Annual Financial Report

1 Existing market outlook

Risk and impact

The risk of a change to the outlook for our key markets is either unplanned or unforeseen and as a result we are poorly positioned to respond.

This risk would include legislative change, for example as a result of Brexit or changes in customer or consumer behaviour impacting our business.

Mitigation

·      Strategic planning process in place to assess and understand trends across our sectors and markets with an understanding and assessment of the impact of economic and geopolitical uncertainty and legislative changes.

·      Plans in place to execute mitigation strategies.

·      Mechanisms to monitor changes and launch mitigation actions if required.

Changes since 2017

annual report

As we continue to strengthen our strategic planning process, the robustness of our scenario planning is also increasing. However, uncertainty will always be present in the external environment.

This risk is unchanged.

2 Future growth

Risk and impact

To deliver growth as communicated in our capital markets day, we are making significant investments in key growth opportunity areas. This risk considers the potential failure to deliver this growth and create value.

Mitigation

·      A clear strategy, which is continuously reviewed in the light of new information, and a business review process to track execution of that strategy.

·      Appropriate investment in R&D, capital and talent identified to support realisation of the strategy.

·      Ongoing monitoring and review of new technologies and market competitiveness.

·      Project Management Offices (PMOs) in place to ensure appropriate governance in place and plans are delivering to expected timelines.

Changes since 2017 annual report

This risk has been refined to consider our key growth areas as described in our capital markets day. This risk is therefore not directly comparable with that reported in 2016/17.

3 Maintaining our competitive advantage

Risk and impact

Failure to maintain our competitive advantage in existing markets and, as a result, not meeting customers' evolving needs as efficiently as our competitors.

Mitigation

·      Strong customer relationships, built around technical proposition, reputation in the market and a high level of technical service.

·      Regular strategy reviews to retest the external environment.

·      Embedding analysis of competitor strategy and benchmarking relative performance.

·      Strong balance sheet to support significant ongoing investment in R&D.

·      Active prioritisation of R&D and capital investment to areas of greatest opportunity.

Changes since 2017

annual report

This risk is unchanged. We will continue to evolve our position to maintain our competitive advantage.

4 Environment, health and safety

Risk and impact

In common with other similar manufacturing companies, the group operates in a challenging safety environment that is subject to numerous health, safety and environmental laws, regulations and standards.

If we fail to operate safely we could injure our people. We could breach applicable laws, regulations and standards which could adversely impact our employees, result in lost production time and could attract negative media and regulator interest.

Mitigation

·      Setting the tone from the top with senior managers leading by example.

·      Understanding of our business risk profile.

·      Systems and processes to facilitate adherence to corporate policies, procedures and standards.

·      Ongoing investment in the business to ensure that our equipment is appropriate.

·      Training and awareness activities.

·      Risk, audit and safety checks.

·      Safety culture programme and behavioural standards.

·      Investigations to determine the cause of incidents and accidents and the development of remediation plans.

·      An independent hotline for employees to report concerns.

Changes since 2017

annual report

This risk is unchanged. Health and safety continues to be our priority and we take our responsibility for environmental impact very seriously

5 Sourcing of strategic materials

Risk and impact

As JM has limited suppliers from which to source certain strategic raw materials, any significant breakdown in the supply of these materials would lead to an inability to manufacture and satisfy customer demand.

Mitigation

·      Strengthening supplier relationship management, regular reviews to discuss supplier capacity constraints.

·      Continuing to build expertise in supply chain, logistics, procurement and trade export controls.

·      Supplier quality management processes.

·      Safety stocks held in strategic locations.

·      Research and development to consider alternative materials.

·      Business continuity management, identification of critical failure risks and plans in place to manage these.

Changes since 2017

annual report

This risk is inherent in our Automotive and Health related businesses, where validated materials are utilised in our products.

Risk landscape unchanged

6 People

Risk and impact

To execute the JM strategy and deliver growth, we need to ensure that we have the breadth and depth of leadership and the appropriate capabilities.

Mitigation

·      Assessment of skills and capability requirements.

·      JM leadership values and behaviours.

·      Robust talent management processes.

·      Leadership development programmes.

·      Building high quality personal development plans in place for all leaders.

Changes since 2017

annual report

With greater clarity of our strategic priorities we have tightened this risk to focus on the skills and capabilities we need now and in the future. We are investing in our leadership and growing talent through robust succession planning to build our future leaders.

7 Security of metal and highly regulated substances

Risk and impact

On any given day, the group has significant quantities of high value precious metals or highly regulated substances on site and in transit; loss or theft due to a failure of the security management systems associated with the protection of metal or highly regulated substances may result in performance impact, reduced customer confidence and potential legal action.

Mitigation

·      Assay and other process controls.

·      Stock takes to check inventories.

·      Security awareness campaigns and training.

·      Security management systems and site security systems.

·      Audits of site security systems and process controls.

·      Use of approved carriers for transit.

·      Liaison with local law enforcement for high risk sites.

·      Insurance coverage for losses from theft or fraud.

Changes since 2017

annual report

As reflected at the half year, we saw this risk increase in response to the impact of the metal price on our balance sheet.

8 Intellectual capital management

Risk and impact

Failure to identify and protect the group's intellectual capital or failure to identify third party intellectual capital rights could lead to a loss in business advantage, loss of freedom to operate and reputational damage associated with litigation.

Mitigation

·      Business intellectual capital management strategy.

·      Ensuring we maintain a data security strategy to protect our intellectual capital.

·      Investment in cyber security (see risk 13).

·      Annual research and development and intellectual property reviews.

·      Monitoring of third party intellectual capital.

·      Use of intellectual capital lawyers to provide specialist guidance.

·      Training and awareness.

Changes since 2017

annual report

We are developing market leading intellectual capital, through intellectual property, in the battery materials and health markets, both of which are crowded and litigious. Although cyber risk to our business is considered separately, it is also recognised as a threat to this risk area. As such we are investing in our mitigating activity to manage our increased risk profile.

9 Failure of significant sites

Risk and impact

Potential risks include a disruptive event such as fire, flood or earthquake, a major incident at site level such as an explosion or other events such as geopolitical instability.

The consequences associated with this risk include the impact on our ability to manufacture goods and satisfy customer demand.

Mitigation

·      Assessment of significant sites.

·      Business impact analysis for sites covering all activities, e.g. supply chain, production, commercial etc.

·      Building plans that enable a comprehensive response to an event and annual testing.

·      Insurance of activities.

Changes since 2017

annual report

Risk landscape unchanged.

10 Ethics and compliance

Risk and impact

Failure to comply with ethical and regulatory compliance standards leading to reputational damage, to civil or criminal legal exposure for the company or for individuals or to risk of contractual breach.

Mitigation

·      Code of ethics and tone from the top set by senior leadership.

·      Use of subject matter experts, internal and external, to identify risks, set standards and provide advice and training.

·      Suite of legal compliance policies and procedures to mitigate key ethics and compliance risks.

·      Code of ethics in place supported by online training and formal acknowledgement.

·      Global network of ethics ambassadors.

·      Independent confidential speak up hotline for employees, contractors and third parties.

·      Investigation / response to all matters overseen by an Ethics Panel.

Changes since 2017

annual report

This risk is reassessed on an ongoing basis in the light of the evolving regulatory and business background. In response, we review our policies, processes and controls and amend these as appropriate.

Examples of this include General Data Protection Regulations (GDPR) and the CCO (Corporate Criminal Offence).

11 Business transition

Risk and impact

To position the group for future growth and maximise available efficiencies, we continue to evolve the way in which we run our business. This includes standardising some activities across the group, directed by strong functional leaders, in order to ensure best practice is used and maintained across the group.

The risk is that we fail to achieve the benefits of these efficiencies, lose our business agility and / or fail to maintain a very high level of customer responsiveness.

Mitigation

·      Strategic PMO in place to monitor progress and provide assurance across the workstreams.

·      Programme management in place for key initiatives, with group owners cascading plans and agreed deliverables with business leads.

·      Audit of key projects with third party assurance where appropriate.

·      Communication and employee engagement plans associated with key initiatives.

Changes since 2017

annual report

Risk landscape unchanged. A number of programmes are in place to mitigate this risk.

12 Product quality

Risk and impact

Our products are used in a wide range of applications, processes and systems. The safety and quality of these products is crucial to ensuring they operate as intended.

Should a product fail to perform as expected, we could be responsible for consumer harm or exposed to liability claims. This could lead to loss of future business, reputational damage and loss of licence to operate.

Mitigation

·      Regulatory framework for compliance in place.

·      Developing robust new product introduction process and technical change processes.

·      Developing robust manufacturing systems supported by standardised processes.

·      Monitoring and reporting of quality performance, taking corrective action where required.

·      Quality management systems in place supported by education and audit.

·      Robust contract terms and conditions.

Changes since 2017

annual report

The regulatory environment continues to tighten and our customers are experiencing greater scrutiny which has created pressure for our business

13 Applications, systems and cyber

Risk and impact

Risks that our applications and systems security is inadequate or fails to adapt to changing business requirements and / or external threats.

The impact of these may adversely affect our financial position and could harm our reputation.

Mitigation

·      Ensuring we maintain a data security strategy in line with the evolving threat.

·      Investment in information security systems, monitoring and assurance in support of our data security strategy.

·      Mapping of all at risk data and understanding of regulatory requirements.

·      Maintenance of a breach reaction plan.

Changes since 2017

annual report

The external cyber threat is increasing with more sophisticated attacks on a wide range of organisations. Against this backdrop we are investing in our IT infrastructure to support a more efficient business and, in doing so, we are increasing the global consistency and connectivity of our applications and infrastructure. As such, we have decided to elevate the risk of cyber attack from within the risk of failure of a critical site to a principal risk in its own right, to ensure greater board visibility.