Competitive activity
The nature of our marketplace means that all of our businesses are exposed to risk from competitor activity.
We maintain our market-leading positions by significant investment in research and development. The diversity of our products and markets, and the high barriers to entry, limit the overall risk from any single competitor. Our business model means that we are able to react quickly to changes in customer and market demand.
Supply chain disruption
Potential risk exists in the loss of a key customer or non-payment by customers. The company is also exposed to the risk that some of the components it sources, particularly for custom-built items or older components, are provided by a single supplier and are vulnerable to interruption of supply.
Potential risk from loss of a key customer is limited as no single customer accounts for more than 2% of turnover, and credit control procedures limit the risk from non-payment by customers. Group operating companies also monitor customer satisfaction to ensure they are meeting customers’ product, delivery and service requirements. Our strategic sourcing teams work hard to source lower-cost components from around the world. We also mitigate this risk by finding alternative sources in order to reduce dependency on single-source suppliers and building sufficient safety stock of critical components.
Larger contracts and systems work
Although the majority of our business is to supply products only, instances where our companies enter into larger contracts and systems work are becoming more common across a number of our businesses. The risk exists that the profitability of such business may be impacted adversely unless effective processes are in place.
We have a strict approval process for such contracts in order to manage any risks they may present. Effective processes ensure that contractual exposures are mitigated, price discipline is maintained, and we have good visibility of costs. In addition, training programmes are in place, and the legal and internal audit focus has been strengthened.
Project management
Risk exists from the potential impact of poor project management discipline. As project management becomes an increasing feature of the way we do business, an impact upon group profitability may result from failures in project management – through, for example, missed sales opportunities or cost overruns arising from delays in new product development.
This risk is being mitigated through enhanced front-end planning and the preparation and monitoring of performance against Project Charters for all major projects.
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