Annual Report and Accounts 2016
The accounts have been drawn up on a going concern basis. Management has developed medium-term financial projections and future cash flows on the basis of the current business model and after consideration of the risks and uncertainties noted on page 34. The key assumptions relate to the retention and recruitment of members, the agreed funding requirements for the pension deficit and the ability of the CBI to continue to manage costs tightly. Management has applied sensitivities to these variables for the period to the end of July 2018, and concluded that it is reasonable to expect that the CBI will have sufficient resources to operate until at least this date, despite the negative balance sheet position.
The majority of the CBI's income is raised by Membership Subscriptions. If we considered there was a serious prospect that we could not raise sufficient funds to carry out our core functions, we have contingency plans in place to cover such a shortfall.
In addition, our cash reserves of £7.4m provide a buffer against volatility and we will look to increase them over time.
For the reasons stated below, the directors fully expect that the CBI will be able to continue in operation and meet its liabilities as they fall due up to 2020, the period of the assessment, and we have therefore applied the going concern basis of accounting in preparing the annual financial statements. The key assumptions made can be found in the going concern note above.
In making this assessment the Directors have reviewed the principal risks which affect viability (Defined Benefit Pension scheme independence on membershipand commercial income), and the Strategic Plan, which was completed in the summer of 2016. The period of the review was for 4 years to December 2020. This shows significant prospects of expanding our commercial basis, as well as keeping costs under control on areas, such as headcount. The aim of this plan is to increase our cash reserves which are currently £7.4m. The review looked at scenarios based on current performance and also the occurrence of a reasonable worst case, with a significant reduction in income. In this case the CBI has outlined plans to cover such a shortfall.
The Board has overall accountability for ensuring that risk is effectively managed across the group and, on behalf of the Board, the Audit Committee reviews the effectiveness of the group Risk Process.
Each business area is responsible for identifying, assessing and managing the risks in their respective area.
Risks are identified and assessed by all business areas half-yearly and are measured against a defined set of criteria, considering likelihood of occurrence and potential impact to the CBI.
This information is combined to form a consolidated view of risk. The top risks (based on likelihood and impact) form our Risk Profile, which is reported to the Executive Committee for review and challenge, ahead of final review and approval by the Board.
To ensure that our risk process drives continuous improvement across the business, the Management Board monitors the ongoing status and progress of key action plans against each risk quarterly, together with annual reviews by the Board and Audit Committee.
We continue to drive improvements to our risk management process and the quality of risk information generated, whilst at the same time maintaining a simple and practical approach.
The objective of our risk management approach is to identify and assess all significant risks to the achievement of our strategic objectives.
The principal risks and mitigation of these for the CBI are as follows: