LENMED AIR 2019.pdf

RISK MANAGEMENT Risk appetite determination The King IV™ Code requires the Board to determine the organisation’s risk appetite or tolerance for risk. Risk appetite in this context is ‘the amount of risk Lenmed is willing to accept in pursuit of value’. Risk appetite is directly related to our business strategy; therefore, strategy changes could require re-assessing our risk appetite and strategy. Both are re-evaluated annually. Enterprise risks Lenmed has limited control over environmental risks and no appetite for enterprise risk. We keep informed on risk topics such as: + National and/or international opinion on the private healthcare industry. + Environmental concerns or thinking that could impact hospital locations and the disposal of medical waste. + Social, health and political policies of national and regional government. + Competitor activities and strategies. + Technological and industry changes in surgery, hospital design and infrastructure, and healthcare in general. + Patient, medical aid andmedical practitioner opinions, behaviour and concerns as they relate to the industry and the use of the Lenmed facilities. + Key industry challenges facing the overall health sector. + Responses to enterprise risk. + Maintain a neutral position towards government. + Ensure a culture of compliance at all levels. + Perform adequate due diligence and review exercises before making new investments. Operational risks Trading operations expose the Group to levels of risk in processes (clinical and operational), labour, supply of pharmaceutical consumables, availability and suitability of medical practitioners. These vary according to location and time. Often these risks are short-term in nature and have to be managed on a day-to-day basis but can lead to long-term disruption of operations if not mitigated promptly. Accordingly, Lenmed has an appetite for operational risk, which seeks to balance the risks of maximising profitability against the risks of disruption of services, production and/or distribution of our products. Lenmed pursues strategies that will: + Ensure operational efficiencies and productive management processes. + Attract suitable doctors to Lenmed facilities. + Optimise facilities for efficient recovery of fixed overheads. + Implement appropriate clinical governance processes for positive clinical outcomes. + Train and motivate nursing staff to adhere to agreed standards. + Work with medical practitioners and medical aids to optimise capacity usage and efficient fee recovery. + Ensure ongoing electricity, water and gas supply at optimal cost. + Provide optimal insurance for potential disruption of operations, non-recovery of debtors and medical malpractice. + Keep Lenmed in the forefront of industry technologies. + Maintain lower medical procedures costs than local and international competition. + Optimise the organisational structure to ensure efficient controls over a diverse network of healthcare facilities spread over several countries. + Ensure that the Group sets and maintains consistent standards throughout. Financial risks Lenmed takes a balanced approach to financial risks and evaluates any potential capital investments against specific criteria. Accordingly, Lenmed has an appetite for financial risk, which will reward shareholders with an above average return but provide lenders with sufficient comfort to advance funds to the company without excessive security. Lenmed deploys strategies that: + Ensure all projects generate an acceptable return in excess of the weighted average cost of capital in the Group, as stipulated by the Board. + Restrict maximum gearing to prudent levels. + Ensure forecast liquidity and solvency ratios for forecast periods of five years are within acceptable limits. + Maintain a prudent dividend policy. Reputational risks These risks have similar consequences as enterprise risks. They are capable of destroying the business, stakeholder perceptions, shareholder wealth and the credibility of the Group and its management. Accordingly, Lenmed has no appetite for risks that could damage its reputation or brand. The Group adopts strategies to ensure: + Compliance with the highest healthcare, safety and health performance standards. + Recruitment of high calibre doctors. + Compliance with the highest ethical standards. + Open and transparent dealings with all stakeholders. + Compliance with all regulatory authorities and legislation. + Accurate, complete and timely reporting to shareholders. + Fierce advancement and protection of the Lenmed brand. + Sufficient resources to engage in new projects. LENMED ANNUAL INTEGRATED REPORT 2019 75