for the year ended 30 June 2022
Our risk management framework is embedded in the day-to-day operations of the Group. It promotes responsible risk-taking, aids better understanding of the potential impact of risks and opportunities on our strategic objectives and the likelihood of these risks materialising and identifies effective action plans to mitigate risks and realise opportunities.
Governance and structure
Risk management framework
Provides the foundations and organisational arrangements for designing, implementing, monitoring, reviewing and continually improving risk management.
The board and its sub‑committees
Responsible for the governance of risk and ensuring that formal processes are implemented to effectively manage the risks facing the Group.
Executive Committee and the divisional finance and risk review committees (FRRCs)
Responsible for managing all risks and implementing relevant risk governance processes, standards, policies and frameworks.
The board delegates the responsibility for the implementation and execution of risk management to the Executive Committee and FRRCs. The board and its committees oversee the effectiveness of risk management, receiving regular reports and periodic assurance.
Risk management processes
Risk culture
Communication and
consultation
Risk appetite and tolerance
Risk
assessment
Risk
response
Risk taxonomy
Monitoring
and review
The risk appetite sets out the amount and type of risk that the Group is prepared to pursue, retain or take in pursuit of its objectives and the creation of value. Our risk management policies, procedures and practices are systematically applied to the above activities.
Risk controls
Additional measures to enhance the effectiveness of risk management include internal controls, control self-assessments (CSAs), head office monitoring and oversight, and Group compliance and risk forums.
Monitoring
Documented monitoring of processes, routines and controls.
Implementing policies and procedures
Management controlled activities, including development of strategies, action plans and budgets as well as principles, rules and procedures.
Ensuring sound governing principles
This includes our values, ethics guidelines, Code of Ethics, delegation of roles and responsibilities and oversight committees. Our leaders are expected to lead by example.
Three lines of defence
Our combined assurance framework provides a co-ordinated Group-wide approach to risk management to ensure its effectiveness. All three lines of defence report to the board; either directly or through the ARC and the SES Committees.
FIRST LINE OF DEFENCE – management
Responsible for the identification and management of risks in line with agreed risk policies, appetite and tolerance levels, and controls at an operational level.
SECOND LINE OF DEFENCE – risk management, compliance, legal, quality control functions
Responsible for overseeing and monitoring various risks and developing appropriate tools to effectively manage these risks.
THIRD LINE OF DEFENCE – internal audit, external audit, independent assurance providers
Assurance providers and auditors offer oversight and assurance to the board and management on the adequacy and effectiveness of the controls implemented. External auditors provide an opinion on the fair presentation of the consolidated and separate annual financial statements in accordance with IFRS and the Companies Act.
People, process, data, systems, infrastructure
Our values require that we are honest, transparent and communicate the level of exposure we take in the pursuit of value creation and preservation and the extent to which we guard against value erosion.
Our integrated risk management framework aims to ensure a consistent (value-based) and responsible (within tolerance levels) manner of responding to the uncertainty faced in our operating context, i.e. risks and opportunities associated with our strategy and present in our internal and external operating environment. Both existing and emerging risks are addressed.
Everything we do strives to achieve harmony and efficiency in aligning our people, processes, data, systems and infrastructure to meet our objectives by taking responsible risks within the operating context in which we choose to position the businesses.
Any risk taken is considered within board-approved risk appetite and tolerance levels which are reviewed and, where necessary, updated on a quarterly basis. Management monitors emerging risks on an ongoing basis until they are formally assessed and incorporated into our risk profile. Risks are classified as emerging when their extent, nature and timing are uncertain.
Risk exposure movement:
Inherent risk:
Residual risk:
Currency risks: currency volatility has a direct impact on the costs of imported vehicles and parts. Unfavourable exchange rates against the Rand affect the competitiveness and profitability of the products, as well as service and maintenance plans.
The South African sovereign credit rating impacts the Rand exchange rate volatility. This also results in changes in the Group’s equity, potentially resulting in a positive or negative hedging reserve position. Foreign currency translation differences will arise on the consolidation of foreign subsidiaries in the reported results.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Inventory management risks: ongoing inventory management is needed to meet customer demand for new vehicles, pre-owned vehicles and parts. The planning and forecasting process allows the Group to minimise losses from supply chain disruptions and improve the management of ageing new and pre-owned vehicles and parts inventory levels.
Erratic supply and shortages of vehicles and parts due to supply chain disruptions could result in loss of sales and missed OEM targets, thereby placing additional pressure on margins and profitability.
Supplier dependency risks: we rely on our relationships with OEMs and franchised dealers, which are critical to our business model, and comply with the OEM agreements. Failure to meet OEM dealer standards will negatively affect variable margins earned from the OEMs and result in penalties being imposed.
The Group also relies on commercial relationships with key suppliers to deliver superior service to customers. The loss of any significant supplier could impact operations and financial performance.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Economic risks: the impact on the global economy given the muted recovery and increasing infl ationary pressure post the COVID-19 pandemic is anticipated to continue over the short to medium term.
In South Africa, inconsistent service delivery and poor public infrastructure is coupled with ongoing power outages, high interest rates and high unemployment that could fuel social unrest.
Globally, larger economies may face a debt crisis brought on by an inflationary environment.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Technology risks: a legacy of decentralised IT systems and infrastructure makes it critical to reduce systems complexity through consolidation wherever feasible while enhancing the customer and user experience.
IT strategies are flexible and effective in meeting the requirements of the business and delivering solutions for competitive differentiation and operational effectiveness as the implementation of digital strategies accelerates.
Information security risks: the global increase of cybercrime has the potential to disrupt services, erode customer trust and cause financial loss.
Legislation relating to personal data requires that this information is afforded adequate levels of protection as instances of negligence carry large fines.
Our ability to protect and secure our IT systems and information is critical to managing the threat to operational resilience and reputation.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Regulatory and compliance risks: the Group is exposed to a wide range of legislation, which impacts all our operations and relationships with various stakeholders, including banks, OEMs, suppliers, regulators and the public. Non-compliance with environmental legislation, labour-related legislation (including skills development and employment equity legislation), health and safety, and product legislation could undermine the Group’s reputation and result in penalties and fines. Material legislative changes may impact our business model and core market dynamics.
Read more in the governance report.
Read more about the impact of recent changes in
legislation online in our ESG report.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
People risk: the scarcity of qualified and skilled managers, and specialised technical and customer-facing skills, as the business model becomes increasingly digital and the technological component of most jobs grows, challenges the availability of talent needed to remain competitive and successfully deliver on Motus’ strategy.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Transformation risk: failure to achieve transformation targets and transform the workforce may impact our competitiveness and sustainability.
Read more in the people section of the social
report.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Innovation risk: the acceleration of the pace of change will require competitive digital capabilities and innovation to sustain competitive advantage.
Customers are increasingly product savvy and accustomed to the
convenience of the digital experience and
omni-channel engagement.
Read more in the innovation and digitisation review.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Reputation risk: failure to inculcate a culture that drives good corporate citizenship may undermine the Group's reputation.
In addition, how stakeholder groups experience interactions with the Group must be based on our espoused values and ethics to ensure our continued sustainability.
Failure to take action to curb greenhouse gas (GHG) emissions and minimise environmental impacts could tarnish our reputation, particularly as public perceptions and expectations change.
Opportunities
Risk exposure movement:
Inherent risk:
Residual risk:
Climate-related risk: extreme weather events can disrupt business operations, weaken economic growth and cause damage to vehicles, property and other assets. Higher temperatures and lower rainfall brought about by climate change will impact the length and severity of droughts and, in turn, our customers and communities. In addition, climate change will have a direct impact on energy availability, supply chains and the supply of food.
The transition to a low-carbon economy may also pose risks to the Group, for example, increasing emissions tax and introduction of NEVs.
Read more in the environmental report
Opportunities
Read more about our future focused response in our material priorities section.