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Imperial Brands (IMBBY) Risk Analysis
Risk Overview Q4, 2021
Source: the company's latest filing for the period ended May 18, 2021, filed Aug 01, 2021
Risk Change Over Time
No filing history is available.
- Debt & Financing - Risk 1Management of liquidity and financing requirements
Failure to manage liquidity and financing requirements resulting in going concern or viability concerns. • Successful long-term funding initiatives completed in-year • Increased focus of funders on ESG-related matters, and disclosures, notably in relation to sector • Further deleveraging of the business has occurred during the year, and continues to be a key area of focus Failure to maintain cash flows could impact the Group’s ability to pay down debt, impacting covenants, credit ratings, bank bonds and investor confidence • Reduced ability to invest in strategic and commercial business initiatives • A fall in certain of our credit ratings would raise the cost of our existing committed funding and would be likely to raise the cost of future funding, and affect our ability to raise debt • Failure of a financial counterparty (e.g., when holding cash deposits and/ or derivatives) is likely to result in a financial and cash impact • Funding requirements and near-term debt maturities formally evaluated at least semi-annually and signed-off by the Audit Committee as part of Going Concern and Viability process • Full review of funding requirements, current maturities and options available to the Group • Revolver funding implemented, providing the Group with innovative means of managing cash requirements • Strong focus on cash generation supported by Group guidance and governance processes • Appropriate authority and accountability in place for investments and capital expenditure, including achievement of required return criteria • Cash flows, financing requirements and key rating agency metrics are regularly forecast and updated in line with performance and expectations to manage future financing needs and optimise cost and availability • The Treasury function operates in accordance with the terms of reference and delegated authorities set out by the Board, with independent oversight from the Treasury Committee • Maintaining an efficient capital structure allows the Group to maintain an efficient cost of capital to support and generate additional returns on investments and capital outlays/expenditure • The high cash conversion that the Group has delivered/ delivers, provides the Board/ management with cash flexibility and optionality • Effective communication of ESG strategy and initiatives highlights the Group’s sustainability agenda and meets stakeholder expectations • The Group has investment grade credit ratings from the main credit rating agencies, which supports it in accessing financing in the global debt capital markets
- Corporate Activity and Growth - Risk 2Failure to ensure expected benefits of strategic transformation programme
Failure to deliver effective organisational change which ensures a sustainable operating model, aligned to delivery of the Group strategy. Failure to realise expected benefits of change initiatives or unexpected outcomes, resulting in short-term inefficiencies and pressure to achieve objectives. • Group-wide organisational change initiatives have commenced. The scale of this change has inherent risks associated with programmes of this nature • Change management structures and governance implemented at both Group and local level to best support change initiatives • Failure to meet project timelines or key milestones can result in increased implementation cost and opportunity costs • Budgeted savings/returns may not be achieved in key strategic projects • Non-achievement of strategic objectives could result in loss of investor and market confidence • Reporting of incorrect or unsubstantiated benefits realisation • Failure to consider and effectively manage localised impacts of strategic change could impact short-term operational performance • Robust business case approval process in place with wide stakeholder input • Appropriate steering committee structure and reporting in place, with cross-functional involvement • Project benefits realisation verified at key project milestones • Resource requirements constantly reviewed, with specialist project management resource employed • Local project management teams in place to support change programme • Successful delivery of key organisational change projects improves the efficiency and effectiveness of the Group, better enabling it to achieve its strategic goals • Identification of opportunities in development of strategy and execution of “must win battles” in priority markets
- Corporate Activity and Growth - Risk 3Inability to develop, execute and communicate an effective esg strategy in line with expectations of relevant stakeholders
Failure to align the development, execution and communication of the Group’s ESG strategy to external expectations. The pace of change in external requirements and expectations is significant, with greater focus on integrity of reporting, and comparison cross-industry and between sector peers. • Increased focus on ESG related matters from investors and external stakeholders • Increased reporting requirements exist, notably for climate and environmental-related risks, with the Group committed to actions to reduce its impact on the environment (e.g., TCFD) • As with all multinationals the Group manages increasing climatic impacts across its global footprint • Strategy to support investment in the NGP business to offer adult smokers potentially reduced risk products has been communicated and included within the Group’s ESG agenda • Recruitment of additional specialist capabilities including experienced global ESG lead mpact Mitigation Opportunity INABILITY TO DEVELOP, EXECUTE AND COMMUNICATE AN EFFECTIVE ESG STRATEGY IN LINE WITH EXPECTATIONS OF RELEVANT STAKEHOLDERS Failure to align the development, execution and communication of the Group’s ESG strategy to external expectations. The pace of change in external requirements and expectations is significant, with greater focus on integrity of reporting, and comparison cross-industry and between sector peers. • Increased focus on ESG related matters from investors and external stakeholders • Increased reporting requirements exist, notably for climate and environmental-related risks, with the Group committed to actions to reduce its impact on the environment (e.g., TCFD) • As with all multinationals the Group manages increasing climatic impacts across its global footprint • Strategy to support investment in the NGP business to offer adult smokers potentially reduced risk products has been communicated and included within the Group’s ESG agenda • Recruitment of additional specialist capabilities including experienced global ESG lead • Should the Group fail to meet expectations, or to ensure at least parity with industry peers, this may impact its reputation as a sustainable business and adversely affect stakeholder sentiment • Failure to comply with key ESG-related regulation, including environmental and human rights legislation would result in a material impact to the Group, including, but not limited to, financial penalties • Reputational damage may result from allegations, even where no wrongdoing has occurred • Employee engagement may be adversely affected as a result of any perception that the Group is acting in an inappropriate manner • ESG strategy, agenda and communications, including ongoing development and materiality assessment, aligned to strategic goals and targets • ESG Committee with executive representation in place to provide oversight • Investor and stakeholder presentations ensure alignment with expectations and transparency on progress of Group actions • TCFD disclosures and related actions facilitate robust reporting and control frameworks (TCFD overview page 63) • Responsibility and accountability for identification of ESG-related risks understood by the Company and continue to be embedded across the business • Policy, training, guidance and effective governance provided by both internal and external subject matter experts • Positive ESG strategies and communications can increase the attractiveness of the organisation to new joiners, and increase the engagement of existing employees • Sustainability is an increasing factor in customer and consumer choices across FMCG sectors • Sustainability initiatives can reduce long-term financial costs through greater efficiency and reduced waste • Investor and wider stakeholder sentiment increase toward companies with successful and proven ESG strategies and initiatives
Risk Highlights Q4, 2021
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 12
- Debt & Financing - Risk 1AddedManagement of liquidity and financing requirements
Failure to manage liquidity and financing requirements resulting in going concern or viability concerns. • Successful long-term funding initiatives completed in-year • Increased focus of funders on ESG-related matters, and disclosures, notably in relation to sector • Further deleveraging of the business has occurred during the year, and continues to be a key area of focus Failure to maintain cash flows could impact the Group’s ability to pay down debt, impacting covenants, credit ratings, bank bonds and investor confidence • Reduced ability to invest in strategic and commercial business initiatives • A fall in certain of our credit ratings would raise the cost of our existing committed funding and would be likely to raise the cost of future funding, and affect our ability to raise debt • Failure of a financial counterparty (e.g., when holding cash deposits and/ or derivatives) is likely to result in a financial and cash impact • Funding requirements and near-term debt maturities formally evaluated at least semi-annually and signed-off by the Audit Committee as part of Going Concern and Viability process • Full review of funding requirements, current maturities and options available to the Group • Revolver funding implemented, providing the Group with innovative means of managing cash requirements • Strong focus on cash generation supported by Group guidance and governance processes • Appropriate authority and accountability in place for investments and capital expenditure, including achievement of required return criteria • Cash flows, financing requirements and key rating agency metrics are regularly forecast and updated in line with performance and expectations to manage future financing needs and optimise cost and availability • The Treasury function operates in accordance with the terms of reference and delegated authorities set out by the Board, with independent oversight from the Treasury Committee • Maintaining an efficient capital structure allows the Group to maintain an efficient cost of capital to support and generate additional returns on investments and capital outlays/expenditure • The high cash conversion that the Group has delivered/ delivers, provides the Board/ management with cash flexibility and optionality • Effective communication of ESG strategy and initiatives highlights the Group’s sustainability agenda and meets stakeholder expectations • The Group has investment grade credit ratings from the main credit rating agencies, which supports it in accessing financing in the global debt capital markets
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