Risk Management

There are a number of potential risks and uncertainties which could have a material impact on the Group. The directors continue to develop processes for identifying, understanding and evaluating the risks faced by the organisation. The directors recognise that the management of significant risks is necessary in order that the Group achieves its objective of creating long term returns for its shareholders.

At both Group and subsidiary level, it categorises risk across four key areas: Financial, operational, organisational and external. For each key risk, each business reviews the likelihood of its occurrence, its potential effect on the company's performance and identifies management responsibility for the risk, control measures in place and any mitigating actions that are required.

Listed in the table below are examples of key risks being managed by the business and mitigating actions or controls:

Risk Area	Description	Potential impact	Mitigation
Finance	Interest rates – exposure to market rate	Increased borrowing costs	Hedging policy
	Funding – Lack of available funds	Inability to pursue capital expenditure or provide sufficient working capital	Debt capacity
	Foreign exchange - exposure to market rates	Unexpected impact on material or investment cost	Use of forward contracts

Operational	Customer satisfaction - Insufficient quality or on-time delivery	Failure to retain and grow key customers accounts	Proactive service and quality management; regular customer meetings; own fleet (UK); 3rd party service provider (Australia)
	Equipment - breakdown of key plant	Inability to produce carpet in accordance with production plan	Maintenance programme and reciprocal breakdown agreements

Organisational	People – loss of key staff	Failure to retain and develop key management	Service agreements; regular line management reviews; training & development plans
	Health & Safety - personal injury to employees	Loss of availability of employees	Designated health & safety officers, health & safety procedures, first aiders on duty

External	Regulations – breach of applicable rules	Unexpected impact on sales and profit	Internal controls, ongoing training, insurance
	Customer concentration and relationships	Loss of major customer would impact sales and profitability	No single entity has more than 25% of any individual region's revenue
	Increase in material or energy costs	Significant impact on costs and profit	Monitoring of raw material price, forward pricing agreements, proactive energy efficiency
	Market – major downturn	Inability to maintain sales growth	Geographic spread and mix of business widen channels to market