Annual Report and Accounts 2010-11 - Manchester Airport

18 Financial ReviewRisk managementIt is the aim of the Group to promote a culture where as amatter of good business practice both risk and opportunityare identified and managed, thereby ensuring moreinformed and effective business decisions are made andthe Group either achieves or exceeds its objectives andtargets.The management of risk is embedded in the strategic andoperational processes of MAG. This means that riskmanagement is not a separate process or action but part ofnormal business and daily management practice. We arecommitted to promoting effective risk management as acore management capability that will support MAG inachieving its targets. It is also one of the top team’s keytargets and this will ensure that risk policy in terms ofprocess and outputs is monitored.Risk is assessed formally at divisional level through riskworkshops and via the maintenance of risk registers. Theupdating of the risk registers is a continuous processinvolving the identification, evaluation and management ofrisks by individual managers. Risk exposure is assessed byprofiling individual risks in respect of their potential impactand likelihood of occurrence, after consideration ofmitigating and controlling actions that are in place.We are also committed to promoting a culture in whichpeople will openly communicate risk to appropriate levelswithin the Group and in which information on risk, and theactions taken to manage risk, is shared openly through aneffective communication process.Key issues are reported upwards to senior managementand ultimately the Audit Committee. The assessment of riskis also integrated with day-to-day management processesand is included in capital investment and projectmanagement procedures.The key corporate risks and mitigation profiles are detailedbelow:SecuritySecurity of customers and colleagues is ranked as one ofthe most important operational risks that the Group has tomanage. There is ongoing investment in securitytechnology with Manchester leading the way in introducingstate of the art screening technology.There is also an independent quality assuranceprogramme, which employs both an internal and externalprocess for independently checking performance standardswith a view to identifying potential areas for improvement.The Group has continued to invest heavily in trainingsecurity staff to deliver an even higher standard of securityservice to customers. Close co-operation is maintained withGovernment agencies and the police to ensure that thesecurity regime is responsive to changes in external threats,including an awareness of developments in IT security.Health and safetyThe Health and Safety of customers and colleagues is alsoa priority operational issue for the Group. There is a Groupwidestructure in place to support management through theprovision of staff training, auditing and specialist advice.The assessment of health and safety risks is inbuilt intodaily management routines and is monitored by acomprehensive structure of health and safety committeesthat are in turn overseen by a corporate health and safetycommittee with Board level oversight.We are committed to identifying initiatives that will enhancethe safety culture and contribute to the continuousimprovement of the safety and well-being of all ourcolleagues and customers.Environmental complianceIncreased environmental restrictions on noise and pollutionpotentially place limitations on future growth. The risk isaddressed by a dedicated team who research and modelfuture trends in air traffic and who develop environmentalimpact assessments. The Group is also actively workingwith the airlines to research ways to operate in moreenvironmentally efficientways.Changes in demandThe reality of the aviation business is that there is aconstant threat of a downturn in demand due to adverseglobal economic factors or specific events, such as aterrorist incident. The risk is mitigated by the application ofprudent financial controls, the gathering of businessintelligence and contingency planning. The combined effectof these mitigating actions is to make the Group capable ofa flexible response in the event of a business interruption.Political and regulatoryMAG will continue to contribute to the constructiveengagement with government agencies and otherstakeholders to help create a sustainable framework for UKaviation.Capacity shortfallFailure to secure the appropriate planning permissionswould expose the Group to operational capacityconstraints. Medium and long term planning is in progressfor increasing capacity at Manchester, East Midlands andBournemouth airports in line with future projected growth.CompetitionThe development of competitor airports clearly presents achallenge to the Group. Within a dynamic market,considerable effort is being made to develop andcustomise the offer at all four sites to preserve customerpreference for flying from MAG airports. The focus is ondeveloping the proposition to customers in all aspects oftheir travelling experience.The Manchester Airport Group PLC Annual Report and Accounts 2010-11