2C. Maintaining careful risk management

Systems and procedures are in place across the Group to identify, assess and mitigate major business risks that could impact the delivery of our growth strategy. Monitoring our exposure to risk is an integral part of the MOB process. Across our regulated businesses this is supplemented by formally constituted committees.

At Group level, risk management is independently facilitated and challenged by the Group Risk and Business Assurance function, which reports to the Group Finance Director and independently to the Audit Committee.

Risk category	Risk mitigation	2007 update
New contracts	Group Board involvement in all major contracts Aligned with core competencies and financial targets Rigorous pricing and risk assessment, separate from sales process Secure appropriate pricing and contract terms to ensure fair risk/reward profile Detailed, tailored transition process to ensure continuity of service and retention of staff.	Ongoing
Acquisitions	Aligned with core competencies and financial targets Rigorous, risk-based due diligence process Fit with strategy and pricing is subject to consideration and approval by the Group Board Clear transition process to ensure adoption of Group policies and procedures .	Ongoing
Operational risk	Escalated via the MOB process and Risk Committees to Divisional Executive Board and Group Board as appropriate Processes and appropriate multiple operating performance indicators in place across all businesses/contracts Key Group forums in place strengthening operational risk support in the areas of: – Information Security – Business Continuity – Payment Card Industry compliance Particular focus on information security and developing policies, procedures and raising awareness across the Group.	Regular security risk assessments are carried out in areas that manage sensitive customer data to ensure the strongest levels of security are in place Recent national events such as flooding, transport disruptions and epidemics have been learnt from and developments made to existing business continuity plans to deal with more frequent major incidents.
Fraud	Mitigating policies and procedures are promulgated by the Group Risk and Business Assurance function in conjunction with Group compliance.	The Group’s tailored fraud awareness computer based package has been updated and is being rolled out as refresher training across all business units Fraud benchmarking exercises are regularly carried out in key areas of the Group to constantly assess levels of fraud prevention in place against current best practice.
Regulatory and legislative impacts	Monitored by the Group Compliance function reporting directly to the Group Finance Director and independently to the Audit Committee Review and communications process for regulatory and legislative change that impacts Group-wide Separate challenge and review process for businesses operating in a regulatory environment. These businesses have comprehensive processes embedded into their business functions to address specific regulatory requirements.	Financial services regulation is monitored by the Group Compliance function reporting directly to the Group Finance Director and independently to the Audit Committee Review and communications process of other regulatory and legislative change that impacts the Group is dealt with by the relevant business area (i.e. Group HR, Group Legal, Group Risk etc).
Financial	Capital expenditure is subject to rigorous budgetary controls and spending above specified levels requires Group sign off Financial performance of each business unit is monitored each month and actual progress against plan is challenged by the Executive Divisional Board Treasury management – the Group’s principal financial instruments for fundraising are bonds, unsecured loan notes, finance leases and overdrafts. The Group has various other financial instruments such as trade creditors and debtors that arise directly from its operations. Where appropriate, the Group may also use derivatives to hedge its exposure to fluctuations in interest rate and foreign exchange rates. It is the Group’s policy that no trading in financial instruments will be undertaken.	Ongoing
Attracting and retaining staff	Investment in training and development – Competitive, appropriate incentive schemes – Succession planning is a key element of MOB process.	Continual development of our screening and reference process for all staff.
Reputation	Robust process for handling and escalating enquiries/complaints from all stakeholders at both a business/contract and Group level – primarily clients, media, public and suppliers.	Centralised proactive and reactive PR team to promote Group, separate businesses and manage communications regarding issues.
Procurement	Active supplier engagement and management processes	Supplier registration and approvals processes are in place. A new Supplier Development Programme for key strategic suppliers has been implemented in 2007.