Our Risk Management Process
The Main Board has the ultimate responsibility over the effective management of the risks we face in order to achieve our strategic and financial objectives.
As part of our risk assessment framework, a detailed review is carried out of the Company’s strategic objectives and identifies the principal risks and material concerns we face as a business. These headline risks are then approved and compiled into a risk register.
The risks and material concerns are then further broken down into components and sub level risks. These sub level risks are reviewed by each Divisional Board, individually assessing the probability and impact of each risk. In order to mitigate, control and continually monitor these risks, appropriate internal controls are implemented.
Any new risks identified are assessed one at a time, evaluating any potential impact to our business and the likelihood of its occurrence. These new risks are then fed back to the risk owners who use this assessment to inform their formal review, ensuring there are preventive and detective controls in place and included in the risk register.
The risk register is reviewed annually to ensure it is up to date. It is also reviewed by the Audit Committee to ensure that it is relevant and appropriate to our business.
In accordance with provision C.2.2 of the UK Corporate Governance Code 2014, the Directors have assessed the prospects and viability of the Group.
The Group’s investment case, business model and strategy are key to understanding Redrow’s future prospects. The Directors’ assessment has made reference to our current position, our strategy, the potential impact of the principal risks facing the Group, and the Board’s appetite for risk which are to be found in this Report in the Strategic Report. The Group has committed banking facilities through to March 2020.
The Directors have selected a three year timeframe over which to assess the viability of the Group, from 1 July 2017 to 30 June 2020. This timeframe was chosen as it corresponds with the Board’s three year planning horizon. On an annual basis, the Directors review the financial forecasts for the Group constructed using a detailed bottom up process incorporating assumptions about the timing of legal completions of new homes and land purchases, selling prices, profitability, working capital requirements and cash flows. The Group also uses a top down model to give another perspective.
The three year plan is stress tested for robust downside scenarios. This involves flexing key assumptions including the impact of reduced average selling prices, sales rates and land prices which could arise from a deterioration in housing market conditions and mortgage availability.
The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period ending 30 June 2020.