Principal Risks continued
Corporate Strategy
1 Political and economic
Risk trend
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 conditions and market uncertainty when setting strategy, considering the financial strategy of the business and in making investment decisions.
Commentary The recent and continuing conflict in Ukraine has brought further uncertainty to global markets. Although UK GDP has recovered to above pre-pandemic levels there are still risks to the economy, with inflation rising, higher energy and commodity prices and supply chain issues.
Connected KPIs A G B H C
Strategic pillar
3
1
2
2 Market cycle
Risk trend
Risk 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 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 Uncertainty in the property market has declined with the easing of restrictions. There is still a marked divergence in performance across the market sectors, due to structural differences.
Connected KPIs C D
Strategic pillar
3
1
2
Risk trend
Mitigation The Board and senior management receive regular updates on relevant laws and regulations. The Group is a member of the BPF and EPRA, and management attend industry briefings.
Commentary There are no significant changes expected to the regulatory environment in which the Group operates.
Connected KPIs C D
Strategic pillar
3
1
2
4 Climate change resilience
Risk trend
Risk Failure to react to climate change could lead to reputational damage, loss of income and value and being unable to attract occupiers. Rising materials and energy costs as a result of climate change could give rise to asset obsolescence.
Mitigation Sustainability is embedded within the Group’s business model and strategy. We have published our pathway to net zero carbon with a commitment to become carbon net zero by 2040. We have carried out an assessment of the physical and transition risks to the business under two climate scenarios. We have developed a refurbishment checklist to apply to projects ensuring environmental factors are fully considered at all stages.
Commentary Climate change and other sustainability issues are increasingly important to all stakeholders. The UK Government has set a net zero target of 2050 and has implemented other regulations, such as the Minimum Energy Efficiency Standards, which are relevant to the real estate industry. Occupiers are developing their own net zero strategies and demanding energy efficient buildings as well as more staff amenities.
Connected KPIs A J C K
Strategic pillar
3
1
2
Picton Property Income Limited Annual Report 2022
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