Picton Property Income Limited Annual Report 2023

Strategic Report

Governance

Financial Statements

Additional Information

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: ‒ high inflation remaining in the UK economy, causing further interest rate rises and an adverse impact on asset values; ‒ further political uncertainty in the lead-up to a general election in the UK;

‒ the increasing importance of sustainability issues to all stakeholders; ‒ changing demand for commercial space, as businesses reassess their requirements in the light of more flexible working, advances in AI technology and employee wellbeing; ‒ changes in regulations are increasing environmental standards and property owners must keep pace to avoid the risk of stranded assets; and ‒ cyber security, with an increased prevalence of ransomware attacks and greater vulnerability of systems with home working.

Climate-related risks Last year the Board carried out an assessment of the physical and transition risks most relevant to the business, and undertook a review of its procedures for identifying and managing those risks. The recommendations arising from the review have been implemented this year. The mitigating actions that have been carried out in respect of climate-related risks are described in the Task Force on Climate-related Financial Disclosures section of the report, together with more detail on the risk assessment and modelling undertaken.

Read more on pages 47–55

Risk management framework

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

Corporate Strategy

Property

6

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

3

7

6

2

1

5

5

8

4 1

4

8

2

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

Audit and Risk Committee – Recommends risk

11

11

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

9

10

Financial

Operational

Principal risk likelihood Estimated risk of occurrence within next five years

High Medium Low

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

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

Read more on pages 44–46

 Picton Property Income Limited  Annual Report 2023

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