As part of the planning and control cycle, the Executive Board has determined the principal group risks based in part on the risks that have been identified within the business units. The Board has looked at how these risks affect the achievement of the strategic objectives and the material themes. The group risks are discussed in detail below, as are changes in the risk profile compared with 2018. For the financial risks, please refer to the ‘Financial risk management’ chapter in the financial statements.
Key changes in the risk profile compared with 2018
Visible improvements have been made in the control of the risks associated with non-compliance, HSL South, improvement capacity and insufficient operating results. Progress was made in 2019 in terms of both structure and corporate culture in the area of compliance, resulting in improved risk management. Thanks to solid performance on HSL South in the second half of 2019, following resolution of several issues including the software bug and process optimisation, the franchise targets have been realised and control has improved. We improved control of improvement capacity risks by paying constant attention to portfolio management and by implementing changes to set-ups. Regarding the operating result risks, the profit in 2019 was higher than expected and more savings have been realised than were included in the business plan.
Control of risks associated with infrastructure and investments abroad has deteriorated. For Infrastructure we expect to see a rise in the number of bottlenecks in the required infrastructure, with adverse effects on our train services and on our ability to accommodate further growth in passenger volumes and realise our ambitions. As regards investments abroad, there is a downward control trend caused, especially in Germany, by increased personnel expenses under a new collective labour agreement, and penalties arising from works on the infrastructure.
Looking ahead to the group risks in the future
The overview below shows the main group risks classified according to the six risk themes that NS uses. The main risks for the group in 2019 are found in four of the six risk themes. The overview also shows the trends in the control of these risks.
Main group risks
Safety: not fulfilling our duty in cases of major safety incidents involving passengers and/or staff
Non-compliance: not complying with legislation and regulations or exceeding applicable norms and values.
HSL South: failure to achieve agreed results on HSL South.
Infrastructure: inconvenience to customers caused by lack of infrastructure capacity and quality improvement backlog.
Introduction of ERTMS: disruptions to the implementation process causing problems for customers.
IT reliability: failure to meet the operational and security requirements for IT systems.
Capacity for improvement: providing improvements too late or with insufficient results.
Staff shortages: discontinuity in crucial processes due to lack of staff.
Insufficient operating results: inadequate operating results and not enough operational cash flow generated to finance the plans.
Market regulation: losing parts of the business activities and the contributions they make to the result.
NS investments abroad: insufficient operating result from investments abroad.
The main group risks do not concern the theme of Reputation.
The main group risks do not concern the theme of Sustainability.