Our risk appetite
Our risk appetite lies at the heart of our approach to risk management and is integral to both business planning and decision making. The Group’s risk appetite is reviewed annually as part of the strategy review process and approved by the Board, in order to guide the actions management takes in executing our strategy. Our risk appetite is cascaded throughout the business by being embedded within our policies, procedures and internal controls.
We have identified a risk dashboard of Key Risk Indicators (KRIs) for each principal risk, with specific tolerances to track whether our risk exposure is within our risk appetite or could threaten the achievement of our strategic priorities. The risk dashboard is reviewed quarterly by the Risk Committee and serves as a catalyst for discussion about how our principal risks are changing and whether any further mitigating actions need to be taken. The risk indicators are a mixture of leading and lagging indicators, with forecasts provided where available, and focus on the most significant judgements affecting our risk exposure, including: our investment and development strategy; the level of occupational and development exposure; our sustainability risks; our financial resilience; and our key operational business risks (as illustrated in the principal risks table .
Whilst our appetite for risk will vary over time and during the course of the property cycle, in general we maintain a balanced overall appetite for risk, appropriate for our strategic objective of delivering long term sustainable value. The Board has reviewed our risk appetite in light of the continued macroeconomic uncertainty and confirmed that our current risk appetite is appropriate. In summary, our appetite for financial and compliance related risks remains low, whilst our appetite for property and operational related risks is moderate, reflecting our strategy with an increased focus on development, active capital and property management and associated repositioning opportunities.
Significant factors which contribute to our balanced appetite for risk across our business include:
- Approach to capital allocation focusing on prime assets or assets with repositioning potential, and therefore limited obsolescence risk
- Disciplined approach to development including a balanced approach to our speculative exposure
- Maintaining an efficient capital structure and robust liquidity position
- A diverse occupier base – Experienced Board and senior management team