Risk appetite

Our risk appetite is governed through Delegated Authorities and Risk Review committees which are embedded across the Group, and managed by limits and parameters which are monitored continuously in each of our businesses, and reviewed regularly at Group level. 

Risk appetite is articulated in a variety of ways appropriate to the category of risk being considered. For example, at the highest level are our Group policy statements, which describe our risk-based approach to each category and at a more detailed level are our Group standards, which describe acceptable controls and limits. Examples of our policies include our Sovereign, Counterparty and Financial Market Risk Policy, and our Operational and Contractual Risk Policy

Some of the parameters which we use to exercise control over risk appetite include:

  • Health and safety
    • Monthly reviews of KPIs for lost time injuries and high potential (HIPO)  incidents
  • Asset integrity
    • Monthly reviews of control KPIs associated with all key assets across the Group
  • Concentration risk
    • Tolerable exposure by: territory, client, contract type and revenue
  • Market growth risk
    • Agreed bi-annually in strategy setting meetings, with trends reviewed monthly
  • Investment limits
    • For capital expenditures, minimum rates of Internal Rate of Return (IRR) or annual free cash-flow targets
  • Liquidity headroom
    • Agreed by the Board and specified in our Sovereign, Counterparty and Financial Market Risk Policy
  • Financial strength
    • Maintain an EBITDA Debt Ratio agreed with the Board
  • People risks
    • Non-conformances with our Code of Conduct, incident reporting, and attrition rates
  • Off-strategy risks
    • Where the Company has a zero tolerance, for example, sanctioned territories

In 2016, the Board made a number of revisions to its Delegated Authorities to improve risk management, and in 2017 the Board will assess the risk appetite for each of our principal risks.