Operational Risks

Potential impact

• Lack of available management talent/ leadership skills can inhibit growth
• Shortages in drivers and other key staff can disrupt operations and lead to wage and benefits cost inflation
• Increased unionisation and/or poor labour relation presents increased risk of strike or operational disruption

• The Group is committed to employee engagement and invests in a number of retention programmes
• Appropriate training is provided for managers and supervisors
• Reward and recognition programmes are established to further enhance employee engagement
• Focus on the effective management of stakeholder and union relationships, and the advice of specialist outside counsel is sought where necessary

Opportunity

• Ensuring we have an agile, skilled
  workforce will enable us to adapt to emerging challenges and opportunities

Change in risk in the year

• Low levels of unemployment in key markets have led to recruitment and retention challenges and cost inflation
• Established Diversity & Inclusion Council

Potential impact

• Major IT failure could disrupt operations and lead to loss of revenue, especially in the coach businesses
• Data breach involving a loss of customer data could result in reputational damage and significant remedial costs
• Breach of the EU Regulation (GDPR) could result in reputational damage and additional costs

Management/mitigation

• Increased investment in cyber security, including recruitment of specialised resources across the Group, technical measures to protect data assets and the procurement of several services at Group level
• Board approved governance structure and cyber security strategy
• GDPR compliance plans in place, tailored to each division’s exposure

Opportunity

• Strengthened resilience against cyber threats and IT outages increases awareness and expertise across the Group and facilitates greater leverage of technology

Change in risk in the year

• Cyber threat environment continues to be challenging, as demonstrated by high profile data breaches and ransomware events in other companies
• Significant improvements in our resilience, supported by an ongoing maturity programme
• Preparations for California Consumer Privacy Act (CCPA)

Potential impact

• Direct impact through asset damage, disruption to operations and revenue loss
• Potential indirect impact from a general reduction in the public’s appetite to travel reducing demand and revenue

Management/mitigation

• Close liaison with government agencies and industry partners
• Major incident/emergency plans are developed in all divisions
• Insurance coverage is available and in place for some terrorism related risks
• Risk assessment of any new business growth opportunity

Opportunity

• n/a

Change in risk in the year

• UK Government threat level reduced from ‘severe’ to ‘substantial’, but we remain very vigilant

Potential impact

• Major safety-related incident could impact the Group both financially and reputationally
• Higher than planned claims or cash settlements could adversely affect profit and cash outflow
• Non-compliance with regulations can create legal and financial risk

Management/mitigation

• Very strong safety culture driven from the Group Chief Executive
• Dedication to leading edge safety technology
• Appropriate insurance coverage for accident-related claims to employees and third parties
• Experienced claims management and legal teams in each division
• All divisions have established safety audit programmes, supported by Group internal audit

Opportunity

• Continued relentless focus on safety and investment in technology should facilitate risk and cost reductions and enable differentiation in our customer offering

Change in risk in the year

• Zero responsible fatalities in the year
• Significant reduction in Fatality Weighted Injuries (FWI), the Group’s key safety metric
• Global insurance market conditions have deteriorated significantly; the Group was able to achieve satisfactory renewals due to our commitment to safety and to effective litigation/claims management

Potential impact

• Loss of a key location to either a man-made hazard such as fire, or natural catastrophe such as a hurricane, can result in asset loss and lost revenue
• Widespread events such as extreme weather can also interrupt operations and cause revenue loss even if the Group’s assets are undamaged

Management/mitigation

• Geographical diversification of the Group provides a natural hedge to this risk
• Established emergency and continuity plans in each division
• Insurance coverage is available and in place for some hazard-related risks

Opportunity

• n/a

Change in risk in the year

• General increase in extreme weather events around the globe, including hurricanes, storms and wildfires

Potential impact

• Contract-based operations such as North America and Spanish urban are exposed to late or non-payment risk from customers, impacting Group liquidity
• A material increase in interest rates would increase the Group’s cost of borrowing
• Material tightening in investment-grade credit markets could impact the Group’s liquidity

Management/mitigation

• Close monitoring of receivables and appropriate provisions made for possible non-collection
• Strong relationships with a number of banks
• Appropriate liquidity maintained through committed bank facilities, finance lease programmes and debt capital market issuances

Opportunity

• Investment grade rating and proven track record give efficient access to credit markets enabling investment in growth

Change in risk in the year

• RCF extended for a further one year
• Fitch rating raised from BBB-/stable to BBB/stable
• £664 million financing raised in US private placement and bond markets to refinance 2020 debt maturities