Principal Risks and Uncertainties

The Board of DCC is responsible for the Group’s risk management systems, which are designed to identify, manage and mitigate potential material risks to the achievement of the Group’s strategic and business objectives. Details of the Group’s risk management systems and internal controls are set out under ‘Internal Control’ in the Corporate Governance statement on pages 56 to 61.

 

In light of the rapid expansion of the Group in recent years, a Group wide review of risk management policies and structures has been initiated by the Chief Executive to ensure they meet the highest standards while remaining appropriate to DCC's business model.

 

Further detail on the principal risks facing the Group is set out below.

 

Strategic Risks and Uncertainties Impact Mitigation
Economic downturn Demand for goods and services in the Group’s businesses could be impacted by a continuing economic downturn, particularly in the UK, the Group’s key market. The Group’s operations are diversified across five different business sectors. Whilst a continuing economic downturn will affect all businesses the impact will vary according to the sectors in which they operate. The Group has an ongoing focus on operating efficiencies and business development.
Climate change EU and national climate change policies and legislation could reduce demand for carbon based energy sources over the longer term. In the Energy division, initiatives to address this risk include the introduction and marketing of lower carbon fuels, providing advice to customers on energy efficiency and the identification of commercial opportunities in renewable energy.
Acquisitions

Growth through acquisition is an integral part of DCC's strategy. A failure to identify acquisition targets, execute acquisitions or to properly integrate acquisitions could lead to operational and financial difficulties.

Only acquisitions which add value and are a strategic fit are considered. The Group conducts a stringent internal evaluation process and external due diligence prior to completing an acquisition. Group and subsidiary management have significant expertise in and experience of integrating acquisitions.

 

Operational Risks and Uncertainties Impact Mitigation
Management resources The Group's devolved management structure has been fundamental to the Group’s success. A failure to attract, retain or develop high quality entrepreneurial management throughout the Group will impede its strategic objectives. The Group maintains a constant focus on succession planning, remuneration programmes, including long and short term incentive initiatives, and management development. This focus is maintained through a structured review process in which Group Human Resources supports the Board, the Chief Executive and divisional management. A graduate recruitment programme is in place.
Key supplier The loss of a key supplier could have a serious operational and financial impact on the Group’s business. The Group trades with a broad supplier base. Excellent commercial relationships exist with suppliers and there is a constant focus on providing a value added service.
Environmental, health & safety incident A serious environmental, health & safety incident, particularly in the Energy or Environmental divisions, could endanger lives and seriously disrupt operations. All Group subsidiaries operate EHS
management systems appropriate to the nature and scale of their EHS risk profile. Identification of hazards, assessment of the risks and the introduction of control
measures form the basis of these systems. Furthermore, both internal and external monitoring, measurement and review of the control measures ensures a continuous improvement cycle is maintained.
Loss of major site The loss or serious destruction of any one of the Group’s key sites would present significant financial and operational difficulties for the Group. Group subsidiaries have implemented business continuity plans to manage disruptions. An insurance cover programme is in place for all significant insurable risks and major catastrophes to mitigate the financial consequences.
Product quality The Group has certain subsidiaries which operate manufacturing or processing facilities. Poor product quality could have significant consequences for customer or public safety and lead to financial, operational and reputational difficulties for the Group. All manufacturing and processing facilities operate quality management systems appropriate and specific to the nature of the products they manufacture or process.

 

Compliance Risks Impact Mitigation
Regulation DCC has operations in 13 countries. Failure to comply with statutory obligations could result in regulatory action, legal liability and damage to the Group’s reputation. Compliance with all statutory requirements is managed by local management and is subject to formal confirmation by the Compliance Officer of DCC plc. A review of compliance policies and processes is in progress, as part of the Group wide review of risk management as noted above.

 

Financial Risks
The principal financial risks facing the Group are addressed in detail under ‘Financial Risk Management’ in the Financial Review on pages 38 to 45.

 

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