FORM 6-K
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MICRO FOCUS INTERNATIONAL PLC
(Exact name of registrant as specified in its charter)
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Exhibit No.
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Exhibit Description
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99.1
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2021
Annual Financial Report and Notice of AGM, dated 25 February
2022
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Products
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Risk Trend:
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No change
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Link to strategy: Transition to a product group operating
model, Continued focus on installed base
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Risk Category: Marketplace
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Principal risk description
To
remain successful, the Group must ensure that its products continue
to meet the requirements of customers and investment must be
effectively balanced between growth and mature products. Investment
in research and innovation in product development is essential to
meet customer and partner requirements in order to maximise
customer value, revenues and corporate performance. The Group has a
large number of products, at differing stages of their life cycle.
The extent of investment in each product set needs to be managed
and prioritised considering the expected future prospects and
market demand.
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Potential impact
If
products do not meet the requirements of customers, they will seek
alternative solutions, resulting in the loss of existing
maintenance and new revenue opportunities and the cancellation of
existing contracts. Insufficient focus on key research and
development projects may damage the long-term growth prospects of
the Group. The Group’s business and reputation may be harmed
by innovation that falls behind competitors, or by errors or
defects in its products.
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How we manage it
As set
out in Our strategy on pages 12 to 15, a strategic priority for the
Group is the transition to a product group operating
model.
The
Group continues to take a more definitive approach to delivering
Subscription and SaaS-based offerings and to accelerate the
transition to these models where appropriate within the
Group’s portfolios. The transition is being managed over
multiple financial periods with initial focus on products where
this model is the emerging or de-facto market standard. The Group
continues to invest in Security and Big Data. The priorities remain
delivering new innovation in response to rapidly changing market
opportunities, expanded cloud and cross-industry use case support
and further modernising our portfolio to address new SaaS and
subscription requirements.
As
set out on pages 18 to 25 (Our markets) the Group aligns resources
and develops propositions across four main outcomes for its
customers: Accelerate application delivery; Simplify IT
transformation; Strengthen cyber resilience; and Analyse data in
time to act. The Micro Focus Product Portfolio consists of five
product groups with more than 300 product lines, as set out on
pages 29 (Our business model), which are uniquely positioned to
help customers address digital transformation, run and transform
their business and maximise existing software investments.
Continued evolution of product strategy occurs as part of the
annual product planning process, where senior leaders from across
the business determine appropriate product sales, marketing and
investment strategies to best align to the market opportunities.
More details on the business model can be found on pages 26 to
31.
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Sales/Go-To-Market ("GTM") Models
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Risk Trend:
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No change
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Link
to strategy: Transition to a product group
operating model, Continued focus on installed base
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Risk Category: Marketplace
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Principal risk description
For the
Group to succeed in meeting sales revenue and growth targets, it
requires successful GTM models across the full Product Portfolio,
with effective strategies and plans to exploit all routes to
market, including direct and channel/partner led sales. In
addition, the Group must focus the sales force on targeted customer
segments and ensure appropriate responses to the market dynamics
related to changes in customer buying behaviours. Effective GTM
models may be more successful if accompanied by compelling Micro
Focus brand awareness programmes. The Group is dependent upon the
effectiveness of its sales force and distribution channels to drive
Licence and Maintenance sales and a reference-based selling
model.
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Potential impact
Poor
design and/or execution of GTM plans may limit the success of the
Group by targeting the wrong customers through the wrong channels
and positioning the wrong product or solution offerings, reducing
the value that customers receive from Micro Focus.
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How we manage it
As set
out in Our strategy on pages 12 to 15, a strategic priority for the
Group is a continued focus on our installed base. The Group has
made good progress in restructuring its Go-to-Market approach such
that it executes more consistently globally and can align the
resources of the Company better end-to-end to support execution.
The Group has now transitioned the organisation from three very
distinct geographically based approaches to one consistent global
approach.
Across
the five product categories that the Group reports against, the
Group has great depth of capability and experience to help its
customers address some of the most complex challenges they face. To
best enable the Group’s customers and exploit this
capability, the Group continues to align resources and developing
compelling propositions across four customer outcomes –
Accelerate application delivery; Simplify IT transformation;
Strengthen cyber resilience; and Analyse data in time to
act.
The
Group has invested additional resources to support the sales
workforce in virtual selling and customer engagement. Sales
enablement and execution has received considerable attention and
improvement measures have focused on improving consistency of
approach and simplifying the organisational structure to support
more effective and efficient decision making, greater
accountability and a holistic approach to customer success. This
has been achieved through the further removal of unnecessary global
structures and management layers, and the introduction of a single
global sales methodology based on value-driven
outcomes.
Industry
events, such as Micro Focus Universe, continue to be delivered
remotely, helping showcase the Group’s Product Portfolio and
strengthening customer, partner and industry relationships.
Additionally, the Group coordinates a programme of subject matter
expert led media engagement on industry innovation and emerging
industry trends, targeted mainly around social and web media, that
serve to further increase brand awareness.
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Competition
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Risk Trend:
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No change
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Link to strategy:
Transition to a product group operating model, Continued focus on
installed base
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Risk Category: Marketplace
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Principal risk description
Comprehensive
information about the markets in which Micro Focus operates is
required for the Group to assess competitive risks effectively and
to perform successfully. The Group operates in a number of
competitive markets and success in those markets depends on a
variety of factors.
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Potential impact
Failure to
understand the competitive landscape adequately and thereby
identify where competitive threats exist may damage the successful
sales of the Group’s products. If the Group is not able to
compete effectively against its competitors, it is likely to lose
customers and suffer a decrease in sales, which may result in lost
market share and weaker financial performance.
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How we manage it
Group
product plans contain an analysis of both traditional and emerging
competitive threats and subscriptions to industry analyst firms are
leveraged to better understand market dynamics and competitor
strategies. In addition, customer surveys and customer advisory
boards are used to validate product direction – both
standalone and in the context of competitors. Micro Focus continues
to monitor and review intelligence on market threats to focus on
offering best in class service to customers. Marketing and product
teams monitor a variety of metrics (such as NPS, including
competitive benchmark) to analyse customer satisfaction relative to
industry benchmarks.
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Employees and Culture
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Risk Trend:
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Increased net risk exposure
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Link to strategy:
Transition to a product group operating model, Utilise the
enterprise-wide platform to create an agile and lean
organisation
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Risk Category: Infrastructure
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Principal risk description
The recruitment and
retention of highly skilled and motivated employees at all levels
of the Group is critical to the success and future growth of the
Group in all countries in which it operates. Employees require
clear business objectives and a well communicated vision and set of
values for the Group to achieve high levels of employee engagement
and a common sense of corporate purpose among the workforce. There
is a significant increase in attrition in the marketplace, with the
rise of flexible working arrangements, changing employee/candidate
work-life priorities, combined with industry-wide changes in the
nature of the hiring market which has increased the risk across all
competencies of attracting and retaining talent.
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Potential impact
Failure to attract,
develop and retain skill sets, particularly in sales and research
& development, may hinder the Group’s sales and
development plans. Talent market conditions could lead to further
attrition and result in difficulties in meeting talent demands.
Weak employee engagement, organisational alignment and inadequate
incentivisation may lead to poor performance and instability. It
could also have an adverse impact on the realisation of
transformation aims and strategic plans.
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How we manage it
As
noted in the Chief Executive’s Strategic review on pages 08
to 11, the Group is developing new hybrid working models aimed at
addressing the challenges and opportunities of developing a global
team that is characterised by increased mobility, flexibility and
heightened levels of attrition. In response to the changing
environment, the Group has increased its investment in talent
sourcing & acquisition dedicated resources and strategies
including focus on ensuring ease of accessing and engaging with
potential candidates through expanded use of on-line tools,
employee referrals and greater use of third party specialists. It
has also increased its focus on internal movement of the
Group’s existing workforce into new roles which provides both
career opportunities and retention of skills as well as the ability
to close open positions faster than may be possible in the current
market conditions. The Group continues to actively calibrate its
value proposition to potential and existing team members in line
with market trends and benchmark remuneration packages to stay
competitive.
Developing
the most appropriate culture, aligned to driving productive
management behaviours focused on delivering business priorities, is
critical. The Group continues to operate a flexible working
environment whereby up to 90% of the workforce continue to work
remotely. Productivity tools and wellbeing programmes continue to
be utilised to support effective home working and employee
connectedness. Training was rolled out across the Group for
managers, with a particular focus on employee support and
wellbeing. Further details of the actions taken by the Group to
support its employees are provided in Our impact section on pages
35 to 37.
The Group has
statements, policies and programmes in place, including diversity
and inclusiveness, to help ensure that it is able to attract and
retain employees of a high calibre with the required skills. These
include Employee Resource Groups, our Micro Focus INSPIRE
Programme, training, career development and long-term financial
incentives. Succession plans have been developed and are in place
for key leadership positions across the Group. In the period, the
Group also took significant action to develop its management
capability both internally, by training and promotions, and through
external hires. Regular communications during the period focused on
keeping the workforce updated on business objectives, progress
against the strategic plan and the Group’s overall response
to COVID-19 and the future of work.
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Cyber security
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Risk Trend:
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No change
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category: Infrastructure
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Principal risk description
There could be a
data security breach (Micro Focus data or customer data) involving
personal, commercial or product data, either directly from Micro
Focus or a third party. This could occur as a result of a malicious
or criminal act, or an inadvertent system error.
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Potential impact
Data
loss, which could harm client and customer relationships,
compliance and/or perception of the effectiveness of the
Group’s products.
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How we manage it
The
Group works continually to counter the risk posed by the current
and emerging cyber security threat landscape. In the period our
resilience has improved through improved mobile device management
and increased use of two-factor authentication. The cyber team
manages the security of the Group’s data, technology and
training programme to protect the performance, security and
availability of the Group’s IT systems. Group-wide cyber
policies and processes are in place. Cyber security testing in
critical areas of the business is on-going. Group-specific
vulnerabilities are reviewed and continually managed and incident
response processes remain in place. The Group utilises monitoring
tools to identify unusual activity. Cyber security training is
available for new hires and awareness material is available on the
intranet for all employees. The cyber team works closely with the
UK National Cyber Security Centre (“NCSC”) and the US
Cybersecurity and Infrastructure Security Agency
(“CISA”). The Group’s threat posture, including
in response to COVID-19, is continually reviewed and
managed.
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IT Systems and Information
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Risk Trend:
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Reduced net risk exposure
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category: Infrastructure
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Principal risk description
The Group’s
operations, as with most businesses, are dependent on maintaining
and protecting the integrity and security of the IT systems and
management of information. The Group now operates on a single
enterprise platform for its core business processes. The
achievement of this milestone has decreased the net risk exposure
and set the platform for further operational simplification and
decommissioning.
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Potential impact
Disruption to the
IT systems could adversely affect business and Group operations in
a variety of ways, which may result in an adverse impact on
business operations, revenues, customer relations, supplier
relations, and reputational damage. Dependency on IT providers
could have an adverse impact on revenue and compliance in the event
that they cannot resume business operations.
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How we manage it
As set
out in the Chief Executive’s Strategic review on pages 08 to
11, in the period the Group successfully migrated its core business
processes to the simplified enterprise platform. The work
represented a significant milestone for the Group and delivery of
the programme was supported by appropriate programme governance and
change management practices. The enterprise platform has enabled us
to increase our use of SaaS services, materially improved our
resilience and provides the foundation for continued process
simplification and decommissioning. In conjunction with the Product
Group’s, we are continuing to modernise the labs and SaaS
platforms as part of improving customer service and enabling our
SaaS strategy.
The
Group has in place appropriate business continuity and IT disaster
recovery plans that have evolved to incorporate our increased SaaS
adoption and include interlocks with SaaS software release
schedules.
To
maintain the required control environment the Group relies upon
automated, semi-automated and manual controls together with a
combination of preventative and detective controls. The IT control
environment continues to be improved as part of the implementation
of controls to meet Sarbanes-Oxley Act 2002 (“SOX”)
compliance, as set out on pages 87 to 88.
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Business Strategy and Change Management
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Risk Trend:
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No change
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Link to strategy:
Transition to a product group operating model, Continued focus on
installed base, Utilise the enterprise-wide platform to create an
agile and lean organisation
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Risk Category: Marketplace
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Principal risk description
The
Group is engaged in a number of major change projects, including
acquisitions and divestments, to shape and grow the business by
strengthening the portfolio of products and capabilities and IT
projects to standardise systems and processes.
The Group is also
executing a series of operational transformation initiatives. These
projects expose the Group to significant transformation risks. The
Group’s strategy may involve the making of further
acquisitions or divestments to protect or enhance its competitive
position and failure to identify, manage, complete and integrate
acquisitions, divestments and other significant transactions
successfully could have a material adverse effect on the
Group’s business.
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Potential impact
Failure to
successfully analyse, execute and coordinate the implementation and
delivery of the core systems and associated business processes with
the various integration, divestment and transformation programmes
may result in the disruption of the on-going business without
delivering the anticipated strategic and operational benefits of
such transactions and/or initiatives. In addition, this may affect
the ability to execute strategic plans for growth.
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How we manage it
As
detailed in Our strategy on pages 12 to 15, the Group is focused
around three strategic priorities. These are transitioning to a
product group operating model, continued focus on the Group’s
installed base and utilising the enterprise-wide platform to create
an agile and lean organisation. These Group wide priorities are
being pursued concurrently, through both Business-as-usual
(“BAU”) activities and transformation initiatives. In
the period, resources have been aligned to better govern and
deliver the on-going change, with new structures in place to manage
dependencies, prioritise initiatives and reduce the impact on
BAU.
The
Group continues to execute multiple programmes to deliver on these
aims. Programme risks and interdependencies are managed by
utilising deep dives, cross-functional and cross-programme review
sessions and a cadence of regular risk reviews, to ensure that
execution of the various programmes is successfully aligned to
minimise disruption to BAU. The Group continues to utilise
governance structures to manage change for the business in a
structured manner and these governance structures are adjusted
where necessary to meet the changing needs of the
business.
As
noted within the ‘IT systems and information’ risk on
page 68, the Group has successfully migrated its core business
processes to the simplified enterprise platform. Throughout the
programme, an independent programme assurance view was regularly
provided to the board by a specialist third party, together with
senior management. This transition sets a solid base for improved
execution and continued process simplification across the
business.
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Legal and Regulatory Compliance
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Risk Trend:
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No change
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category:
Reputational
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Principal risk description
The Group operates
across a number of jurisdictions and two regulated exchanges.
Compliance with national and regional laws and regulations,
including those that relate to ESG matters, such as the Task Force
on Climate-Related Financial Disclosure (“TCFD”)
requirements, is essential to successful business operations. The
Group may be involved in legal and other proceedings from time to
time, and as a result may face damage to its reputation or legal
liability. The Group has entered into various acquisitions and
disposals over recent years and may be subject to, or have the
benefit of, certain residual representations, warranties,
indemnities, covenants or other liabilities, obligations or rights.
The Group has a variety of customer contracts in a variety of
sectors, including Government clients. This Legal and regulatory
compliance risk was increased in the prior period due to the
COVID-19 restrictions in place across regions in which the Group
operates and the heightened complexity this posed to securing
personal and/or sensitive information, particularly in
work-from-home settings. This level of risk has continued to apply
during the period.
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Potential impact
Failure to comply
could result in civil or criminal sanctions (including personal
liability for directors), as well as possible claims, legal
proceedings, fines, loss of revenue and reputational
damage.
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How we manage it
The
Group has in place policies and procedures to mitigate these risks.
The Group’s legal and corporate compliance team, including
specialist external advisers as required, monitor and review
compliance. During the period, the operational risk and compliance
committee, which reports to the audit committee, continued to meet
regularly to monitor cross-functional risk management and
compliance activity. The Group is committed to ensuring on-going
compliance with anti-bribery and corruption, data protection and
market abuse and insider dealing laws and has in place a Code of
Conduct with supporting training materials. Mandatory Code of
Conduct online training is provided annually and during the year
was completed by all employees. In addition, virtual
anti-corruption and anti-fraud training was carried out widely
across the regions in which the Group operates, with particular
focus on higher risk territories.
The
Group maintains processes and policies to ensure it is compliant
with data protection requirements imposed by data protection and
privacy laws, including GDPR. Data protection and privacy
compliance is driven and monitored by the Group’s legal and
corporate compliance team, supported by technical and other subject
matter experts as required. Data protection compliance is built
into the Group’s corporate-wide information security
management system and is kept under review to ensure that required
standards are met. The compliance environment is also strengthened
by the implementation of SOX controls, as set out on pages 87 to
88.
The Group is
committed to working towards incorporating the TCFD recommendations
for the first time in our annual report for the year ended 31
October 2022, as set-out on pages 44 to 45.
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Intellectual Property ("IP")
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Risk Trend:
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Increased net risk exposure
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category: Marketplace
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Principal risk description
The Group is
dependent on its IP and its rights to such IP may be challenged or
infringed by others or otherwise prove insufficient to protect its
business. The Group’s products and services depend in part on
IP and technology licensed from third parties. Third party claims
of IP infringement against the Group may disrupt its ability to
sell its products and services. Defending and/or resolving such
claims may cause the Group to incur substantial expense. The Group
has increased its assessment of the risk in view of indications of
increasing litigation activity from non-practicing patent
entities.
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Potential impact
This IP risk could
adversely affect the ability of the Group to compete in the market
and/or affect the Group’s revenue and
reputation.
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How we manage it
There
are procedures in place across the Group to ensure the appropriate
development, protection and use of the Group’s brands and IP,
including vigilance with respect to copyright and other IP
infringement. These procedures are monitored by the Group’s
IP panel and IP Legal team.
During the period,
an additional review of the Group’s IP protection procedures
was undertaken by the Group’s IP Legal team. The
Group’s management of this risk includes membership of
organisations designed to reduce the risk of patent infringement
litigation.
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Treasury
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Risk Trend:
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Reduced net risk exposure
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category: Financial
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Principal risk description
The
Group’s operational and financial flexibility may be
restricted by its level of liquidity, indebtedness and covenants.
Financing costs could increase or financing could cease to be
available in the long-term. The Group may incur materially
significant costs if it breaches its covenants under its banking
arrangements.
The
Group targets a net debt to Adjusted EBITDA ratio of three times in
the medium-term and may require additional debt funding in order to
execute its strategy. The Group is exposed to interest rate risk
related to its variable rate indebtedness, which could cause its
indebtedness service obligations to increase
significantly.
The Group operates
across a number of jurisdictions and so is exposed to currency
fluctuations.
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Potential impact
Insufficient
access to funding could limit the Group’s ability to achieve
its desired capital structure or to complete acquisitions. An
increase in interest rates could have a significant impact on
business results.
The relative values
of currencies can fluctuate and may have a significant impact on
business results.
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How we manage it
The
Group has significant committed financing facilities in place, the
earliest of which matures in June 2024. The Group closely monitors
its liquidity and funding requirements to ensure it maintains
sufficient headroom to meet its operational requirements. The Group
seeks to maintain strong relationships with its key banking
partners and lenders, proactively monitors the loan market and will
opportunistically enter the loan market to refinance portions of
the Group’s debt. The Group also has strong engagement with
the providers of equity capital, which represents an alternative
source of capital.
The
Group holds interest rate swaps to hedge against the cash flow risk
in the LIBOR rate charged on $2,250m of total borrowings for the
period to 30 September 2022. Under the terms of the interest rate
swaps, the Group pays a fixed rate of 1.94% and receives one month
USD LIBOR. In addition, the Group has transacted interest rate
swaps to hedge the cash flow risk on 1m Term SOFR related to its
newly issued $750m debt. The SOFR swaps have an effective date of
21 September 2022 and a maturity date of 28 February 2027 fixing
SOFR at 1.656%. The Group continually reviews the currency mix of
its borrowings and the projected forward curves associated with the
benchmark rates of its debt to assess market risk.
Monitoring
policies and procedures are in place to reduce the risk of any
covenant breaches under the Group’s banking arrangements. At
31 October 2021, $nil of the $350m Revolving Facility was drawn. As
a covenant test is only applicable when the Revolving Facility is
drawn down by 35% or more, and $nil of the Revolving Facility was
drawn at 31 October 2021, no covenant test is applicable. This
facility was amended post year end, reducing the size to $250m,
increasing the leverage covenant to 5x and increasing the amount of
the facility able to be drawn when above the covenant threshold to
40%. The increased leverage covenant gives the Group greater
flexibility in accessing the Revolving Facility.
Currency
fluctuations are monitored by the treasury risk committee on an
on-going basis. Key currency exposures are detailed on page 202.
Changes in foreign exchange rates are monitored, exposures
regularly reviewed and actions taken to reduce exposures where
necessary. The Group provides extensive constant currency reporting
to enable investors to better understand the underlying business
performance.
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Tax
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Risk Trend:
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Reduced net risk exposure
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category:
Financial
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Principal risk description
The tax
treatment of the Group’s operations is subject to the risk of
challenge by tax authorities in all territories in which it
operates. Cross-border transactions may be challenged under tax and
transfer pricing rules and initiatives targeting
multinationals’ tax arrangements.
International
tax rules continue to develop at each of the OECD, EU and national
levels and the pace of change is expected to increase in the
short-term, in particular as a result of recent announcements in
the US and at the OECD level. The impact of COVID-19 is also
expected to drive further changes in approaches taken by individual
country tax authorities. Future changes to tax laws could adversely
affect the Group across the territories in which it
operates.
As
a result of the HPE Software merger, the Group may be required
under the Tax Matters Agreement entered into with HPE (the
“TMA”) to indemnify HPE, if actions undertaken by the
Group affect the tax treatment of the separation of the HPE
Software business from HPE.
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Potential impact
Tax liabilities in
the territories in which the Group operates could increase as a
result of either challenges of existing positions by tax
authorities or future changes in tax law. Specifically, given the
substantial operations in the US any changes in tax policy in the
US could have a significant impact on the Group. Furthermore, if
the Group is required to make indemnification payments to HPE under
the TMA, these could be substantial.
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How we manage it
Tax
laws, regulations and interpretations are kept under on-going
review by the Group, with input from external advisors where
appropriate. The Group also reviews its operations, including the
structuring of intra-group arrangements, on a periodic basis to
ensure that all relevant laws are complied with and that risks are
identified and mitigated appropriately.
External
professional advice is obtained ahead of significant transactions
or structuring activity, and to support positions taken in
financial statements and local tax returns where there is
significant uncertainty or risk of challenge.
The risk that any
actions taken by the Group going forwards have an impact on the tax
treatment of the HPE transaction and the potential indemnification
under the TMA is now considered to be very low.
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Macro-Economic Environment and pandemics
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Risk Trend:
|
No change
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Link to strategy:
Transition to a product group operating model, Continued focus on
installed base, Utilise the enterprise-wide platform to create an
agile and lean organisation
|
Risk Category: Marketplace
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Principal risk description
The Group’s
businesses may be subject to inherent risks arising from the
general and sector specific economic, public health and political
conditions, including as a result of any pandemics or natural
disasters, in one or more of the markets in which the Group
operates. This is heightened by the fact the Group sells and
distributes its software products globally. Exposure to political
developments in the United Kingdom, United States or other
jurisdictions in which the Group operates could have an adverse
effect on the Group. Further deterioration of the macro environment
could result in more conservatism and longer decision making cycles
within the Group’s customer base.
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Potential impact
Adverse economic
conditions could affect sales, and other external economic or
political matters, such as price controls, could affect the
business and revenues.
|
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How we manage it
The
spread of jurisdictions allows the Group to be flexible to adapt to
changing localised market risks, including navigating the
continuing effects of COVID-19 and its variants across different
geographies.
The
Group is cognisant of inflationary pressures and incorporates these
considerations into organisational planning activities. The effects
of changes in interest rates or foreign exchange rates across
regions in which the Group operates are actively monitored through
the treasury risk committee. Further details on the management of
these factors are noted in the Treasury risk on page
70.
The Group has
business continuity plans and crisis management procedures in place
in the event of political events, pandemics or natural
disasters.
|
COVID-19
|
|||
Risk Trend:
|
No change
|
Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
|
Risk Category: Marketplace
|
Principal risk description
The
Group, like all businesses continues to navigate through a period
of disruption, as it has responded to the practical and
macro-economic impacts of COVID-19. COVID-19 still presents fast
moving, and in some areas unpredictable, direct and indirect risks
to the Group’s businesses. The Group may be subject to
inherent risks arising from the continuation of the on-going
COVID-19 pandemic, including the emergence of virus
variants.
|
|||
Potential impact
Adverse economic
conditions arising as a result of the continuation of the COVID-19
pandemic could affect sales performance and business
operations.
|
|||
How we manage it
The
Group continues to maintain its key COVID-19 decision making
structures, including the COVID-19 steering committee and COVID-19
Operational Response Team. The status of key COVID-19 operational
risks is monitored in real time through reporting provided daily to
the COVID-19 Operational Response Team on indicators such as rates
of infection, illness and facility occupancy levels.
The Group continues
to closely monitor the status of the COVID-19 pandemic, including
the emergence of variants, and continues to follow all local
government laws in the regions in which it operates.
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Internal Controls over Financial Reporting
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Risk Trend:
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No Change
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Link to strategy:
Utilise the enterprise-wide platform to create an agile and lean
organisation
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Risk Category:
Financial
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Principal risk description
Internal controls
over financial reporting may not prevent or detect an error, fraud,
financial misstatement or other financial loss, leading to a
material misstatement in the Group’s financial
statements.
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Potential impact
Failure to discover
and address any material weaknesses or deficiencies in the
Group’s internal controls over financial reporting could
result in material misstatement in the Group’s financial
statements and impair the Group’s ability to comply with
applicable financial reporting requirements and related regulatory
filings on a timely basis. Based on the assessment as at 31 October
2021, management identified a material weakness in the
Group’s internal controls over financial reporting where
there was insufficient time to allow ITGC’s and related
business controls to operate effectively by 31 October 2021
following the implementation of the new enterprise-wide application
platform in July, which included new business controls and IT
ITGC’s. Please refer to the FY21 annual report on SOX
compliance as set out on pages 87 to 88 for further details.
Although the Group continues to implement measures to address and
remediate this material weakness, failure to do so, and the risk
that other deficiencies may be identified, could also result in an
adverse reaction in the financial markets due to a loss of
confidence in the reliability of the Group’s financial
statements and could have a material adverse effect on the
Group’s business, financial condition, results of operation
and prospects.
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How we manage it
The Group has a
cross-functional SOX steering group chaired by the CFO, reporting
to the audit committee to implement, review and monitor SOX
compliant internal controls and any required remediation. Further
details of the Group’s SOX compliance programme and FY21
annual report on SOX compliance are set out on
pages 87 to 88.
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By:
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/s/
Matt Ashley
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Name:
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Matt
Ashley
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Title:
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Chief
Financial Officer
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