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Excerpts
Overview of Risks
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The Rolls-Royce board had established a structured approach to risk management.
Risks were formally identified and recorded in a corporate risk register, which
was reviewed and updated on a regular basis. Mitigation plans were prepared for
all significant risks.
The risk committee of the Board assumed accountability
for risk management and for reporting the key risks and associated mitigating
actions. The Director of Operational Risk reported to the Finance Director.
According to an external assessment of the risk management system, carried out
during 2001, the Rolls-Royce risk management process more satisfied the Turnbull
compliance requirements...
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Product Development Risks
Rolls Royce believed that to respond to future challenges it had to develop a
new generation of advanced engines. With R&D costs for a new engine programme
estimated to cost approximately $1 billion, the company had made attempts to
develop risk and revenue sharing partnerships with other world-class
companies...
Marketing Risks
The commercial aero-engine business operated within two distinct market sectors:
- New engine sales to manufacturers like Airbus Industry and Boeing, as well as
airlines;
- Engine parts sales to airlines who serviced and maintained aircraft.
Competitors in this secondary market included specialist maintenance companies...
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Financial Risks
Rolls Royce used various financial instruments in order to manage
the exposures that arose in its business operations as a result of
movements in financial markets. The group did not trade in financial
instruments for profit generation. The policy was to focus treasury
activities on mitigating risk.
The main financial risks for Rolls Royce were movements in foreign
currency exchange rates, interest rates and commodity prices. The
Board regularly reviewed the group's exposures. A specialist
committee also considered these exposures in detail. |
All such exposures were managed by the Group Treasury
function, which reported to the Finance Director. The Treasury operated within
written policies approved by the Board and within the internal control framework
described in the report of the directors...
Exhibits
Exhibit I: Rolls Royce Group Financial Highlights
Exhibit II: Benefits by Applying ERM
Exhibit III: Rolls Royce Segment Information
Exhibit IV: Rolls Royce Civil Aerospace Division Financial Highlights
Exhibit V: Rolls Royce Risk Mitigation Mechanisms
Exhibit VI: Rolls Royce Defence Division Financial Highlights
Exhibit VII: Rolls Royce Marine Division Financial Highlights
Exhibit VIII: Rolls Royce Energy Division Financial Highlights
Exhibit IX: Rolls Royce R&D Expenditure
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