Professional Documents
Culture Documents
ti
tig fy t
at he e
ing
xis
con ting
trols
Mo
and nito
rep r
or
t
r th
f fu equ
fy i
Identi are r
ls
contro
Identify
the risks
he
fy t
nti risk
ua
Q ross
g
e
ire r
d
Quantify
the net risk
en
Id i
m
Strategic
risk
Industry and market
downturns.
Technological
advances.
Pricing pressures.
Acquisitions
and mergers.
Planning and
resource allocation.
Hazard
risk
Political and
social instability.
Natural disasters
and other major
incidents.
Fraud and
corruption.
Environmental and
safety incidents.
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The Weir Group PLC Annual Report and Financial Statements 2013
Operational
risk
People.
Delivery and
supply chain.
Quality.
Commercial.
Communication.
IT.
Cyber security.
Compliance
risk
Laws and
regulations.
Code of Conduct.
Environment,
health & safety.
Governance.
Intellectual property.
Financial
risk
Financial
management.
Credit.
Debt and
interest rates.
Foreign exchange.
Accounting
and reporting.
Taxation.
Internal fraud.
Overview
Strategic Review
Operational Review
Corporate Governance
Financial Statements
Not all risks are controllable or foreseeable, a key example being natural disasters. Our response to such risks is having controls which lessen
the impact to our business should they occur. For example, in the case of natural disasters, we have controls in place to reduce the risk of harm
to our people, as well as response planning protocols, with clear accountability, to minimise disruption to operations and our customers.
Risk appetite statement
The Weir Group is strategically positioned in markets with long term high growth potential. We will pursue ambitious growth targets, and
we are willing to accept a higher level of risk to increase the likelihood of achieving or exceeding our strategic priorities, subject to the
parameters below.
Risk assertions
Risk parameters
Post-tax returns should exceed our cost of capital within three years
of the acquisition.
3. Returns and profitability: We will not pursue growth at all costs Short term margin dilution is acceptable in gaining market entry
and expect high margins, strong returns on capital and working
but over the cycle we aim for top quartile operating margins and
capital discipline.
returns on capital.
4. Capital allocation: We will encourage capex in pursuit of our
growth ambitions subject to Internal Rate of Return (IRR) and
achievement of Group free cash flow targets.
We will seek to maintain the ratio of net debt/EBITDA below two times
(current financial covenants 3.5 times).
The Weir Group PLC Annual Report and Financial Statements 2013
25
Strategic Report:
How We Manage Risk
Board and
sub-committees
Group Executive
Risk Committee
s
ion
cis
de
and
es
lici
Po
Re
po
rtin
g
The bottom-up risk reporting requires key risks identified, and reported, at project level to be escalated to the operating company management,
which in turn may be escalated to divisional management, and ultimately to the Risk Committee and the Board. This is achieved through risk
dashboard reports, which are maintained at operating company, divisional and Group level. The dashboards provide a summary of the top
ten net risks at each respective level, as well as a summary of the key mitigating controls and actions, and further control actions required.
The Risk Committee monitors quarterly risk dashboard reports from the operating companies and divisions. In addition, the Risk Committee
has oversight of the Group Risk Dashboard, providing an update to the Board at each Board meeting. The Board obtains assurance over risks
through the internal control framework. More information on the internal control framework can be found in the Corporate Governance Report
on page 67 and in the Audit Committee Report on page 82.
Divisional management
Operating company management
Figure 3: Risk responsibilities and reporting
26
The Weir Group PLC Annual Report and Financial Statements 2013
Overview
Strategic Review
Operational Review
Corporate Governance
Financial Statements
The key roles and responsibilities for risk management are set out below:
Risk management responsibilities
Board
Overall responsibility for the Groups risk management and internal
control frameworks, and strategic decisions within the Group.
Audit Committee
Delegated responsibility from the Board to review the effectiveness
of the Groups risk and internal control frameworks.
Risk Committee
Management committee responsible for governance of the Groups
Risk Management Policy and Framework.
Group Executive
Executive committee with overall responsibility for managing the
Group to ensure we achieve our strategic objectives.
Excellence Committees
Engineering
Environment, Health & Safety
Finance
HR
IT
Manufacturing
Planning
Purchasing
Value Chain
The Weir Group PLC Annual Report and Financial Statements 2013
27
Strategic Report:
How We Manage Risk
Risk
28
The Weir Group PLC Annual Report and Financial Statements 2013
Overview
Risk
Strategic Review
Operational Review
Corporate Governance
Financial Statements
Supply chain
We fail to adequately
manage the supply
chain thereby
reducing our
ability to meet
customer demand
in an economic and
efficient manner.
29
Strategic Report:
How We Manage Risk
Risk
Cost competitiveness
Failure to deliver
cost competitive
products and
services, or failure
to deliver sufficiently
differentiated
products and
services which justify
a price premium
through lowest total
cost of ownership
value propositions.
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The Weir Group PLC Annual Report and Financial Statements 2013
Overview
Strategic Review
Operational Review
Corporate Governance
Financial Statements
OPERATIONAL REVIEW
WEIR MINERALS
DIVISION
Dean Jenkins
Divisional Managing Director
Market drivers
Mining sector capital expenditure fell by an estimated
16% in 2013 as metals prices continued to decline
from 2011 highs. Greenfield projects were hardest
hit as mining companies switched their priorities from
new projects to maximising returns from their current
operations. This drive towards optimisation supported
largely unchanged maintenance and brownfield
capital expenditure.
Some new projects experienced order delays as
customers continued to adopt a cautious approach to
large investments. In addition, ongoing projects were
subject to delay. This was particularly evident in South
America where developments were postponed by
regulatory and operational issues.
The Weir Group PLC Annual Report and Financial Statements 2013
31