Savills plc
Report and Accounts 2007
Risks and Uncertainties
Facing the Business
Identifying and evaluating the risks we face is fundamental to the achievement of our objectives and the creation of long-term shareholder value. Details on our approach to risk management and internal control can be found in the Corporate Governance Report.
Our consideration of the key risks and uncertainties relating to the Group’s operations, along with their potential impact and the mitigating factors in place, is set out below. It is not possible to mitigate fully all of our risks and other risks and uncertainties besides those listed below may also adversely affect the Group:
Achieving the right market positioning in response to the needs of our clients
The markets in which we operate are highly competitive and we need to ensure that we continue to reflect the changing, increasingly global, needs of our clients. This need drives our continued strategy to grow geographically and to add greater diversity to the services offered by the Group. For example, our acquisition of Granite Partners LLC means that we can now support our existing European and Asia Pacific clients wishing to invest in the US and attract US investors looking to diversify elsewhere.
This ongoing development of our geographic capabilities is aligned with our focus on further developing the service capabilities in the major global markets in which we operate. An example is our acquisition of Hepher Dixon Limited which has significantly strengthened our residential planning service offering in the UK.
We talk more about these developments in detail in the Group Strategy section.
Responding to changes in the markets in which we operate
As witnessed during the second half of 2007, the property markets in which the Group operates are cyclical and may change for a number of reasons; for example, economic cycles, interest rates, and supply and demand of property in the market at any one time.
Such changes may impact on different areas of our business and we recognise the need to respond rapidly to these. Our continual monitoring of market conditions and review of market changes against our Group strategy, is supported by the quarterly reforecasting undertaken by all of our businesses.
Our continuing geographic and product diversification is designed to reduce the impact on the business overall of a downturn in any one area of the property market.
Promoting and protecting the Savills brand
Savills is a global brand with an excellent reputation in the markets in which it operates. We recognise that our brand strength is vital to maintaining market share and expanding into new markets. To this end, we have a brand management programme in place to ensure the brand’s positioning, identity and personality is clearly and consistently promoted.
Recruitment and retention of high calibre staff
We recognise that our ability to attract, develop, motivate and retain people with the right skills to deliver our strategy is fundamental to the future success of our business. Whilst we pride ourselves in our reputation for excellence as an employer and having an incentivisation structure that rewards out-performance, we recognise that this is an area in which we must continually improve.
Key developments during 2007 included the further strengthening of our graduate recruitment programme, the implementation of a talent management and development strategy across the Group and a renewed focus on improving the work/life balance of all employees. We talk more about these developments in detail in the People section in Our Responsibilities.
Continuing to meet expected standards of professional, regulatory and statutory compliance
The success of any business providing professional advice is dependent on the quality and integrity of its people. Professional opinions provided in good faith may be open to challenge resulting in claims against the Group.
We are also required to meet a broad range of regulatory compliance requirements in each of the markets in which we operate. For example, in the UK, the Financial Services Authority (FSA) regulates the conduct of our Savills Private Finance and Cordea Savills businesses and The Royal Institution of Chartered Surveyors (RICS) regulates a number of the services we provide through our Commercial and Residential businesses.
Finally, we have a number of key statutory obligations including the protection of the health, safety and welfare of our employees and others affected by our activities.
Each of our businesses have regulatory and statutory compliance resources in place and they maintain the internal processes and controls required to fulfil our compliance obligations. Our compliance environment, at all levels, is subject to regular review by internal audit and other assurance providers.
Responding to political risks in the countries in which we operate globally
Our continued geographic expansion means that our success depends in part on understanding and responding to the changing political and legislative conditions in the many countries around the world in which we do business.
Extensive market research and due diligence is conducted whenever we enter new markets and the requirements of the Group Risk Management Policy, specifically the need to regularly evaluate the key risks to our business objectives, extend to all of our businesses globally.
Managing our financial risks
For all areas of financial risk we have an established financial control environment with clear responsibilities for operational and finance teams at all levels of the Group. The key financial risks and uncertainties are covered in the Financial Review section.