Advanced Computer Software Group plc Annual report 2013

Principal risks anduncertaintiesOverviewThe Group has a process for identifying risks that could affect business operationsand consequently the financial results. Further information on this process is set outin the corporate governance statement on pages 26 to 28.Advanced considers the following to be its principal risks:Risk category Specific risks MitigationEconomicThe Group’s markets fall into decline.Weak economic conditions affect theability of the Group’s clients to do business.The Group has a diversified portfolio of products, servicesand markets, so as to mitigate dependence on any oneproduct, service or market.Innovative solutions are offered in a variety of ways to bestsuit each customer’s business needs, including the traditionallicence and services model or payment by subscription viaSoftware as a Service.Business review GovernanceStrategicThe Group fails to execute its M&Astrategy successfully.The Group fails to properly integrateacquisitions made.The strategy remains to identify and make earningsenhancingacquisitions with strong recurring revenuestreams, that are complementary to the Group’s existingportfolio.The Group has a specific integration team led by adesignated Board director that has successfully integratedall acquisitions made to date.FinancialsCompetitionThe Group operates in highly competitivemarkets characterised by rapidly changingtechnology and increasingly sophisticatedcustomer requirements. Failure to respondpromptly and effectively may lead to lossof market share.Significant investment is made in product development.Dedicated development resource centres exist inBangalore and Baroda, India, which continually reviewand update products.Systems failureThe loss or failure of the 365 ManagedServices systems would impact on boththe Group’s operations and those of itshosted clients.All critical new business and client focused systems have‘High Availability’ built in by design.Regular testing of business continuity/disaster recoveryplans is maintained, including annual full livescheduled testing.Project deliveryThe Group contracts for multiple projects eachyear to deliver products and services to clients.Failure to deliver large or even smaller projectscan result in significant financial loss.The Group has proven procedures and policies for projectdelivery and regularly measures and reviews projectprogress. Problem projects involve senior managementat an early stage.FinancialIncomplete management/financialinformation informing Board/managementdecisions could result in the business beingmanaged sub-optimally and adverselyaffect performance.The Group may be unable to financegrowth or acquisitions.Detailed management information on each division iscirculated monthly and reviewed by the managementboard and Group Board.The Group has a £105.0m term loan and revolving creditfacility taken out in March 2013.The Group continues to be highly cash-generative,improving its cash conversion to 108% during the year.PeopleThe Group’s success relies on recruiting,developing and incentivising seniormanagement and other key employees,the loss of whom may affect the financialperformance of the Group.A comprehensive vetting and recruitment process exists.There is continual development of employees throughobjective setting and regular appraisals.An in-house development and training facility providesa structured learning environment for the professionaldevelopment of all staff.Key employees are incentivised via bonus plans andshare schemes.ComplianceThe Group is subject to a wide range ofUK legislation and regulation.There is regular interface with the Group’s external advisers.Appropriate policies and procedures are in place across theGroup, including staff training.Advanced Computer Software Group plcAnnual Report 201317