TIDMTCAP
RNS Number : 6690V
TP ICAP PLC
09 April 2019
9 April 2019
TP ICAP plc 2018 Annual Report and Notice of 2019 Annual General
Meeting
TP ICAP plc (the 'Company') has today published its 2018 Annual
Report and circular to shareholders incorporating the Notice of the
2019 Annual General Meeting. Both documents can be viewed at or
downloaded from www.tpicap.com/investors.
Copies of both these documents, together with the Form of Proxy,
will shortly be available for inspection via the National Storage
Mechanism at www.morningstar.co.uk/uk/nsm.do.
The following disclosures comply with Disclosure and
Transparency Rule 6.3.5. The Company's full year results
announcement on 19 March 2019 contained a management report and
condensed financial information derived from the Group's audited
statutory accounts. A description of risks and uncertainties,
details of related party transactions and the Directors'
Responsibility Statement, extracted in full unedited text from the
2018 Annual Report, are set out below. This information should be
read in conjunction with, and not as a substitute for, reading the
full 2018 Annual Report. Page numbers and notes in the following
appendices refer to page numbers and notes in the Company's 2018
Annual Report.
Appendix A: Principal Risks
The Board has conducted a robust assessment of the principal
risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity.
In undertaking this assessment on behalf of the Board, the Risk
Committee has considered a wide range of information, including
regulatory requirements, reports provided by the Group Risk
function, presentations by senior management and the findings from
the Group's risk assessment processes.
Risk
Adverse change to regulatory framework
Description
The Group is exposed to the risk of a fundamental change to the
regulatory framework which has a material adverse impact on its
business and economic model.
Potential impact
> Reduction in broking activity
> Reduced earnings and profitability
> Material change in applicable regulatory rules and
their interpretation including loss of consolidation
waiver
Change in risk exposure since 2017
No change
Mitigation
> Close monitoring of regulatory developments
> Active involvement in consultation and rule setting
processes
Key risk indicator
> Key regulatory changes
> Status of regulatory change initiatives
Related strategic objectives
> Build and sustain our technology offering
> Enhance our operational excellence
> Diversify customers and services
Risk
Deterioration in the commercial environment
Description
The risk that due to adverse macro-economic conditions or
geopolitical developments, market activity is suppressed leading to
reduced trading volumes.
The impact of Brexit is addressed separately below.
Potential impact
> Reduction in broking activity
> Pressure on brokerage
> Reduced earnings and profitability
Change in risk exposure since 2017
No change
Mitigation
> Clearly defined business development strategy to maintain
geographical and product diversification
Key risk indicator
> Operating profit
> Revenues by region
> Trade volumes
> Revenue forecast
> Stress testing scenario outcomes
Related strategic objectives
> Diversify customers and services
Risk
The impact of Brexit
Description
The risk that Brexit leads to a macro-economic downturn and a
consequential reduction in trading
volumes and revenue.
The risk that the Group is unable to obtain the necessary
permissions and implement an appropriate legal structure to
preserve cross-border broking between UK and EU clients, resulting
in a fragmentation of liquidity and reduced trading volumes.
Potential impact
> Reduction in broking activity
> Loss of market share
> Reduced earnings and profitability
Change in risk exposure since 2017
Increase
Mitigation
> Adoption of a Brexit plan which would accommodate a range
of potential Brexit scenarios (including a 'no deal Brexit')
> Incorporation of a new EU subsidiary to hold EU-based business
> Proactive engagement with European regulators and clients
Key risk indicator
> Key regulatory changes
> Brexit plan tracking
Related strategic objectives
> Build and sustain our technology offering
> Enhance our operational excellence
> Diversify customers and services
Risk
Failure to respond to client requirements
Description
The risk that the Group fails to respond to rapidly changing
customer requirements, including the demand for enhanced electronic
broking solutions for certain asset classes.
Potential impact
> Loss of market share
> Reduced earnings and profitability
Change in risk exposure since 2017
No change
Mitigation
> Proactive engagement with clients through customer
relationship management process
> Clearly defined business development strategy which
continues to enhance the Group's service offering
Key risk indicator
> Operating profit
> Trade volumes
> Revenues by region
> New business initiatives
> Client satisfaction surveys
Related strategic objectives
> Build and sustain our technology offering
> Enhance our operational excellence
> Diversify customers and services
Risk
Failure to deliver integration
Description
The risk that the Group fails to achieve the targeted
operational efficiencies due to a failure to successfully integrate
the ICAP business, or that the cost to complete the integration
programme is too high.
Potential impact
> Double running costs leading to reduced profitability
> Lack of investor confidence
Change in risk exposure since 2017
Decrease
Mitigation
> Clearly defined integration plan
> Robust integration governance structure
> Management of synergies released and monitoring of
integration costs
Key risk indicator
> Integration plan tracking (status)
Related strategic objectives
> Build and sustain our technology offering
> Enhance our operational excellence
> Develop our people
> Diversify customers and services
Risk
Failure to retain and recruit talent
Description
The Group operates in a highly competitive market and is exposed
to the risk that it fails to retain or recruit the employees
required to deliver its strategy.
Potential impact
> Potential loss of expertise and client relationships
> Increase in employee costs as the Group seeks to counter
aggressive competitor activity
Change in risk exposure since 2017
No change
Mitigation
> Proactive management of broker contracts
> Competitive remuneration and performance management
> Early Careers Programme
Key risk indicator
> Staff turnover
> Revenue per broker
> Performance appraisal ratings
Related strategic objectives
> Develop our people
Risk
Cyber-security and data protection
Description
The risk that the Group fails to adequately protect itself
against cyber-attack and/or to adequately secure the data it holds,
resulting in loss of operability as well as potential loss of
critical business or client data.
Potential impact
> Loss of revenue
> Remediation costs
> Damage to reputation
> Regulatory sanctions
> Payment of damages/compensation
Change in risk exposure since 2017
No change
Mitigation
> Monitor and assess the evolving, and increasingly sophisticated,
cyber-threat landscape
> Ensure the Group's control framework to address the
potential cyber-threats to which it is exposed is appropriate
Key risk indicator
> System outages
> Data loss events
> Cyber-security events/losses
> Vulnerability monitoring
Related strategic objectives
> Build and sustain our technology offering
Risk
Operational failure
Description
The Group is exposed to operational risk in nearly every facet
of its role as an interdealer broker, including from its dependence
on:
> the accurate execution of a large number of processes,
including those required to execute, clear and settle
trades; and
> a complex IT infrastructure.
Potential impact
> Financial loss which could, in extreme cases, impact
the Group's solvency and liquidity
> Damage to the Group's reputation as a reliable market
intermediary
Change in risk exposure since 2017
No change
Mitigation
> Appropriate control framework to manage operational
risk within risk appetite
> Reverse stress tests to identify key risks that could
undermine the Group's viability
> Effective business continuity plans and capability
> Incident and crisis management plans
Key risk indicator
> Risk events
> Execution failure
> Settlement fails
> Margin calls
Related strategic objectives
> Build and sustain our technology offering
> Enhance our operational excellence
Risk
Failure to protect proprietary data
Description
The risk that the Group fails to protect unauthorised
dissemination of Group's proprietary data leading to loss of
potential revenue streams.
Potential impact
> Failure to achieve future revenue growth targets due
to non-contractual use of our market information
> Damage to reputation
Change in risk exposure since 2017
New
Mitigation
> Periodic audit of licences
> Appropriate legal remedies incorporated within licence
agreements
Key risk indicator
> Coverage against defined data audit plan
> Data audit findings
Related strategic objectives
> Diversify customers and services
Risk
Breach of legal and regulatory requirements
Description
The Group operates in a highly regulated environment and is
subject to the laws and regulatory frameworks of numerous
jurisdictions.
Failure to comply with applicable legal and regulatory
requirements could result in enforcement
action being taken.
See Notes 24 and 33 to the Consolidated Financial
Statements.
Potential impact
> Regulatory and legal enforcement action including censure,
fines or loss of operating licence
> Severe damage to reputation
Change in risk exposure since 2017
No change
Mitigation
> Group compliance function to ensure that staff are
aware of regulatory requirements, and for monitoring
compliance with these requirements
> Cultural framework to implement the Group's core values
and principles
> Comprehensive compliance training programme
Key risk indicator
> Policy breaches
> Regulatory and legal enforcement action
Related strategic objectives
> Enhance our operational excellence
Risk
Counterparty credit risk
Description
The Group is exposed to counterparty credit risk arising from
brokerage receivables owed by clients, unsettled Matched Principal
trades held with clients and from cash deposit counterparties.
Potential impact
> Financial loss which could, in extreme cases, impact
the Group's solvency and liquidity
Change in risk exposure since 2017
No change
Mitigation
> Counterparty exposures managed against threshold, calibrated
to reflect counterparty creditworthiness
> Exposure monitoring and reporting by independent credit
risk function
> Exposure concentration limits to prevent excessive
exposure to one institution
Key risk indicator
> Matched Principal trade exposure
> Name Passing receivables
> Group cash peak exposure
Related strategic objectives
> Enhance our operational excellence
> Diversify customers and services
Risk
FX exposure
Description
There is a risk that the Group suffers loss as a result of a
movement in FX rates whether through transaction risk or
translation risk.
Potential impact
> Financial loss which could, in extreme cases, impact
the Group's solvency and liquidity
Change in risk exposure since 2017
New
Mitigation
> Ongoing monitoring of Group's FX positions
Key risk indicator
> Net currency position
> FX exposure
Related strategic objectives
> Enhance our operational excellence
Risk
Liquidity risk
Description
The Group is exposed to potential margin calls from clearing
houses and correspondent clearers. The Group also faces liquidity
risk through being required to fund Matched Principal trades which
fail to settle on settlement date.
Potential impact
> Reduction in the Group's liquidity resources which
could, in extreme cases, impact the Group's liquidity
Change in risk exposure since 2017
No change
Mitigation
> Broking limits that restrict potential margin exposure
> Group maintains significant cash resources in each
operating centre to ensure immediate access to funds
> Committed GBP270m revolving credit facility ('RCF')
Key risk indicator
> Unplanned intra-Group funding calls
> RCF draw-down
> Level of margin call
Related strategic objectives
> Enhance our operational excellence
> Diversify customers and services
Appendix B: Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this Note.
The total amounts owed to and from associates and joint ventures
at 31 December 2018, which also represent the value of transactions
during the year, are set out below:
Amounts owed by related Amounts owed to related
parties parties
2018 2017 2018 2017
GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------
Associates 3 3 - -
Joint Ventures 1 1 (2) (2)
------------ ------------ ------------ ------------
The amounts outstanding are unsecured and will be settled in
cash. No guarantees have been given or received. No provisions have
been made for doubtful debts in respect of the amounts owed by
related parties.
Directors
Costs in respect of the Directors who were the key management
personnel of the Group during the year are set out below in
aggregate for each of the categories specified in IAS 24 'Related
Party Disclosures'. Further information about the individual
Directors is provided in the audited part of the Report on
Directors' Remuneration on pages 85 to 93.
2018 2017
GBPm GBPm
Short term benefits 3 4
------ ------
Social security costs - 1
------ ------
3 5
------ ------
Appendix C: Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
> the Financial Statements, prepared in accordance with
the relevant financial reporting framework, give a
true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the
undertakings included in the consolidation taken as
a whole;
> the Strategic report includes a fair review of the
development and performance of the business and the
position of the Company and the undertakings included
in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties
that they face; and
> the Annual Report and Financial Statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company's position, performance, business
model and strategy.
Enquiries:
Richard Cordeschi, Group Company Secretary
TP ICAP plc
Direct: +44 (0)20 7200 7331
email: richard.cordeschi@tpicap.com
Media
William Baldwin-Charles, Media Relations & Internal
Communications Director
TP ICAP plc
Direct: +44 (0)20 7200 7124
email: william.baldwin-charles@tpiap.com
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END
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