The Board is collectively responsible for
determining the nature and extent of the
principal risks it is willing to take in
achieving its strategic objectives.
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 Auto Trader 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
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.
A four-step process is adopted to help us manage our principal risks. OLT members are responsible for identifying, assessing, mitigating and monitoring risks, and reporting against these risks. The Governance, Risk and Compliance function facilitates this process and supports the OLT in designing responses to risks, thereby ensuring that the response is aligned to the Group’s risk appetite.
A top-down and bottom-up approach is used to identify principal risks across the business. Whilst the Board has overall accountability for the effectiveness of internal control and risk management, the day-to-day management of risk is delegated to the OLT. Independent support is provided to the OLT by the Governance, Risk and Compliance function.
Risks are evaluated to establish the root causes, the impact and the likelihood of occurrence. Risks are categorised as:
After identifying the root cause of a risk, owners must consider whether the existing mitigations reduce the risk to an acceptable level, with this assessment challenged independently by the Governance, Risk, and Compliance function. The level of acceptable risk is guided by our Group risk appetite. If the residual level of risk after mitigation remains above our risk appetite, then further mitigating actions are implemented.
The OLT is responsible for monitoring the effectiveness of controls and mitigating actions, with continuous independent challenge provided by the Group’s Governance, Risk and Compliance function, and Internal Audit. The Board reviews the Group’s risk register and assesses the adequacy of mitigating actions to ensure that risks are being managed in a manner consistent with our risk appetite.
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.
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.
The Board considers the nature and extent of the principal risks Auto Trader
currently faces, the potential risks we expose ourselves to as we proceed with
our strategy, and the wider market, economy, and business environment,
setting its risk appetite accordingly:
Auto Trader acknowledges that, in some circumstances, fast-paced and innovative development of new products within the technology space presents significant opportunities and taking advantage of these opportunities may result in financial loss. We consider the opportunities can outweigh the downside risks, and therefore, in pursuit of our strategic objectives, we are flexible about taking risks which relate to product innovation, addressing competitive threats, and/or making the most of market opportunities.
As we pursue our strategic objectives, we must remain cognisant of the potential for them to have conflicting impacts on our stakeholders, including employees, suppliers and third parties, and the environment. Owing to the potential for these risks to have significant knock-on impacts across a wide range of categories, we are cautious about taking risks in relation to such areas.
We are averse to taking risks which conflict with our values; risks which could damage our reputation; risks which threaten the security of our systems and technology; risks leading to a breach of laws, regulations or financial covenants; and/or risks which could compromise the organisation’s going concern status. Across these categories we take all reasonable steps to ensure our business activities do not give rise to significant risk of damage to our stakeholders, and in pursuing our strategic objectives we are averse to exposing ourselves to higher levels of risk knowingly.
In order to remain successful in the long term, an understanding of what ESG topics matter most to our key stakeholders is essential. Our materiality assessment helps to inform our make a difference strategy, together with the aim of understanding which ESG topics matter most to our internal and external stakeholders, to capture our impacts in a non-financial manner and help us prioritise matters on which to focus and inform our ESG strategic thinking.
To learn more about which material issues are important to our stakeholders, please visit our ESG section:
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 More
Engaging 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