indicators)
  • Extent to which different categories of risk are regarded as acceptable for the company to bear

The KRR is designed to:

  • Provide the Board and Audit Committee with clarity around our principal risks and uncertainties, risk ownership, accountability and mitigation strategies
  • Promote active engagement, informed debate and constructive challenge
  • Keep under review the effectiveness of our decision-making processes

Our principal risks

Our principal risks are:

Market conditions:

  • Volatility in oil and gas prices could influence the level of investment within the industry and the demand for our services
  • The financial performance of IES is directly impacted by oil and gas price volatility (due to Equity Upstream Investments)
  • Significant movements in exchange rates could also impact our financial performance

Worsening political risks in key geographies

  • The risk of exposure to civil or political unrest, civil war, regime change or sanctions that could adversely affect our operations
  • The risk of over-concentration in a particular market or geography

Failure to meet future order targets

  • The risk of a significant change to the marketplace dynamics and the ways in which this could threaten our market position or our geographic footprint

Operational and project performance

  • Our portfolio typically includes a relatively small number of very large contracts. The risk is the impact on our financial performance if any of these contracts were to be disrupted or if we fail to execute in line with our expectations
  • The risk of experiencing a serious environmental, asset integrity or safety incident. The risks is the potential harm to our people – and the commercial and reputational damage that could be caused
  • If we are unable to transfer certain risks to the insurance market (due to the availability or cost of cover, for example), we could be exposed to material uninsured losses

Application of the commercial strategy

  • The risk that poor strategic or investment decisions could negatively impact our business model

IT resilience

  • There is a risk that IT security or integrity failings could result in the loss of commercially sensitive data and create substantial business disruption

Counterparty risk

  • The risk of over-exposure to any one client – and the impact this could have if the relationship were to be jeopardised
  • The risk of financial or commercial exposure if counterparties (such as key financial institutions, clients, partners, subcontractors or vendors) default on their commitments 

Loss of financial capacity

  • The risk arising if we are not able to meet our financial commitments

Dilution of Company culture and/or capability

  • A lack of availability of sufficiently skilled, experienced and capable personnel (particularly at senior levels) could impact on our ability to deliver our business plans

Effectiveness of the internal control framework

  • The risk that employees or suppliers may fail to live up to our high ethical standards – and the consequent impact on our reputation
  • The potential financial and reputational risk that would arise if any of our employees (or third parties) were to breach local or international laws
  • The potential of material financial losses if there are weaknesses in our financial internal control framework

More details are available, including mitigation and management, in our Principal Risks section of our Annual Report.