Risk Appetite

The Group’s risk appetite is reviewed annually as part of the annual strategy review process and approved by the Board. This evaluation guides the actions we take in executing our strategy. We have identified a suite of Key Risk Indicators (KRIs) to monitor the Group’s risk profile (as summarised below), which are reviewed quarterly by the Risk Committee, to ensure that the activities of the business remain within our risk appetite and that our risk exposure is well matched to changes in our business and our markets. These include the most significant judgements affecting our risk exposure, including our asset selection and investment strategy; the level of occupational and development exposure and our financial leverage.

The Board has considered the Group’s risk appetite in light of the outcome of the UK’s referendum on continued membership of the EU. Our strategy, which is based on long term trends, endures; we had already positioned the business for a range of outcomes with modest development exposure, high occupancy and robust finances. However, we have a range of tactical levers to address the evolving political and economic uncertainties.

We have moderated our development activity, reflecting increased uncertainty. We reduced our internal risk metric for the maximum we will develop speculatively from 10% of the portfolio to 8%, although our current exposure is much lower at 4%.

Our financial position is strong; our proportionally consolidated LTV has reduced to 29.9% reflecting asset sales and our financing has an average term of eight years on drawn debt with no requirement to refinance until early 2021.

The Board considers that the Group’s risk appetite is appropriate to achieve our strategic objectives. Our business is both resilient and well placed to capture value in the long term.

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