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Principal Risks / Continued
Corporate Strategy
1 Political and economic Risk Uncertainty in the UK economy, whether arising from political events or otherwise, brings risks to the property market and to occupiers’ businesses. This can result in lower shareholder returns, lower asset liquidity and increased occupier failure.
Mitigation The Board considers economic
Commentary The UK economy has been more stable this year, after the volatility seen in 2022/23. However, growth has been muted and only limited growth is forecast in the medium-term. Interest rates remain high. The prospect of a general election in the UK this year is also causing uncertainty. Global events, such as the crisis in the Middle East and the continuing war in Ukraine, are also hampering economies.
Risk trend
conditions and market uncertainty when setting strategy, considering the financial strategy of the business and in making investment decisions.
2 Market cycle Risk
Mitigation The Board reviews the Group’s strategy and business objectives on a regular basis and considers whether any change is needed, in light of current and forecast market conditions.
Commentary Although interest rates rose during 2023, it appears that these have peaked and are forecast to fall later in the year. Bond yields, however, have remained relatively high and have increased since the start of 2024.
Risk trend
The property market is cyclical and returns can be volatile. There is an ongoing risk that the Company fails to react appropriately to changing market conditions, resulting in an adverse impact on shareholder returns. 3 Regulatory and tax Risk The Group could fail to comply with legal, fiscal, health and safety or regulatory matters which could lead to financial loss, reputational damage or loss of REIT status.
Mitigation The Board and senior management receive regular updates on relevant laws and regulations from the Group’s professional advisers. The Group has a Health and Safety Committee which monitors all health and safety issues, including oversight of the Property Manager. The Group is a member of the BPF and EPRA, and management attend industry briefings. Mitigation Sustainability is embedded within the Group’s business model and strategy. We have published our net zero carbon pathway and have reported on our progress this year. We have addressed the identification and assessment of climate-related risks as identified through the TCFD process.
Commentary There are no significant changes expected to the regulatory environment in which the Group operates.
Risk trend
4 Climate change resilience Risk Failure to react to climate change could lead to reputational damage, loss of income and value and being unable to attract occupiers. Physical and transitional risks associated with climate change could give rise to asset obsolescence.
Commentary Adaptation to climate change and asset resilience is an important issue for property owners. This year, the Group has developed its on-site renewable strategy, with the installation of solar panels at a number of properties.
Risk trend
Picton Property Income Limited / Annual Report 2024 44
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