Key Objectives and Principle Integrated Risks

 

PRINCIPAL INTEGRATED RISKS

Remgro’s four principal risks are summarised below. A more comprehensive analysis of our risk management process is provided in the Risk and Opportunities Management Report, while our main financial risks, including those relating to the global economy and currencies, are disclosed in the CFO’s Report. The impact of the Covid-19 pandemic on external risk and opportunity along with the implications for Remgro’s Six Capitals and risk appetite is also specifically addressed in the Risk and Opportunities Management Report here.

		RISK/OPPORTUNITY		CONTEXT
1		South African country risk due to sustained social unrest, low economic growth, the increasing current account and budget deficits and the resultant impact of lowering sovereign credit ratings. During the year under review these were further exacerbated by the global Covid-19 pandemic. In particular, regulatory response and socio-economic impacts, net of fiscal relief measures, impeded growth scenarios.		The boards of investee companies are increasingly directing focus to addressing pressing issues such as foreign currency risk, social instability, power supply risk, water scarcity, legislation and regulatory aspects and increased crime, by means of strategic and/or control processes. Increased emphasis on relationship capital and stakeholder interaction.
2		Inability of boards of investee companies to identify and respond to disruptive technology risks timeously and opportunities or similar political, environmental, social, regulatory or economic developments in their markets. Inadequate capacity to innovate can impede competitive ability.		The sustainability of investee companies is dependent upon their ability to identify and respond to market trends and other disruptive impacts in the markets or their business model, which can materially impact their businesses. Optimising the utilisation of human, intellectual, manufactured and relationship capital.
3		The destruction of value due to poor management of existing investments, including management at investee company level. Non-identification and assessment of suitable investment opportunities.		The successful management of investments is dependent upon a proper understanding of the businesses of the investee companies and also on identifying the appropriate Remgro executives that will represent it on the boards of the investee companies. Creating “Alpha” requires effective organic growth and judicious corporate investments.
4		Remgro seeks suitable investment opportunities, taking cognisance of its risk appetite and available investment capacity to give effect to its investment mandate and value creation strategy.		During the year Remgro unbundled its interest in RMB Holdings Limited. This, along with the financial impact of Covid-19 on various investees and potential investment opportunities required a reflection on risk appetite. Remgro has various projects focused on, inter alia, business resilience, stakeholder relations, human capital enhancement and innovation.