Picton Property Income Limited Annual Report 2023

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 Economic uncertainty has risen over the year, although is less than in the immediate aftermath of the September mini-budget. Interest rates have risen significantly and inflation remains at a high level. The cost of living crisis is still evident and industrial disputes, particularly in the public sector, are causing further disruption. The UK economy is not forecast to grow by any meaningful amount over the next year. The war in Ukraine continues to impact global politics and economics.

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 Economic factors have caused more volatility in the property market this year. Interest rates and bond yields have risen, with a consequent adverse impact on property yields and valuations, particularly towards the end of 2022.

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 pathway to net zero carbon 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. Rising materials and energy costs as a result of climate change could give rise to asset obsolescence.

Commentary Climate change resilience remains a key issue for property owners. The increasing cost of energy has raised the importance of building efficiency for occupiers. On-site renewables, such as solar panels, are increasingly being included in refurbishment projects.

Risk trend

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Picton Property Income Limited Annual Report 2023

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