RISK MANAGEMENT / PRINCIPAL RISKS AND UNCERTAINTIES con nued
Risk trend Description Mitigation
A sizeable portion of the Group’s pro ts and cash flows are generated by a small number of joint ventures. In these circumstances, there is an inherent risk that the objectives of the joint-venture partners in regard to the joint venture may diverge.
• The Group seeks to participate only in ventures in which its interests are complementary to those of its partners. • Thorough pre-transaction due diligence procedures on any potential joint venture partner. • Continual focus on sustaining strong relationships with joint venture partners.
Such a misalignment of objectives could result in the Group’s inability to pursue its desired strategy. Consequently, the Group’s business and future results may be adversely a ected.
In 2014 we sold our stake in Emitec; there have been no signi cant changes in our ongoing revenues and pro ts generated by other joint venture partners. Relationships relating to our largest joint venture, Shanghai GKN HUAYU Driveline Systems Co Limited (SDS), remain strong and continue to develop positively.
Read more about the Group’s joint ventures in note 13 to the financial statements
Laws, regulations and corporate reputation
Risk trend Description Mitigation
The Group is subject to applicable laws and regulations in the global jurisdictions and industries in which it operates. This includes certain territories where strong ethical standards may not be well established or where parts of the markets in which we operate are highly regulated. Regulations include those related to export controls, environmental and safety requirements, product safety, tax laws, intellectual property rights, competition laws and other ethical business practices. Tax in particular is a complex area where laws and their interpretation change regularly, leading to potential uncertainty in tax exposures.
• A strong culture of ‘doing the right thing’ which is regularly emphasised by senior management. • Group-wide governance policies and procedures, ongoing compliance training and strong oversight. • Ongoing monitoring of regulatory developments in major jurisdictions. • Ongoing monitoring of employee concerns through our independent employee disclosure hotline.
There have been no signi cant new regulations impacting the Group during 2015, but our markets continue to be subject to robust enforcement activities in relation to existing regulations, particularly in relation to vehicle safety. In response, we have taken steps to reinforce our commitment across the Group to ‘doing the right thing’ in all activities. This includes emphasising its importance to all senior managers at each of our divisional leadership conferences and completing the roll-out of the new GKN Code to remind employees of the standard of behaviour we expect. We continue to strengthen our risk management systems. As part of the ongoing integration of Fokker, we will align our risk and governance procedures taking account of speci c regulatory risks associated with the acquired business. During 2015 we introduced a new online export control training course and, to date, 97% of the target audience has completed it.
Read more about doing the right thing on pages 48 to 55
Non-compliance could expose the Group to nes, penalties, damage to reputation, suspension or debarment from government contracting or suspension of export privileges.
GKN plc Annual Report and Accounts