RISK MANAGEMENT / PRINCIPAL RISKS AND UNCERTAINTIES con nued
Risk trend Description Mitigation
The Group’s ability to deliver its strategic objectives is dependent upon the recruitment and retention of su ciently quali ed, experienced and motivated people. It is critical for the Group to secure and maintain the relevant capabilities in speci c geographical regions and disciplines in both existing markets and to support growth markets.
• Competitive reward packages together with focused training and development programmes. • A culture that motivates individuals to perform to the best of their abilities. • Strong succession and development programmes. • Local initiatives designed to engage young people, promote science, technology, engineering and mathematics (STEM) subjects and encourage the next generation of young engineers.
The failure to recruit, or the loss of, key personnel, and the failure to plan adequately for succession or develop the potential of employees may impact the Group’s ability to deliver its strategic and nancial objectives.
During 2015 we reviewed the reward schemes for our senior managers and introduced a medium-term incentive plan for managers below Board level to help mitigate our retention risk. We also made some minor changes to the bonus schemes for executive Directors. We hope to implement further changes in 2017. The recruitment and development of young engineering talent has continued to be a priority during 2015 with the reintroduction of our Group-wide International Graduate Programme. We also continue to develop resources and capabilities aligned to our growth markets.
Read more in our sustainability report on pages 48 to 55
Risk trend Description Mitigation
The quality and safety of our products are essential. We are exposed to warranty, product recall and liability claims in the event that our products fail to perform as expected. In automotive, the industry in general has experienced higher levels of recalls in recent years and the OEMs o en seek contributions from throughout the supply chain. This risk increases where: • vehicle manufacturers o er longer warranty periods • more vehicles are being built on standard platforms, so a single quality issue can a ect a large number of vehicles • regulators and our customers are taking a more stringent approach to recalling vehicles, particularly if there is a possible safety issue. In aerospace, customers and regulators impose very strict product safety and quality obligations on all aircra suppliers.
• High levels of quality assurance are embedded in robust manufacturing systems. • Regular reporting and monitoring of quality performance based upon customer KPIs. • Maintenance of critical parts lists. • External agency quality reviews and certi cations. • Robust contract terms and conditions.
Excellence in quality has continued to be a priority during the year with continuous improvement programmes ongoing in each of our businesses. We continue to monitor quality and delivery performance as viewed by our customers and strive to continuously improve product quality, safety and delivery key performance indicators. During 2015, the Executive Committee and Audit & Risk Committee reviewed the quality management system in each division and agreed future actions. A cross-divisional Quality Committee has been formed to share best practice and co-ordinate Group-wide quality management projects.
Read more about our continuous improvement culture on page 53
A product failure could result in serious losses, damaging GKN’s nancial performance and potentially our reputation. In particular, the costs associated with vehicle or aircra recalls can be signi cantly higher than the cost of simply replacing defective products.
GKN plc Annual Report and Accounts