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Operational Risks

Key

 

Attraction/retention of talent/HR/labour relations

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
 Management/mitigation
  • 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

Cyber/
IT failure/
general data protection regulations ('GDPR')

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)

Terrorism

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

Safety, litigations and claims

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

Natural catastrophe/extreme weather/loss of key facility

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

Credit/financing risk

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
National Express Group

National Express Group is a leading public transport operator with bus, coach and rail services in the UK, Continental Europe, North Africa, North America and the Middle East. Passengers made 938 million journeys on our services in 2019.

National Express Group PLC is a company registered in England and Wales, whose registered office is National Express House, Birmingham Coach Station, Mill Lane, Digbeth Birmingham, B5 6DD. Registered No: 2590560.

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