Risk Committee role

Ensures appropriate establishment of risk appetite, monitoring and management of existing and emerging risk factors relevant to the Company.

Effective identification, management and mitigation of risk is essential for achieving the Company’s strategic objectives. The Board of Directors is responsible for developing and maintaining the Company’s risk management strategy, with oversight from the Risk Committee. The Risk Committee is responsible for implementing the risk management strategy, monitoring and reporting, managing risk tolerance and ensuring the effective application of risk management in the Company’s operations.

Risk Committee activity

The Risk Committee was active in 2023 against a backdrop of ongoing challenging macro-economic conditions and continued geopolitical risk. The particular focus was to consider the effects of rising interest rates, inflationary pressures, economic slowdown and foreign currency fluctuations on portfolio companies, together with the resulting impact on operating and finance models and valuations.

Overall, the portfolio has remained resilient with low leverage relative to peers; they are typically asset-light businesses with strong market positioning and many operate subscription-based pricing models allowing for pricing elasticity. These factors have enabled them to navigate the current market conditions. 

At the Company level, short and long-term cash flow modelling and additional (extreme) stress testing continue to show the Company operating within established liquidity risk tolerances. The newly established credit facility provides further headroom in the form of a £175 million committed facility with an option to increase the facility by £50 million. In the context of geopolitical risk, direct exposure to the continued Russia/Ukraine conflict and more recent conflict in the Middle East has been minimal. 

During the year, the Committee worked with the Oakley risk team to review the risk registers and risk reporting to the Board with the benefit of external specialist input, including analysis of the Company’s risk appetite statements, further enhancements to dashboard reporting and regular quarterly reporting on both existing and emerging risks.

The risk and compliance teams collaborated with an independent third party throughout the year to review risks and controls, enhancing the risk framework by updating internal risk indicators' measurement and thresholds.

The Committee continues to work with Oakley on its cyber security risk agenda, which covers the risks at both the Oakley level and portfolio company level.

2024 focus

Looking ahead to 2024, the Risk Committee will continue to support the Board in ensuring the Company operates within established risk tolerances in what is expected to remain a very volatile macro-economic and geopolitical environment. An important part of this is being mindful of, and proactive with, emerging risks. Particular areas of focus for 2024 are expected to be:

• Continued focus on cash flow management and liquidity risk
• Monitoring emerging risks and uncertainties with the objective of reducing their likelihood and impact
• Remain at the forefront of regulatory best practices. 

The Chair of the Risk Committee is appointed by the Board of Directors. The role and responsibility of the Chair of the Risk Committee is to set the agenda for meetings of the Risk Committee and, in doing so, takes responsibility for ensuring that the Risk Committee fulfils its duties under its terms of reference.

The Risk Committee met twice during the year, with quarterly reports supplied to the Board as part of the Board’s active monitoring approach.

In the Strategic report, you can view the principal risks and uncertainties faced by the Company. Note 5 to the Consolidated Financial Statements provides detailed explanations of the risks associated with the Company’s investments.

On behalf of the Board.

Fiona Beck
Chair of the Risk Committee