Principal risks and uncertainties

The Board is ultimately responsible for the management of risk in the Group.

Managing risk during 2020

The Board and Audit Committee continue to recognise the importance of risk management in achieving the Group’s strategic objectives. Keeping risk management integral to the operation of our businesses is a priority, requiring a continuous scan of all threats and opportunities. Our risk management processes aim to anticipate risks before they impact upon our activities to ensure that we are in the best place to mitigate those risks, and recognise the opportunities they may bring in a competitive marketplace. For all our key risks, we identify the key mitigating controls and their ownership. Our assurance activities are focused upon those controls so we can continually gauge their effectiveness.

Within that context, the Group is disappointed to report significant separately disclosed items in both 2019 and 2020, the details of which are described in the Financial review as set out on pages 22 to 24. The items relate to strategic initiatives that were either not executed successfully or were severely impacted by the global pandemic and energy price changes in the first half of 2020. The Board has carried out a detailed cause and effect review and combined with the strategic review, a more rigorous approach to the markets the Group seeks to provide services into and the capital allocated to those activities has been implemented.

Pandemic risk

During the extraordinary circumstances created by the pandemic the Company needed a robust response from all areas of the Group. As events and Government policy have progressed, the Group has responded quickly to keep our people safe; to preserve as many jobs as possible, and to protect the interests of the Company and its stakeholders.

The pandemic continues to bring significant uncertainty to the operation of the Group, and further lockdowns and restrictions are possible. Nonetheless the Group continues to demonstrate sound control and resilience, with people working from home where possible and those not able to work from home working in operational environments adapted in accordance with Government guidelines and best practice, and with those needing to travel to deliver for our customers finding ways to do so safely and effectively.

Climate change

During 2020 the Group has been impacted by volatile energy prices. Following its analysis of risk and opportunity relating to climate change, the Board expects that oil and gas will remain an important part of the energy mix for many years to come. However the Board considers both the transition from fossil fuels and the matching growth of the renewables market as part of a lower carbon environment represent a risk and an opportunity for the Group. The risk is mitigated by the continuing strategic diversification of the Group into new markets by supporting the energy transition, which also provides growth opportunities.

Nature Potential impact  Mitigation 

Group trading companies may experience an adverse operational incident or failure to maintain appropriate levels of health and safety.

  • The health and safety of our workforce and others could be impacted by our operations
  • The Group's reputation could potentially suffer if there was a major accident or health and safety issue
  • Claims and regulatory action may be taken against the Company or the affected business
  • First item on Plc and business board agendas
  • Policy and training
  • Group safety forum
  • Insurance 

There have been a number of safety incidents in 2020 including one fatality. Whilst thorough investigations show that primary responsibility for the fatality is not with the Group, it is a sobering event and gives added impetus to our own policies and processes. Executive management has continued to increase the level of awareness and focus on HSE, including mental health. The net risk has increased in 2020 due to the global pandemic and every effort is being made to mitigate that risk and to learn from and avoid the incidents in 2020, with greater diligence and awareness in this area


Increase. In light of the environments in which the Group companies work, health and safety is an inherent risk. There has been an increased focus in this area in the last 12 months


Operating in competitive markets there is an increased opportunity to provide differentiation to our customers by our strong commitment to health and safety, thereby building long-term trust


Nature: Potential impact: Mitigation:

The Group may experience loss or harm related to technical infrastructure or the use of technology within the Group

Cyber-attacks could result in financial and reputational damage by way of significant interruption to business systems. Phishing could result in financial and reputational damage by way of theft or fraud

  • Introduction of new Group-wide operating system with enhanced security, alongside infrastructure and software updates to existing systems
  • Regular review of IT security issues, including penetration testing
  • Enhanced cyber awareness training and regular briefings

Following a cyber security incident in November 2019, a number of infrastructure and security improvements were implemented. A rollout of Office 365 was fast-tracked, providing additional security improvements and further investment in specialist cyber security software was approved for implementation early in 2021


Unchanged. The Group is reliant on its systems in order to operate effectively and has invested in the last year to enhance security. The external threat is continually adapting and increasing, notwithstanding the mitigating activities. A combination of new software and training will bring extra vigilance

Upgraded IT systems increase security, but also flexibility, facilitating secure working while travelling or from home


Nature: Potential impact: Mitigation:

The Group operates in overseas emerging markets and key growth economies with fluctuating legislative restrictions, embargoes, sanctions and exchange controls, often undertaken in association with local joint venture partners

Those operations may expose the Group to increased risk of governance and compliance issues. Any significant failure to comply with laws or regulations could lead to penalties and other financial liabilities, as well as reputational issues. Where there is a jurisdictional requirement for local investment or representation, the Group’s ability to continue business in that jurisdiction could be adversely impacted from an ethical or legal perspective

  • Limits of authority and other internal corporate governance
  • Risk tracking of JVs, agents and other third party relationships, including use of bespoke web-based platform
  • Policies and training
  • Corporate structuring of relationships, using external local legal advice
  • Internal audit operating overseas using co-sourced PwC resources to leverage advantages of working in local language and consistent with local law/regulation

Operating in challenging conditions in developing markets remains a key part of our strategy. This has been made more challenging due to worldwide Government-imposed travel restrictions in response to Covid-19, making control and communications in relation to our operations in developing markets more challenging


Decreased. Improved commercial and financial controls, project management and on-going improvements in risk management in this area decrease the risk of one-off charges experienced during 2020

The Group’s ability to operate in emerging markets for global customers offers an increased opportunity to be differentiated from our competitors


Nature: Potential impact: Mitigation:

The Group operates in industries which may be adversely impacted due to the change in energy mix. The Group is committed to minimising the impact of its operations on climate change

The Group may suffer operational impacts of extreme weather events, as well as potential changes in technologies, markets and regulation in response to climate change which could increase costs, challenge the viability of Group services or affect asset values. The Group is also conscious of the need to reduce its impact on the climate, including its emission of greenhouse gases

  • Continuing the Group's end markets and geographical diversity
  • Initiatives to reduce the Group's emissions and other impacts on the environment

The Board is conscious of the risks and opportunities created by climate change. During 2020, the Group’s businesses have been impacted by a combination of volatile oil prices and Covid-19. Whilst it is expected that oil and gas will remain an important part of the energy mix for many years to come, the transition to a lower carbon environment represent both a risk and an opportunity for the Group. The risk is mitigated by the continuing diversification of the Group into new markets by supporting the energy transition which also provides growth opportunities

New and increasing. The impact of Covid-19 may accelerate the changing energy mix and individuals’ travel and work patterns
The Board believes that the global market for renewable energy will continue to grow, and therefore sees the energy markets as an opportunity


Nature: Potential impact: Mitigation:

The Group operates in markets where larger project based contracts may seek to pass risk down the supply chain

Through its growth and diversification into new markets and geographies, the Group may be exposed to increased contractual risks, which could result in financial impact caused by late payment, or cost overruns, increased claims and litigation, and/or exposure to non UK legal jurisdictional uncertainty

  • Internal contract management governance, including policy and training
  • Internal and external specialist legal support
  • Appropriate balance of risk and reward in contract
  • Targeting increased contract management skills
As the Group continues to grow, contractual risk remains significant, as the potential liabilities under contracts increase, and customers attempt to pass more risk down the supply chain
As the Group pursues its strategy of increased diversification, contracts become a key mechanism for merging risk and also enhancing engagement with our customers and suppliers


Nature: Potential impact: Mitigation:

Group businesses may fail to meet customer expectations or contractual requirements on project delivery

This could cause significant adverse financial and reputational consequences, and/or increased cost and management time resulting from management of disputes and litigation

  • Increasing the specialist project management skillset across the Group through training and recruitment
  • Implementation of project management best practices
  • Focus on post-signature contract management



The successful management and delivery of projects continues to be of high importance to the Group, as the profi le of the work undertaken by the businesses has moved more towards project work. 2020 has seen on-going and increased challenges in project delivery and close out, exacerbated by the Covid-19 pandemic. While the Group has processes for managing project risk, our focus is to improve outcomes across a diverse group where resource and skills in certain areas are less mature

Our customers require suppliers which can manage large projects in demanding environments. the Group is in a key position to support them, grow our customer engagement, and win new work
Nature: Potential impact: Mitigation:

The Group may fail to attract, retain and develop personnel of the requisite calibre and to plan for succession in key leadership positions

This may result in the Group not being able to maintain its existing strong and experienced management teams in its operational businesses, and/or a risk to the Group’s delivery of its strategic objectives, which depends on recruiting and retaining the right people in all areas of our business to maintain competitive

  • New employee strategy
  • Graduate recruitment
  • Talent identification and management
  • Management development programmes
  • Appraisal process
  • Training plans
  • Remuneration incentives
  • Succession planning

Progress continues on succession planning across the Group. 2020 has seen material senior management changes across the Group, as well as roll out of a new employee strategy aimed at various areas, including improvement in recruitment and retention. The new CEO has brought new focus on people development and retention


Unchanged. Succession, recruitment and retention remain a key risk but has been managed well at a business level, and the new employee strategy will bring additional improvements

Improvements in recruitment and retention will strengthen our teams worldwide, as well as the ability to compete in our chosen markets      


Nature: Potential impact: Mitigation:

The Group is exposed to interest rate, foreign
exchange and credit risk

 An increase in interest rates or change in exchange rates or credit restriction would have a financial impact on the Group
  • Non-syndicated banking relationships
  • Loans with spread of maturity profiles
  • Centralised finance function management of Group cash, debt, and foreign exchange
  • Forward currency contracts
  • Interest rate swaps 

Interest rates, foreign exchange and credit risks remain key risks and are reviewed regularly by the Board. The Group is exposed to USD cash inflows and uses forward contracts to reduce earnings volatility



Nature: Potential impact: Mitigation:

The Group is a global business and continues to be impacted by the Covid-19 pandemic. The Group may face a risk of future pandemics, and in particular an enhanced international government response to future potential virus spread which may lead to quicker triggering of restrictions on work and travel in the places where the Group needs to provide its services

The current impact on the Group’s operations created by the Covid-19 pandemic may continue. A future pandemic, or governmental response to a potential virus spread may impact the Group’s ability to provide services to its customers

  • Tracking and following Government restrictions and recommendations
  • Making office locations safe for work
  • Home working where possible, supported by improved IT services enabling better communication
  • Covid-19 working group providing advice and support to employees
  • Enhanced employee assistance programme

While pandemics have previously been considered a risk for the Group, this is the first time the risk has increased and is now considered one of the Group’s principal risks. In light of the Covid-19 pandemic, and the restrictions imposed by governments in locations where the Group needs to provide its services, there is an on-going risk posed by Covid -19. Future pandemics may be less problematic, but governments are likely to have a quicker and more conservative approach to tackling possible future pandemics, meaning restrictions may be imposed deeper and quicker

New risk.                                                                                                                                                                                                 

We aim to assist our customers and suppliers to manage through a global pandemic and innovatively developed products and services in 2020 in relation to safety and testing


Emerging risks

We have identified three macro-economic trends that will impact the markets in which the Group operates:

• Changing energy mix as renewable energy reduces carbon emissions and environmental concerns lead to an increased focus on decommissioning. Whilst recognising that oil and gas will remain part of the energy mix for some time, we aim to provide services to production, delivery and decommissioning in the safest, most sustainable way whilst we support the energy transition to low carbon sources. This forms part of the Board’s analysis of the impact of climate change on the Group, and has already been considered as one of the Group’s principal risks (and opportunities);

• Acceleration of digital innovation as customers seek efficiencies and effective asset management; and
• Shifting economic power to developing regions giving potentially increased political risk and increased defence spending.

These macro trends are seen as emerging risks and potential opportunities for the Group and, as such, are central to the development of the Group’s strategic aim to deliver sustainable benefits to our five key stakeholders. Capital will be allocated to growth opportunities, supplemented by selective acquisitions whilst business with below benchmark return potential will be divested. Delivery of the Group’s strategy will require a strong focus on both commercial excellence and operational excellence.