Port of Milford Haven

Annual Report 2021: Principal Risks and Uncertainties

The Board reviews the overall Risk Register on a regular basis. Risk appetite has been defined for specific risk categories and is included in our Risk Management policy. The principal risks and uncertainties facing the business, and actions taken to mitigate them, are:

 

Risk

Mitigation

Risk to Operational Continuity

 

The Milford Haven Waterway is considered a part of the UK Critical National Infrastructure and therefore we recognise the potential financial and reputational losses associated with a business disruption.

 

 

We maintain and exercise a robust set of contingency and emergency plans, which involves working closely with our stakeholders to ensure we are prepared should an interruption occur.

More generally in relation to operational risk, we are committed to ensuring effective and efficient operations and have established a Safety and Environmental Management System (SEMS) to help continually improve performance. The system follows the Plan-Do-Check-Act cycle.

As a port we recognise the challenges that climate change could bring to our operations in relation to more frequent and severe extreme weather patterns. We will continue to mitigate potential risks by monitoring weather conditions in conjunction with stakeholders.

In recent years the various implications of the Covid-19 pandemic have been carefully managed through our Critical Incident Response management procedures. We ensured minimal business disruption by determining early in the pandemic what our priority areas were for maintaining operational resilience and focusing efforts on mitigations in order to continue safe operations.

The digital world creates many risks for a business, with an ever-increasing risk of cyber-attacks. We mitigate the risk of breaches through the implementation of multiple layers of software and processes, including firewalls, VPN (Virtual Private Network) access and penetration testing.  We regularly monitor and test the effectiveness of our IT security infrastructure and our ability to defend against current and future cyber risks.

Risk to Financial Resilience

Our financial instruments comprise borrowings, cash and various items such as trade debtors and creditors that arise directly from our operations. We are not generally exposed to movements in exchange rates as we trade in sterling (GBP) with major customers, and currencies other than sterling are only occasionally used.

Our policy is to ensure that sufficient funding is available at all times for resilience purposes. We invest our cash balances in UK banks with low-return/low-risk deposits. We finance our operations with a mixture of retained earnings and term debt. Loans are at a fixed rate or based on widely recognised index rate benchmarks and we have a revolving credit facility to support short-term needs and future investments.

We do not actively seek high-risk high return projects and are circumspect in choosing our trading partners and, where appropriate, joint venture partners. We adopt financial controls in line with industry best practice.

The Covid-19 pandemic has impacted our revenues in the short-term, however we have carefully managed costs and cashflows throughout to ensure that adequate headroom is maintained to support the Port’s funding requirements. 

Risk to Fit for Purpose Assets

We have a wide variety of assets that are required to deliver services to our customers, and we continue to seek new opportunities to maximise the use of these.

We are committed to ensuring adequate stewardship and maintenance of our assets by sustaining a strong balance sheet.

We have adopted a risk-based approach, implementing our Asset Management policy and undertaking what is reasonable and practical to ensure assets remain in a suitable condition through a robust inspection and maintenance regime.

Diversification Programme Risk

The most significant risks in relation to our diversification programme are the Milford Waterfront and Pembroke Dock Marine developments.

We have appropriate project governance and are seeking support and advice, when necessary, from external consultants. We have a strong desire to work collaboratively with our stakeholders, recognising that these important projects cannot be delivered alone. Contract risks are being managed through a rigorous procurement process.

Securing sustainable diversified income streams will help us mitigate against the significant revenue fluctuations that can occur within the oil and gas industry and remain out of our control.

Risk to Reputation and Influence

Our reputation and influence can be affected by internal failures, by external events outside our control and through the management of our stakeholder expectations.

We have a long-established Stakeholder Accountability Committee and have good control over our messaging and relations with the media through a proactive PR and Communications department. In support of our purpose to build the Haven’s prosperity, we reinvest our profits into the business to secure the future sustainability of the Port, which in turn has positive impacts across Pembrokeshire in terms of job creation and economic growth. We also have powers within our Act to make investments which are likely to provide economic, social, cultural or environmental benefits to all or some of the population of Pembrokeshire.

Regulation, Governance and Compliance Risk

As a Trust Port, we are governed by  Acts of Parliament. In addition, we adopt a best practice code of governance using the Department for Transport’s guidance document “Ports Good Governance Guidance” to ensure an efficient, accountable and competitive Trust Port.

 

The obligations on the Port therefore are (1) first and foremost to comply with its Acts, and (2) operate so far as reasonably practicable and relevant to the particular circumstances of the Port of Milford Haven, in accordance with the guidance set out in “Ports Good Governance Guidance”.

To meet these obligations, we have developed a Governance Manual, established an Audit & Risk Committee and conduct internal and external audits.

We have policies and procedures in place to ensure compliance with legal obligations and industry standards. These are reviewed regularly, underpinned by a continual focus on ensuring our employees abide by the highest standards of governance and integrity while focused on achieving our strategy.

During the year the Port continued to mitigate the Covid-19 risks to the extent possible, by ensuring compliance with all relevant public health measures and adopting other mitigations such as the use of Lateral Flow Testing with the support of the Welsh Government Pathfinder programme.

We recognise the long-term risks associated with Climate Change and compliance with UK Government’s commitment to achieving a Net Zero Carbon economy by 2050. Mitigations currently include carbon-offsetting and will continue to evolve as new technologies emerge to support our industry in reducing its carbon footprint.

Culture, Values and Behaviours Risk

It is recognised that we undertake activities that pose significant safety risks. Our core values - Safety, Collaboration, Excellence and Sustainability - are central to our credibility and provide our team with the confidence to deliver safe and superior services.

In providing our services we utilise dedicated employees and we aim to create an environment where employees are motivated and empowered to the full extent of their abilities.

We adopt a positive safety culture through the proactive reporting of accidents, incidents, near misses and concerns through our Assurance Framework. This Assurance Framework is the over-arching structure that sets out the Group’s approach to dealing with risk and ensures the comprehensive management of risk in all its forms.

To mitigate behavioural risks, we invest in our people through training and reward and have established both an Employee Forum and a Wellbeing Team. Our leaders work hard to embody our values and vision and cultivate a positive culture.

We remained closely engaged with all stakeholders in 2021 to manage the various implications of the Covid-19 pandemic. The number one priority remains the safety of our people and visitors to our sites. Mitigation measures taken include social distancing, the wearing of PPE, increased hygiene measures, use of asymptomatic Lateral Flow Tests for surveillance purposes, remote working and curtailing of non-essential on-premises meetings.