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Vodafone (VOD) Risk Analysis
Risk Overview Q4, 2021
Source: the company's latest filing for the period ended Jun 23, 2021, filed Jun 23, 2021
Risk Change Over Time
No filing history is available.
- Share Price & Shareholder Rights - Risk 1TCFD disclosure
We recognise that climate change poses a number of physical (i.e. caused by the increased frequency and severity of extreme weather events) and transition-related (i.e. economic, technology or regulatory challenges related to moving to a greener economy) risks and opportunities for our business. As part of our commitment to operate ethically and sustainably, we are dedicated to understanding climate-related risks and opportunities and embedding responses to these into our business strategy and operations. We are aligning internal processes with the recommendations of the Task Force on Climate-related Financial Disclosures (‘TCFD’). The summarised progress is detailed in this section as we aim to be fully aligned by 2022. More in-depth information on our work to date on climate-related risks and opportunities, as well as further plans as we continue the TCFD programme can be found in our first standalone TCFD report. Click to read our TCFD report: investors.vodafone.com/tcfd Governance The Group External Affairs Director, a member of the Group Executive Committee, is the executive-level sponsor for the Planet agenda as part of our purpose-led strategy (pages 38-40) and has overall accountability for the climate change action within the Group. This includes providing updates to the Board on the progress towards our climate-related goals. In addition, at the 2020 AGM shareholders approved the current Remuneration Policy which incorporates our environmental, social and governance (‘ESG’) priorities in the executive long-term incentive plan. For FY21, this measure included a specific greenhouse gas reduction ambition linked to our 2025 target of reducing our emissions by 50% from the FY17 baseline. More details can be found in the Directors’ Remuneration Report on pages 82-103. Further details on how TCFD is managed at Group and in key markets are available in our TCFD Report. Strategy This year, we have made progress in understanding the current and potential climate-related impacts on our business, strategy, and financial planning. We have adopted three scenarios in line with the Bank of England’s reference climate scenarios as outlined in their consultation document released in December 2019. This year, we conducted the required assessments to quantify the business impacts of all material climaterelated risks under each scenario and over different time horizons to better understand the financial impact on our business. To continue our TCFD programme, we will use the outputs of the scenario analysis to assist us in either adjusting or introducing policies, as well as considering the available opportunities. We continue to review each material climate-related risk and opportunity and build mitigation strategies to improve the resilience across our infrastructure portfolio and our key markets. Risk management We have continued to align the climate-related risk management process with the global risk management framework. The following data sources were used for this year’s process: – Climate-change publications and data; – Relevant literature on the potential impacts of climate change on the ICT sector; – Guidance from TCFD on potential risks and opportunities; and – CDP (formerly Carbon Disclosure Project) data and disclosures from other companies in the ICT sector. We evaluated the materiality of the identified risks and opportunities by assessing their likelihood and impact using our global risk management framework. This process helped us determine the relative significance of the climate-related risks in relation to other risks. We are currently working to further embed applicable climate-related risks, controls and monitoring metrics into our risk management framework using our emerging risks process. Metrics and targets We use a wide variety of metrics to measure climate-related current and potential impact. We have been measuring and reporting on energy and carbon emissions since 2001. In addition, we have set a number of ambitious targets to manage climate-related risks and reduce our impact on the environment, such as reaching ‘net zero’ emissions across our full value chain by 2040 and purchasing 100% renewable electricity in Europe by July 2021, and all markets by 2025. We constantly review whether any additional metrics and key risk indicators can be identified to measure and manage climate-related risks, and track and act on the opportunities resulting from the impact of climate change. Material risks and opportunities Physical risks: – Damage to infrastructure caused by increasing frequency and severity of extreme weather events, including wildfires, flooding, storms – Damage to infrastructure caused by sea level rise – Interruption or reduction in the quality of our wireless services due to increased precipitation Transition risks: – Changing consumer preferences impacting our revenues and market share – Increasing energy consumption due to increased global temperatures – Changing cost of carbon impacting costs to meet Vodafone’s net zero target – Increasing risk of litigation around climate action – Increase in carbon taxation – Changes in regulation over infrastructure efficiency Opportunities: – Change in market valuation as a result of changing investor expectations with regard to climate change and Vodafone’s ESG performance – Change in the availability and cost of capital impacted by sustainability performance – Increasing consumer attractiveness and ability to meet net zero targets through increased energy efficiency of products and services
Risk Highlights Q4, 2021
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 13
- Economy & Political Environment - Risk 1Adverse political and regulatory measures
Description Adverse political and regulatory measures impacting our strategy could result in increased costs, create a competitive disadvantage or have negative impact on our return on capital employed. Mitigation activities We actively address issues openly with policy makers and regulatory authorities to find mutually acceptable ways forward. As a last resort we uphold our rights through legal means. Target tolerance To have strategies that are based on common objectives with political, policy and regulatory stakeholders to reduce the risk that our business could be undermined by unpredictable and disproportionate political and regulatory environments and interventions. Scenario Exposure to additional liabilities by regulatory authorities or if tax laws were to adversely change in the markets in which we operate. Emerging threats Regulation is becoming geographically diverse with increases in protectionist behaviours and fragmented regulation. Additionally, governments could seek to recover the costs of the COVID-19 pandemic through tax increases.
- Economy & Political Environment - Risk 2Brexit
The EU-UK Trade and Cooperation Agreement, which came into effect on 1 January 2021, provides greater clarity on the trading relationship between the UK and the EU. Vodafone’s cross-functional steering committee established early in the Brexit process identified risks and produced a comprehensive mitigation plan. Since the signing of the agreement, any outstanding risks have been managed by operational teams. The impact of the agreement, and any legal challenges to elements of the agreement, continue to be monitored, with further mitigations put in place where necessary.
- Economy & Political Environment - Risk 3Global economic disruption
Description A global economic crisis could result in reduced telco spend from businesses and consumers, as well as limit our access to financial markets and availability of liquidity, increasing our cost of capital and limiting debt financing options. Mitigation activities We have a relatively resilient business model. Our offers are competitive in the markets in which we operate. We are supporting our business customers’ efficiencies through our innovative products. We have a long average life of debt which minimises refinancing requirements, and the vast majority of our interest costs are fixed. Target tolerance Conservative management of the balance sheet to avoid potential consequences of unstable economic conditions. Access to sufficient liquidity at favourable terms. Scenario A severe contraction in economic activity leads to lower cash flow generation for the Group and disruption in global financial markets impacts our ability to refinance debt obligations as they fall due. Emerging threats Because this is an externally driven risk, the threat environment is continually changing. External factors such as the COVID-19 pandemic or a potential sovereign debt crisis could have future impacts on economic activity across our markets. The financial markets are currently experiencing high levels of volatility and sovereign debts levels have reached record levels. These could lead to a significant change in the availably and cost of financing
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