Chemring Group PLC |Annual Report and Accounts 2012

22
Business review
Principal risks and uncertainties
continued
Risk description
Political risks
It is recognised that political unrest
and changes in the political structure
in certain non-NATO countries to which
we currently sell could impact on their
future defence expenditure strategy and
our ability to export products to these
countries. During periods of unrest,
delays in obtaining export licences can
result in delayed revenues.
It is also recognised that current military
operations around the world may change
in nature or diminish over the next three
to five years. Certain of our businesses
have already been impacted by the
withdrawal of troops from Afghanistan
and Iraq.
Introduction of new
manufacturing facilities
We continue to invest in the
establishment of new manufacturing
facilities across the Group. We need to
ensure that these facilities are completed
within budget and on time, in order to
maximise our manufacturing capacity for
our future growth expectations.
Introduction of new products
The Group’s approach to innovation and
continued emphasis on research and
development activity ensure that we are
continually adding new products to the
range. We need to ensure that this new
product development is completed in a
timely manner, to a standard which allows
us to undertake volume manufacturing
and to produce products against high
reliability and safety criteria to meet our
customers’ requirements.
Product failure
Many of our products are single-use
devices, where it is impossible to conduct
functional testing without destroying the
product. There is a risk that products may
fail, either in use or during customers’
own sample-based functional tests.
Where we procure components for our
products from third parties, we need
to ensure that the suppliers adhere to
our high quality standards and that the
components are reliable.
Mitigation actions
Our businesses strive to maintain relationships at all levels within the political structure
of certain key countries, in order to ensure that we are aware of and can respond to
proposed changes, if and when they occur.
The Group’s Counter-IED, Munitions and Pyrotechnics businesses are less dependent
on active military operations, particularly as our electronics activities expand and
our product portfolio continues to grow in areas such as IED-detection, space, safety
systems, training, munitions components and naval ammunition.
Progress on all significant capital investment projects is closely monitored by the
Group Executive Committee and the Board.
Dedicated project managers have been appointed to oversee all of our major capital
expenditure programmes in the US and Europe.
Our new UK countermeasures facility has taken longer to complete than originally
expected, principally due to the significant challenges associated with the new
automated processes which are being installed, but we now expect the facility to be
commissioned during 2013. The Australian countermeasures facility has been completed
and is operating well.
We continue to strengthen our engineering resources to ensure that we have the right
people in place to deliver product development activities in support of our five year plan.
We have established relationships with a number of prominent universities, which are
focused on exploring new technologies and products for future development.
We continue to invest in new manufacturing facilities to accommodate the production
of new products, and to increase capacity on our existing production lines. This
necessitates careful management of contractors – where construction work is being
undertaken; suppliers – where new components have to be qualified for use in our
products; and employees – where training in new skills is required. We continue to
introduce Six Sigma techniques as appropriate within the organisation to improve our
manufacturing capabilities.
We maintain rigorous control of our production processes, monitoring critical
parameters on a batch or unit basis. We apply state-of-the-art techniques, including
statistical process control or Six Sigma, and where appropriate, automate processes to
reduce the scope for human operator error. We also conduct detailed assessments of
incoming components on materials to ensure compliance with specifications.
Finally, we perform a range of non-destructive and sample-based functional tests on all
our products, to ensure a level of in-service reliability and integrity appropriate to the
product application.
Chemring Group PLC Report and Accounts 2012