Risk management

Background

Based on the Group’s approach to managing a sustainable business, its strategic objectives, stakeholder engagement and risk management, the Group has identified material risks or issues that could potentially prevent the business from achieving its objectives. The Group Risk Committee (GRC) is responsible for the overall monitoring, assessing and mitigation of risks within Super Group. In addition, the Group ensures that sufficient insurance cover is purchased to mitigate all the significant risks.

The risk categories

Super Group classifies the risks that have a material impact on the Group into six strategic categories: Strategic, Human Resources, Financial, Operations, Compliance and IT.

The risk categories can be described as follows:

Risk categories Overview

Strategic

 The strategic risk considers the brand and reputation of the Group, the Group’s strategy, initiatives, communication and investor relations.

Human Resources

 The Human Resources risks are associated with capacity requirements, employment of skills, compensation and benefits as well as the culture of the organisation.

Financial

 The financial risks pertain to the accounting, tax and reporting structures of the Group.

Operational

 Operational risks are associated with sales and marketing, customer service, and service delivery to meet our customers’ expectations.

Compliance

 Compliance risks are those that consider the adherence to and compliance with governance, legal and regulatory issues.

IT

 IT risks contemplate the application development, availability, security, continuity and the data integrity of the Group’s IT systems.

The risk identification process

Each division is responsible for identifying, recording and assessing risks that would hinder the division from achieving its objectives. Appropriate control procedures are introduced aimed at mitigating these risks to an acceptable level. The Group Audit and Risk Officer facilitates risk sessions with each division and ensures that the risks identified have been correctly assessed and mitigated. Risks are assessed based on the potential impact on the business, financial position and reputation. A scale of 1 to 5 is used where 1 is “Minor” and 5 “Catastrophic”. Risks are also assessed on the likelihood of the risk occurring after taking into account controls in place to mitigate them. A scale of 1 to 5 is used, where 1 is “Rare” and 5 is “Almost certain”.

The GRC sets out the risk policy in its Charter detailing the objectives, scope, approach and roles and responsibilities of the committee members. The GRC meets twice a year and is chaired by an independent non-executive director. The membership of this committee comprises two non-executive directors, the CEO and CFO. The Group Audit and Risk Officer, the Group Legal Manager and the CIO are invited to the meeting.

The Board reviews the list of strategic and critical risks regularly, as required by King IV™, and approves the risk tolerance of the Group.

Management and mitigation of major risks to the Group


Risk level
2020
 Risk level
2019
Risk
Context
Mitigating factors
– Impact of Covid-19:
  • The Covid-19 pandemic has impacted the Group’s operations by varying degrees.
  • Severe loss of revenue and reduction in profits during lockdowns experienced in Dealerships UK, Dealerships SA, Supply Chain Africa, Supply Chain Europe and SG Fleet.
  • Dealerships closed their doors during initial lockdown phases, and low consumer confidence impacted sales volumes in the subsequent weeks after lockdown rules were relaxed.
  • Except for volumes related to essential services, volumes in Supply Chain Africa plummeted, warehouses were closed, and vehicles were parked.
  • The consumer businesses in SG Fleet were impacted by worsening consumer sentiment in Australia, which saw demand for novated leases decline as spending on large ticket items, including cars, shrunk markedly.
  • Germany and European automotive OEMs closed their plants for up to two months, which affected inTime directly.
  • Strict expense and cash management procedures instituted.
  • Freeze on non-essential capital expenditure.
  • Employees furloughed where possible. The Group facilitated applicable UIF and government support claims for the employees.
  • Employees worked remotely from home where possible.
  • The necessary protective measures (set out in greater detail in the ESG Report) were implemented as businesses re-opened and employees returned to work.
Highly competitive local markets, adverse macroeconomic conditions, political turmoil, industry unrest and deteriorating business confidence hinder growth in and place margin pressure on operations.
  • The continual need for customers to cut their costs.
  • Transaction volume declines due to an economic downturn in the markets in which the Group trades/operates.
  • Impact of labour unrest on the industries serviced by the Group.
  • Customers going out of business or in business rescue for the same reason mentioned above as well as the severe impact of Covid-19 on both suppliers and customers.
  • Continually focusing on customer service and service delivery at all levels.
  • Expanding the competitive product offerings to the market.
  • Acquiring businesses operating in targeted areas of the market that complement the Group’s existing offerings.
  • Passing on the cost of fuel price, toll fee and wage increases to the customers through generally accepted escalation arrangements, where possible.
  • Maintaining a conservative Statement of Financial Position and preserving resources to meet the challenges of the economy and the industries in which the Group operates.
  • Managing labour force challenges by the Head of HR within each business.
African socio-economic environment, including commodity cycles.
  • Understanding the commodity and capital investment cycles, e.g. coal, copper and fuel.
  • Concerns regarding investment in neighbouring countries, e.g. Zimbabwe.
  • Management closely monitoring trends and cycles.
  • Diversifying commodity exposures.
  • Driving costs and revenue initiatives to support the achievement of financial targets.
  • Trading with large multinational companies in neighbouring countries.
The attacks on trucks in South Africa.
  • Targeting trucks with foreign drivers.
  • Accosting and stealing goods from trucks as they drive through communities.
  • Criminal syndicates and cargo theft under the guise of checking for foreign drivers.
  • Employ South African Nationals in South African operations.
  • Working with the communities in the affected areas.
  • Liaising with the Road Freight Association to try to find a solution.
Changing regulatory environment.
  • Compliance with a wide range of regulatory requirements including licensing, consumer protection, B-BBEE changes, new legislation, WLTP (EU and UK) and AARTO regulations.
  • Repetitive and highly inefficient WLTP cycles resulting in large declines in European automotive manufacturing and sales volumes.
  • Developing or exploring new revenue streams.
  • Engaging specialist regulatory and Government relations consultants that understand the legislative and regulatory environment.
  • Monitoring all changes to the legal and governance framework by the Group Company Secretary, who is also the Group’s Compliance Officer.
  • Diversification of industry and customer risk.
Customer concentration.
  • The Group faces intensive competition in all the markets in which it operates.
  • The ability to compete depends on the Group’s geographical footprint, quality of service and the use of market leading technologies.
  • Continuing efforts to achieve new business.
  • Offering a wide range of services at competitive prices.
  • Continuing efforts to offer more value to customers.
  • Continuing development of IT-based logistics solutions to improve control and monitoring of the supply chain by its customers.
Retention of critical management, succession planning for key personnel, skills development and gender diversity.
  • The skills shortage in South Africa makes it imperative for the Group to retain and develop key management and specialist skills.
  • Unforeseen loss of a key manager.
  • Gender equality and transformation are to be promoted where appropriate.
  • Focusing on career development, fair reward as well as education and training to develop all personnel, both male and female.
  • Looking to promote from within and ensuring that succession planning is implemented in all the business units.
  • Gender and transformation targets have been determined.
The long-term effect of Brexit on the UK and Eurozone economies. Brexit D-Day was 31 October 2019, however, the exact way in which the trade agreements are going to be structured to “divorce” the UK and Eurozone countries, is still uncertain. Continuing to monitor developments closely.
The threat of cyber-attacks and data breaches. The threat of cyber-attacks and data breaches is alarming, and is set to escalate as hackers become more daring and tools more sophisticated. Continuing to invest heavily in measures to ensure that any future attacks are mitigated. The Group’s cyber-security forum meets monthly to evaluate and discuss new and better ways of combatting this global threat.
Development in the IT/Technology space in terms of on-line trading, telematics, Internet-of-Things (IoT), Artificial Intelligence (AI) and electric cars.
  • Technology is changing the face of how trading is done in terms of digital platforms (i.e. goods, vehicles, package delivery, etc).
  • When looking at logistics and monitoring driver behaviour, Telematics, IoT and AI continue to need to be evaluated.
  • The rise in the use of electric cars, especially abroad.
  • Spending time and dedicating resources to ensure continued product and service innovation and development in the Group’s various businesses to keep abreast of the latest trends.
  • The Group has world-class systems and state-of-the-art facilities making use of technology.