As part of the planning and control cycle, the Executive Board has determined the principal group risks based in part on the risks that have been identified within the business units. The board has looked at how these risks affect the achievement of the strategic objectives and the materially relevant themes. The group risks are discussed in detail below, as are changes in the risk profile with respect to 2017. For the financial risks, please refer to the ‘Financial risk management’ chapter in the financial statements.
Key changes in the risk profile compared with 2017
Visible improvements have been made in the control of the risks associated with non-compliance, improvement capacity, the introduction of ERTMS, and poor operating results. Progress was made in 2018 in terms of both structure and corporate culture in the area of compliance, resulting in improved risk management. Control of risks associated with improvement capacity was improved by paying constant attention to portfolio management and by implementing changes to setups. As regards risks associated with ERTMS, various measures suggested by NS to mitigate poorer operational performance or unacceptable disruption for customers have been included in the proposed programme decisions. Regarding the operating result risks, the profit in 2018 was higher than expected and more specified savings have been included in the business plan. Control of the risks associated with investments abroad has worsened, largely due to external factors such as Brexit, deficiencies in the infrastructure, changes in passenger behaviour and delays in the delivery of new trains. This was reflected in the disappointing results for ScotRail and Greater Anglia in particular in 2018.
Looking ahead to the group risks in the future
The overview below shows the main group risks classified according to the six risk themes that NS uses. The biggest risks for the group in 2018 are found in four of the six risk themes. The overview also shows the trends in the control of these risks.
Risk theme | Risk | Trend |
1. Safety
Averse | Safety: NS not fulfilling its duty in cases of major safety incidents with passengers and/or staff | |
2. Compliance
Averse | Non-compliance: Not complying with legislation and regulations or exceeding applicable norms and values. | |
3. Operations
Averse | HSL South: The risk that the performance delivered in 2018 is not in line with the agreements due to crowded trains, the complexity of HSL South and/or an inability to implement measures. | |
| | Infrastructure: lack of infrastructure capacity and quality improvement backlog | |
| | Introduction of ERTMS: disruptions to the implementation process cause problems for customers | |
| | IT reliability: not meeting the operational and security requirements for IT systems or of legislation and regulations | |
| | Capacity for improvement: providing improvements too late or with insufficient results | |
4. Finance
Averse | Insufficient operating results: inadequate operating results and not enough cash flow generated to let the plans be financed | |
| | Market regulation: losing parts of the business activities and the contributions they make to the result | |
| | NS investments abroad: insufficient operating results from foreign investments, e.g. because of the effects of Brexit and shortcomings in the infrastructure | |
5. Reputation
Averse | This risk is associated with all the major risks listed above. | |
6 Sustainability
Tolerant | No major risks for the company have been reported within the ‘Sustainability’ theme. | |
| Trend improved | |
| Trend unchanged | |
| Trend worsened | |