ANNUAL REPORT 2012

Principal Risks and Uncertainties

Risk management framework

Risk is an inherent part of doing business. Our risk management system is designed to identify and assess all significant risks which could adversely affect the Group’s ability to achieve its business objectives and to identify management actions which seek to mitigate those risks to an acceptable level.

Whilst not intended to be exhaustive, a summary of the Group’s principal risks are provided below:

Risk

 

Description

 

Mitigation

Political, Social and Economic

DP World has global operations. Our assets are exposed to, and earnings influenced by, political, social and economic events associated with the countries in which we operate. Political actions such as changes to the regulatory environment, strikes, civil strife, expropriation or nationalisation of property could cause us to incur additional costs, impact our financial earnings, and disrupt or terminate our operations.

DP World has a diversity of investments across a number of geographical jurisdictions spreading the risk. We have covered a range of risks through insurance where appropriate.

Ongoing security assessments and continual monitoring of geopolitical developments worldwide and engagement with government, local authorities and joint venture partners ensures we are well positioned to respond to changes in the political, social and economic environments in which we operate.

Uncertain Trading Environment

The Group’s results are subject to adverse impact from a downturn in the global / local macroeconomic environment.

DP World’s diversified portfolio is focused on the more resilient emerging markets and more stable origin and destination cargo.

We have a continuous focus on delivering high levels of service that meet our customers’ expectations and a proven track record of active cost management in line with the changing economic climate to mitigate any downturn in the macroeconomic environment.

Legal, Regulatory and Contractual Obligations

Our businesses operate under increasingly stringent regulatory regimes around the world and are subject to various legal and contractual obligations. New legislation and other evolving practices could impact our operations, increase the cost of compliance, limit or impose restrictions on our growth.

DP World continually monitors regulatory trends and developments. We have comprehensive policies, procedures and training in place to promote legal and regulatory compliance.

Project Risk

Business development is subject to regulatory approvals and political, capital raising, construction and commercial risks. Crystallisation of associated risks could impact the Group’s results.

DP World has a thorough approvals process prior to committing to business development or major expansion opportunities, including reviewing political risk, regulatory obligations and construction risk.

Skilled technical teams are assigned to oversee large projects and actively monitor risks throughout the process.

Foreign Exchange Rate Exposures

The global diversity of the Group’s operations results in foreign currency exposure. Adverse currency movements and volatility may impact financial performance.

The Group’s policy is to identify the impact of foreign exchange exposure and to monitor and mitigate material currency exposures through hedge programmes where applicable.

Health, 
Safety and Operational Risks

The nature of our operations exposes us to various operational, health, safety and security risks. The occurrence of any such risks could impact our business operations, financial results and our reputation.

The Board and senior management are committed to creating a safe culture throughout the Group. The Board monitors the implementation of health and safety strategies, including employee training programmes.

We mitigate these risks with continuous monitoring by management and by having management review processes, policies, guidance documents and specific operational procedures in place.

Internal controls

The Board is responsible for establishing and maintaining an effective system of internal control. This system of internal control is embedded in all key operations and is designed to provide reasonable assurance that the Group’s business objectives will be achieved. Regular management reporting and annual self-certification provides a balanced assessment of key risks and controls and is an important component of the Board’s assurance. The Board also receives updates from the Audit Committee, which receives regular information from internal and external audit reports on the Group’s risks and internal controls. The Group’s internal audit function is responsible for reporting to the Audit Committee on the effectiveness of the Group’s risk management process and for evaluating the internal control environment to ensure controls are appropriate and operating efficiently and effectively.

The core elements of DP World’s system of internal controls consists of:

Organisational structure: A clearly defined organisational structure that provides clear roles, responsibilities and delegated levels of authority to enable effective decision making across the Group.

Code of conduct: A code of conduct, originated from the top of the Group that sets out how the Group expects its employees to act.

Whistle blowing policy: A whistle blowing programme for employees to report complaints and concerns about conduct which is considered to be contrary to DP World’s values. The programme, monitored by the Audit Committee, makes communication channels available to all employees within the Group.

Anti bribery and corruption policy: An Anti Bribery and Corruption policy has been implemented by DP World, supported by online training that is directed and proportionate to the identified areas of risk.

Strategy and financial management: Clear strategy and financial management which is consistent throughout the organisation and can be actively translated into practical measures. Comprehensive reporting systems, including monthly results, annual budgets and periodic forecasts, monitored by the Board.

Policies and procedures: Documented policies and procedures for all Group functions within the business, which are communicated to all business units.

Risk management and performance: Risk-profiling for all business units and the Group to identify, monitor and manage significant risks which could affect the achievement of the Group’s objectives.

Assurance: Assurance activities cover key business risks which contribute to the overall assurance framework, including an internal audit function to review the systems of internal control.