Principal risks and uncertainties The Board is ultimately responsible for the management of risk in the Group. Managing risk during 2020 The Board and Audit Committee continue to recognise the importance of risk management in achieving the Group’s strategic objectives. Keeping risk management integral to the operation of our businesses is a priority, requiring a continuous scan of all threats and opportunities. Our risk management processes aim to anticipate risks before they impact upon our activities to ensure that we are in the best place to mitigate those risks, and recognise the opportunities they may bring in a competitive marketplace. For all our key risks, we identify the key mitigating controls and their ownership. Our assurance activities are focused upon those controls so we can continually gauge their effectiveness. Within that context, the Group is disappointed to report significant separately disclosed items in both 2019 and 2020, the details of which are described in the Financial review as set out on pages 22 to 24. The items relate to strategic initiatives that were either not executed successfully or were severely impacted by the global pandemic and energy price changes in the first half of 2020. The Board has carried out a detailed cause and effect review and combined with the strategic review, a more rigorous approach to the markets the Group seeks to provide services into and the capital allocated to those activities has been implemented. Pandemic risk During the extraordinary circumstances created by the pandemic the Company needed a robust response from all areas of the Group. As events and Government policy have progressed, the Group has responded quickly to keep our people safe; to preserve as many jobs as possible, and to protect the interests of the Company and its stakeholders. The pandemic continues to bring significant uncertainty to the operation of the Group, and further lockdowns and restrictions are possible. Nonetheless the Group continues to demonstrate sound control and resilience, with people working from home where possible and those not able to work from home working in operational environments adapted in accordance with Government guidelines and best practice, and with those needing to travel to deliver for our customers finding ways to do so safely and effectively. Climate change During 2020 the Group has been impacted by volatile energy prices. Following its analysis of risk and opportunity relating to climate change, the Board expects that oil and gas will remain an important part of the energy mix for many years to come. However the Board considers both the transition from fossil fuels and the matching growth of the renewables market as part of a lower carbon environment represent a risk and an opportunity for the Group. The risk is mitigated by the continuing strategic diversification of the Group into new markets by supporting the energy transition, which also provides growth opportunities. HEALTH AND SAFETY RISK Nature Potential impact Mitigation Group trading companies may experience an adverse operational incident or failure to maintain appropriate levels of health and safety. The health and safety of our workforce and others could be impacted by our operations The Group's reputation could potentially suffer if there was a major accident or health and safety issue Claims and regulatory action may be taken against the Company or the affected business First item on Plc and business board agendas Policy and training Group safety forum Insurance Context There have been a number of safety incidents in 2020 including one fatality. Whilst thorough investigations show that primary responsibility for the fatality is not with the Group, it is a sobering event and gives added impetus to our own policies and processes. Executive management has continued to increase the level of awareness and focus on HSE, including mental health. The net risk has increased in 2020 due to the global pandemic and every effort is being made to mitigate that risk and to learn from and avoid the incidents in 2020, with greater diligence and awareness in this area Movement Increase. In light of the environments in which the Group companies work, health and safety is an inherent risk. There has been an increased focus in this area in the last 12 months Opportunity Operating in competitive markets there is an increased opportunity to provide differentiation to our customers by our strong commitment to health and safety, thereby building long-term trust CYBER SECURITY RISK OPERATING IN EMERGING MARKETS CLIMATE CHANGE CONTRACTUAL RISK PROJECT DELIVERY RECRUITMENT AND RETENTION OF KEY STAFF FINANCIAL RISK PANDEMIC RISK Emerging risks We have identified three macro-economic trends that will impact the markets in which the Group operates: • Changing energy mix as renewable energy reduces carbon emissions and environmental concerns lead to an increased focus on decommissioning. Whilst recognising that oil and gas will remain part of the energy mix for some time, we aim to provide services to production, delivery and decommissioning in the safest, most sustainable way whilst we support the energy transition to low carbon sources. This forms part of the Board’s analysis of the impact of climate change on the Group, and has already been considered as one of the Group’s principal risks (and opportunities); • Acceleration of digital innovation as customers seek efficiencies and effective asset management; and • Shifting economic power to developing regions giving potentially increased political risk and increased defence spending. These macro trends are seen as emerging risks and potential opportunities for the Group and, as such, are central to the development of the Group’s strategic aim to deliver sustainable benefits to our five key stakeholders. Capital will be allocated to growth opportunities, supplemented by selective acquisitions whilst business with below benchmark return potential will be divested. Delivery of the Group’s strategy will require a strong focus on both commercial excellence and operational excellence. You may also be interested in... 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