The volatile and uncertain environment created by the Covid-19 pandemic, coupled with a backdrop of increasing geopolitical and macroeconomic uncertainty, has continued to present an uncertain general risk environment for our business to navigate throughout the year. Covid-19 was viewed as an overarching risk rather than a single principal risk and fundamentally affected all aspects of our business. Whilst our performance continued to be impacted, our rent collection has recovered to close to pre-pandemic levels as the UK economy recovered across the year.
Looking forward, the removal of all Covid-19 restrictions in England from April 2022 following the successful vaccination programme reduces the risks relating to Covid-19, particularly in relation to our macroeconomic, property markets, major business event, customer and people risks. However, it is likely that Covid-19 will still be prevalent in society and the risk of further Covid-19 variants, and whether current vaccines will deal with them effectively or not, remains. Also, the long term impact of Covid-19 on the future demand for and use of space, the evolution of customer behaviour (including an acceleration of trends in flexible working and online shopping) and travel patterns could have further implications for the real estate market and the Group’s portfolio.
There are also wider concerns that we are potentially entering an extended period of global volatility with several increasing macroeconomic headwinds including energy price volatility, supply chain disruption and material and labour shortages. These are all increasing inflationary pressures, and are being compounded by the war in Ukraine, and may give rise to further interest rate rises and in turn serve to dampen UK economic growth. Whilst these headwinds continue to evolve, we have set out in our principal risks table the key potential impacts on our business and how we plan to mitigate these.
Risk management, and the Group’s continued ability to be flexible to adjust and respond to these external risks as they evolve, will be fundamental to the future performance of our business. The challenges of the last two years have demonstrated the resilience of our business model, and our robust risk management to protect our business through this period of uncertainty and adapt to a rapidly-changing environment.
During the year, the Risk Committee has also focused on key operational risk areas across the business including:
- A programme to enhance and strengthen our key financial and operational controls
- A site-specific risk assessment and compliance review across our assets
- Information security general controls incorporating vulnerability scanning and cyber security testing
- Occupier covenant risk and working proactively with customers to maximise collection rates
- Covenant strength of key development contractors and subcontractors, and managing our exposure to them
- Health, safety and environmental risk management and compliance with our key performance indicators. Our health and safety management system was re-certified under ISO 45001
- Climate risks incorporating our TCFD transition risk assessment and EPC ratings of our assets
- Supply chain and new supplier onboarding process
- Internal audit reviews and the implementation of any control findings or process improvement opportunities