Picton Property Income Limited Annual Report 2022

Strategic Report

Financial Statements

Additional Information

Governance

Covid-19 impacts The impacts of the Covid-19 pandemic have lessened over the past year as restrictions have been lifted and the UK economy has largely recovered, with GDP above pre- pandemic levels. However, the longer-term implications may be felt for some time. Government borrowing has increased significantly during the pandemic which could lead to higher taxes and lower growth. Other consequences of the pandemic, such as flexible working and increased online retailing, are unlikely to reverse. Climate-related risks The Board has carried out an assessment of the physical and transition risks most relevant to the business, and undertaken a review of its procedures for identifying and managing those risks. This review made a number of recommendations which will be implemented during the coming year. More detail on the risk assessment and scenario modelling is set out in the Task Force for Climate- related Financial Disclosures section of the Report. Emerging risks During the year the Board has considered themes where emerging risks or disrupting events may impact the business. These may arise from behavioural changes, political or regulatory changes, advances in technology, environmental factors, economic conditions or demographic changes. All emerging risks are reviewed as part of the ongoing risk management process. The principal emerging risks have been identified to be: ‒ rising inflation in the UK economy, caused by higher energy, food and commodity prices; ‒ the legacy effects of the pandemic, which has heightened awareness of social injustice and global inequality, and the pressure on businesses to create positive societal value; ‒ cyber security, heightened by the disruption during the pandemic and greater home working; ‒ the increasing importance of sustainability issues to all stakeholders; ‒ office working is evolving into a more flexible model, making businesses reassess their space requirements; ‒ online retailing continues to reduce the demand for physical space in the retail market; ‒ advances in technology are impacting both the real estate sector, in areas such as smart building systems and electric vehicle charging, and also occupiers’ businesses, changing their space requirements; ‒ changes in regulations are increasing environmental standards and property owners must keep pace to avoid the risk of stranded assets. These emerging risks are covered in more detail in the Marketplace section of the Report.

Risk management framework

Board – Has overall responsibility for risk management – Determines business model – Considers risk appetite

Executive Committee – Implements strategy and risk policy – Identifies and assesses risks – Carries out risk mitigation

Audit and Risk Committee – Recommends risk

management policy – Reviews internal controls – Reviews detailed risk matrix – Considers principal and emerging risks

Management Committees – Review specific transaction risks – Consider forthcoming legislation – Review operational risk

The matrix below illustrates the assessment of the impact and likelihood of each of the principal risks.

Corporate Strategy

Property

Financial

Operational

Principal risk likelihood Estimated risk of occurrence within next five years

High  Medium  Low 

0% to 10%  10% to 33%  Greater than 33% 