The occurrence of an event that may lead to a significant business, supply chain or market interruption. This includes events such as natural disasters, pandemics (including COVID-19), significant IT interruption, the loss of an operating location or geo-political events including significant changes in trading relationships such as Brexit or US/China trade developments. This results in an inability to operate or meet customer demand, a reduction in market demand or poses a health risk to employees.

The Group has proactively managed its response to the COVID-19 pandemic throughout the year including extensive health measures at operations; temporary cost control measures; ongoing review of demand and production levels, regular review of supply chain ability to supply; reviewing stock levels and responding; increased contact with remote working team members and weekly COVID-19 case reviews. More broadly the Group reviews business continuity management, IT disaster recovery, IT security as appropriate throughout the year. The Group also ensures appropriate insurance cover is maintained.

The most significant impact throughout the year has been the global impact of the COVID-19 pandemic, which was reported as a watchlist risk in the last Annual report and then added to the Group's principal risks at the half year. Given the duration, uncertainty and widespread impact of COVID-19, this risk has been updated to a broader business interruption risk.

Risk assessment

High

Demand in the building products sector is dependent on levels of activity in new construction and RMI markets. This demand is cyclical and can be unpredictable and the Group has low visibility of future orders from its customers.

Whilst there is a high degree of economic uncertainty, in previous cyclical downturns Tyman has proved effective in responding to events through:

•  monitoring of market conditions and macroeconomic trends through both annual strategic planning processes and regular performance / forecasting reviews;

•  maintaining appropriate headroom and tenor in the Group's available borrowing facilities;

•  its geographic spread providing a degree of market diversification;

•  the ability to flex the Group's cost base in line with demand.

As part of its process for assessing the ongoing viability of the Group, the Board regularly stress tests Tyman's financial and cash flow forecasts over both a short- and medium-term horizon.

Markets have been disrupted throughout the year, predominantly in H1 due to COVID-19. The majority of the Group's core markets have rebounded strongly throughout H2 with leading indicators remaining positive. There remains uncertainty over medium to long-term market conditions due to wider macroeconomic conditions.

Risk assessment

Medium

Loss of competitive advantage may adversely affect the Group financial performance or reputation in the short to medium term. The Group's ability to maintain its competitive advantage is based on a wide range of factors including the strength of the Group's brands, the breadth and depth of our portfolio, the level of quality and innovation reflected in our products, our supply chain flexibility, excellent customer service and technical support, and the depth of customer relationships we nurture, all supported by fair and competitive pricing. Failure to perform on any one of these aspects may lead to erosion of competitive advantage over time, and in turn to loss of customers to competition.

Some of the Group's markets are relatively concentrated with two or three key players, while others are highly fragmented and offer significant opportunities for consolidation and penetration.

Tyman continues to differentiate itself through its wide range of products, its focus on customer service including technical support, its geographical coverage, innovation capabilities and the reputation of its brands. The Group monitors the status of our competitive advantage through feedback from customers and close review of the market positioning of our products.

The Group aims to minimise the impact of competitve pricing pressures by competitors through margin expansion activities including continual sourcing review, innovation and value engineering, as well as building long-term relationships with its customers based on value creation, quality, service and technical support.

The overall risk from loss of competitive advantage across Tyman's global portfolio remains stable. The disruption caused by COVID-19 has put pressure on service levels across the industry. The flexibility of the Group's manufacturing footprint allowed it to respond quickly to closure of certain facilities, delivering better service levels than some competitors and enabling the Group to take market share.

Risk assessment

Medium

The Group operates internationally and is therefore exposed to transactional and translational foreign exchange movements in currencies other than sterling. In particular the Group's translated adjusted operating profit is impacted by the sterling exchange rate of the US dollar and the euro. In 2020, 74% of the Group's adjusted operating profit was derived from North American operations which are principally exposed to the US dollar. The Group is also exposed to interest rate risks on its bank borrowings.

The Group denominates a proportion of its debt in foreign currency to align its exposure to the translational balance sheet risks associated with overseas subsidiaries. Ancillary bank facilities are utilised to manage the foreign exchange transactional risks and interest rate exposure through the use of derivative financial instruments. Where possible the Group will recover the impact of adverse exchange movements on the cost of imported products and materials from customers.

Sterling exchange rates remain volatile and the Group continues to use hedging to mitigate some of this risk. This risk is regarded as stable.

Risk assessment

Medium

The Group must maintain sufficient capital and financial resources to finance its current financial obligations and fund the future needs of its growth strategy.

The Group maintains adequate cash balances and credit facilities with sufficient headroom and tenor to mitigate credit availability risk. The Group monitors forecast and actual cash flows to match the maturity profiles of financial assets and liabilities. In the medium term the Group aims to operate within its revised target leverage range of 1.0x to 1.5x adjusted EBITDA.

During the year, the Group has made good progress in achieving its new medium-term leverage target of 1.0x to 1.5x adjusted EBITDA, finishing the year at 1.1x.

Risk assessment

Low

Information and data systems are fundamental to the successful operation of Tyman's businesses. The Group's digital assets are under increasing risk from hacking, viruses and 'phishing' threats. Sensitive employee, customer, banking and other data may be stolen and distributed or used illegally. GDPR increases the cost of any failure to protect the Group's digital assets.

The Group continues to develop and test disaster recovery plans for all sites. The Group undertakes regular penetration testing of data systems and maintains up-to-date versions of software and firewalls. The Group periodically reviews and improves IT system controls.

In August 2020, a Group Head of IT was appointed with responsibility for the Group's information security policies and controls. Training and IT controls improvements have continued to be implemented during the year.

Risk assessment

High

Raw materials used in the Group's businesses include commodities that experience price volatility (such as oil derivatives, steel, aluminium and zinc). The Group's ability to meet customer demands depends on obtaining timely supplies of high-quality components and raw materials on competitive terms. Products or raw materials may become unavailable from a supplier due to events beyond the Group's control.

The Group continues to invest in and improve its sourcing and procurement capability with dedicated supply chain resources. The Group manages supply chain risk through developing strong long-term relationships with its key suppliers, regular risk assessment and audit of suppliers including logistics providers, review of make or buy strategies, dual-sourcing where appropriate and maintaining adequate safety stocks throughout the supply chain. Where commodity and other material cost increases materialise, the Group seeks to recover the incremental cost through active price management.

The Group has been successful at recovering input cost inflation and foreign exchange volatility. The Group continues to proactively manage supply chain risks, with current focus in particular on global shipping bottlenecks and UK/EU supply chain disruption.

Risk assessment

Medium

The Group's future success is substantially dependent on the continued services and performance of its senior management and its ability to continue to attract and retain highly skilled and qualified personnel at Group, divisional and site level.

The Group mitigates the risk of losing key personnel through robust succession planning, strong recruitment processes, employee engagement and retention initiatives, and long-term management incentives.

Significant attention has been paid to employee wellbeing and engagement through the COVID-19 pandemic, recognising the additional strains this has put on our workforce and in particular on management teams.

Risk assessment

Low

A lack of understanding or non-compliance with laws and regulations in any jurisdiction in which the Group operates could lead to significant financial penalty and/or severe damage to the Group's reputation. Legal and regulatory requirements can be complex and are constantly evolving, requiring ongoing monitoring and training.

Key mitigations include:

•  A comprehensive and engaging Code of Business Ethics and associated training

•  Supporting policies and standards that set out the compliance requirements in detail

•  A group-wide 'SpeakUp' whistleblowing mechanism

•  Risk framework to identify, assess and monitor business and compliance risks

•  Specific legal and compliance matters reviewed by the Group General Counsel as required

Whilst added as a Group principal risk, there is no year-on-year change in the level of unmitigated risk. A Group General Counsel was appointed for the first time in 2020. The General Counsel led a process to develop a new Code of Business Ethics which will be deployed in a series of discussion sessions to all employees in H1 2021.

Risk assessment

Low

The Group has a range of change management programmes and strategic initiatives underway to support our 'Focus, Define, Grow' Strategy. Failure to effectively execute these programmes could adversely affect the Group's ability to deliver on key elements of our strategy.

Oversight mechanisms to track the progress of all strategic programmes takes place on a monthly basis at Group and divisional levels. In addition, each programme has established project governance disciplines in place including project managers for each programme.

Whilst added as a Group principal risk there remains no year-on-year change in the level of unmitigated risk.

Risk assessment

Medium