Nomination Committee report

Graham Holden

Chairman

Director Number of meetings Out of possible
Graham Holden (Chairman) 3 3
Tony Illsley 3 3
Peter Smith 1 1
Martin Towers 3 3

The membership and attendance at Committee meetings during the year is shown in the table above.

The Nomination Committee is a sub-committee of the Board and meets as often as required. It is responsible for reviewing the structure, size and composition of the Board and ensuring that the balance of skills, knowledge and experience of the Board is right for the Group, both for the current challenges and opportunities facing the Group and the skills and expertise that are expected to be needed on the Board in the future.

Balance of Executive and Non-Executive Directors (as at 31 March)

Balance of Executive and Non-Executive Directors (as at 31 March) chart

Board Appointments policy

We have a Board Appointments policy, which sets out the procedure that will be followed in the event of a Board vacancy being identified, along with our approach to diversity on the Board.

The key principle set out in the policy is that the Board will always seek to appoint on merit. The Board recognises the benefits of diversity of all types, including gender, professional and ethnic diversity, and will always aim to develop the diversity of the Board in order to promote a diversity of perspective in the boardroom, while remaining true to the key principle of appointing on merit.

The Board Appointments policy also states that the Nomination Committee will only use firms that have signed up to the Executive Search Firms Voluntary Code of Conduct addressing gender diversity and best practice, that female applicants are given the same consideration and opportunity as male applicants and that gender diversity is considered specifically when drawing up a list of potential candidates.

In addition, through the Board Appointments policy, the Board has committed to:

  • continue to seek to identify and develop the talented individuals in the Group, regardless of gender;
  • review regularly the proportion of women at each level in the organisation to ensure that equal opportunities are being presented to individuals at every level; and
  • always ensure that there is a confidential way in which concerns can be raised without fear of repercussion if anyone, regardless of gender, has a concern about the opportunities available to them.

When Board vacancies arise, the Nomination Committee is responsible for preparing a description of the role and capabilities required for a particular appointment and then identifying and nominating candidates for the approval of the Board. In order to identify suitable candidates the Committee uses open advertising or the services of external advisors to facilitate the search, where appropriate.

Appointments during the year

Since the last annual report, two new Non-Executive Directors have joined the Board; Peter Smith on 5 January 2015 and Liz Barber on 7 April 2015. For each appointment the Nomination Committee set out the qualities that the Board required and an external executive search firm was appointed to lead the search. The firm chosen was Hanson Green, which provides no other services to the Group.

The Nomination Committee believes that both Peter and Liz were the outstanding candidates for the roles that were described by the Committee. Peter brings extensive experience of working with a wide range of businesses on their strategies and joins the Board at a time when there is significant work ongoing in relation to the strategic direction of the Group. When Martin Towers indicated his intention to retire from the business at the AGM in July 2015, the Nomination Committee sought a new Non-Executive Director with significant financial expertise. Liz brings this to the Group as well as experience of working in a large business with similar characteristics to KCOM Group.

Other Committee responsibilities

The Committee is also responsible for considering succession planning for the Directors and for key senior management across the Group, although this is a matter also considered by the full Board. This includes identifying future talent within the business and providing experience and training as appropriate to enable individuals to be ready to step up to the next level.

The Nomination Committee reviews annually the time required from each of the Directors to perform their roles effectively. Following this review, the Committee is satisfied that each of the Directors has committed sufficient time during the year to fulfil their duties as Directors of the Company.

The Committee reviews the re-appointment of all of the Directors standing for re-election at the AGM, giving regard to their performance and ability to continue to contribute to the requirements of the Board. The Nomination Committee then makes recommendations to the Board on whether each Director should be put forward for re-election. Information on the recommendations for re-election this year can be found on the Corporate governance page.

The Committee’s Terms of Reference are in line with the recommendations in the UK Corporate Governance Code and the ICSA Guidance on Terms of Reference for Nomination Committees. Copies of the Terms of Reference are available from the Company Secretary and are on our website, www.kcomplc.com.

Risk management and internal controls

Risk management is key to all that we do as a business, both in managing and mitigating risks where appropriate and also in ensuring we take risks where necessary and do so with a clear understanding of the risk that we are taking. We believe that knowingly taking some level of risk is necessary to enable the business to remain competitive and to maximise benefits to our shareholders, while ensuring we do not take risks that adversely impact our other stakeholders.

Risk management is built into all of our processes. We also have a risk team, which has specific responsibility for health, safety, environmental and legal risks, insurance, governance and all matters relating to standards and compliance.

We recognise that our internal control systems can provide only reasonable and not absolute assurance against material misstatement or loss.

Risk management framework

We have a risk management framework in place to help us to identify, assess, measure, manage and monitor our key risks in a consistent way. We define key risks to be anything that may prevent us from meeting our objectives. The framework is regularly reviewed by the Board and has been developed in accordance with guidance from the Financial Reporting Council to provide us with a single picture of the threats and uncertainties we face. This enables the Board and senior management to make appropriate decisions to manage the key risks. The framework has been in place throughout the year under review and up to the date of approval of this annual report.

Risk identification

By our people
By our whistleblowing process
By external or internal audits

Risk recording

Risks are added to our risk register and rated for probability and impact
Risks are assigned a senior management owner who is responsible for documenting a mitigation plan on the risk register

Auditing

If a risk is auditable it is added to the internal audit plan
Audit issues are assigned a senior management owner to determine the action plan to mitigate the issue
Audit issues, management responses and progress against action plans are reported to the Audit Committee three times a year

Risk reporting

The risk registers are reviewed and updated by the risk owners on a regular basis
The risk registers are reviewed by the Risk Committee three times a year for completeness and consistency in ratings
The risk registers are reported to the Board three times a year

Risk management responsibilities

The Board

The Board has overall responsibility for deciding the acceptable level of risk that the Group may take to achieve its objectives and has held specific discussions around this during the year, to ensure that the level of risk being taken across the Group is appropriate. It is also responsible for ensuring that the Group maintains sound internal control and risk management systems, as well as reviewing the effectiveness of those systems. In order to do this, the Board receives regular reports from senior management, the internal auditors and the external auditors, via the Audit Committee, on the effectiveness of the systems of internal control and risk management. The Board is satisfied that the systems are embedded within the day-to-day activities of the business and cover all material controls, including financial, operational and compliance controls and that the Group continues to be compliant with the provisions of the UK Corporate Governance Code relating to internal control.

Senior management

All of our key risks are now recorded and regularly updated on an online portal and senior managers are responsible for reviewing the portal to ensure that all relevant risks are recorded and that the risks are being appropriately mitigated within reasonable timescales. There are also a number of forums for senior management, such as a Security Forum, where senior managers get together on a regular basis to discuss specific risks and trends and to review the work being done across the Group to mitigate any issues.

Audit Committee

The responsibilities of the Audit Committee in relation to risk management are set out in the Audit Committee report.

Financial risk management

Each part of our business produces an annual budget which is reviewed by senior management and ultimately approved by the Board. A longer-term five year plan is also in place which is updated annually and approved by the Board to enable it to have a clear longer-term view of financial projections.

We also prepare a quarterly forecast; performance against budget and quarterly forecast is monitored at monthly senior management meetings and reviewed by the Board each month. Further information about the financial risk management policies in place, and in particular the way in which credit risk, liquidity risk, interest rate risk and foreign currency risk are managed, is in Note 27 to the financial statements.

Controls around consolidation

The basis of consolidation for the financial statements is detailed in Note 2 to the financial statements. Strong controls are in place around the process for preparing consolidated accounts. The work of consolidation is performed by experienced, qualified accountants and a review of the consolidation forms part of the audit work performed by our external auditors.

Principal risks and uncertainties

The principal risks and uncertainties facing the business are set out on the Risk management page of the Strategic report.