Risk
management
The Board is collectively responsible for
determining the nature and extent of the
principal risks Autotrader is willing to take
in achieving its strategic objectives.
Internal control
The Company does not have a separate Risk Committee; instead the Board as a whole is collectively accountable for determining the nature and extent of the principal risks Autotrader is willing to take in achieving its strategic objectives.
The Board is also accountable for establishing and maintaining the Group’s system of risk management and internal controls. It receives regular reports from management identifying and evaluating our response to key risks.
Our risk management
process
Effective risk management is critical if we are to achieve our strategic objectives, to achieve sustainable long-term growth, and ultimately to achieve our purpose of Driving Change Together. Responsibly.
We use a four-step process to manage principal risks. The Autotrader Leadership Team (‘ALT’) and risk owners in the 1st Line of Defence identify, assess, mitigate, and monitor their risks. They report to the PLC Board on risk management through our governance structure. The process is summarised opposite.
1
Risks are identified using both a top-down and a bottom-up approach and risks are captured on the Group risk register. Identification of risks is achieved mainly via the following:
2
All risks are evaluated to establish their root causes, the impact, the likelihood of occurrence, and the time between the risk occurring and its impact being felt. Risk assessments consider financial, reputational, regulatory, customer, consumer, operational and cultural impacts. Risks are then categorised as:
3
Risk owners then consider how best to mitigate or control risks. Proposed controls and mitigants are reviewed and challenged by 2nd Line Functions, Forums and Committees to ensure that the response is in line with our risk appetite. If the residual level of risk after mitigation remains above our risk appetite, then action plans are agreed to reduce the risk to an acceptable level.
4
The Board and/or Audit Committee monitor the effectiveness of our material mitigations and controls. Monitoring includes:
Our risk management framework
The Group’s principal risks are recorded within a risk register which captures
details of each risk and the root causes; likelihood of the risk occurring; the
impact if it does occur; and details of the actions being taken to manage the risk.
The Board considers whether, given the strategy and risk appetite of the Group,
the mitigations are reducing the risk to an acceptable level.
Our risk
assessment
matrix
The risk landscape has continued to evolve, and we expect changes to
continue, moving forward. Our current view is that the principal risks
we face are:
Accordingly, our strategy is linked intrinsically to our principal risks.
We have taken great strides to manage these risks. Examples include
the launch of Deal Builder and improvements to our core marketplace
products. However, to execute our strategy, it is crucial we protect
ourselves against the threats to achieving our strategic objectives.
Risk appetite
The Board has assessed the principal risks Autotrader faces, including those from our strategy and the wider market. It has set a risk appetite that guides our response to these risks. Our risk appetite can be summarised as follows:
As we develop new products to meet changing customer needs and to stay ahead of our competitors, we acknowledge that there is a potential for financial loss. As an agile and fast-paced business, we are flexible about taking on these risks where the potential losses are outweighed by long-term upside opportunities.
Additionally, our business and strategy are both built on the foundations of longer-term, sustainable growth, and we acknowledge the threats to our short-term performance from short-term fluctuations in: the macro-economic environment, the geo-political landscape and societal expectations of employers.
It is crucial to the long-term sustainability of our business that we achieve our strategy in a responsible manner. There are some areas where pursuit of our objectives will inevitably involve exposure to risks, including a requirement to balance the differing needs of our stakeholders.
When we identify such risks, we take a cautious approach and apply measures to avoid exposing ourselves, and our stakeholders, to harm. Areas where we adopt a cautious approach to taking risks include our reliance on third parties and critical suppliers; our brand activity and marketing; and use of debt.
Similarly, whilst we are averse to non-compliance with laws and regulations, when operating at the forefront of digital innovation we will often need to apply a degree of legal and/or regulatory judgement, for example where guidance and market practices are still developing. In such cases we adopt a cautious approach: continuous, active judgement is applied by specialists, and the ‘compliance by design’ principle is always applied.
There are certain risks that we are generally unwilling to accept as we work towards our objectives. In these areas we strive to take all reasonable steps to prevent their occurrence. In particular, we are averse to taking risks in relation to the following:
Understanding what
matters most
Conducting business responsibly, with stakeholders at the heart of our decisions, is core to our strategy and success. Therefore, an understanding of what ESG topics matter most to our key stakeholders is essential. We believe that the issues identified in our materiality assessment remain relevant to our business and stakeholders. Our materiality assessment helps us capture our impact in a non-financial manner and the findings continue to guide the focus areas of our ESG strategy.
To learn more about which material issues are important to our stakeholders, please visit our ESG section:
Corporate governance
Setting out the key features of our governance framework and how it complies with 2018's UK Coporate Governance Code, published by the Financial Reporting Council.
Read MoreEngaging with stakeholders
Maintaining a clear, consistent dialogue with our stakeholders is key to fulfilling our purpose and ensuring the long-term success of our business.
Read More
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