Annual Review 2011/12

BBC Worldwide is committed to effective and efficient risk management practices to safeguard our people, reputation, assets and interests. Risk awareness is an integral part of the company's culture demonstrated through sponsorship and engagement by the Executive. This is communicated through company values, supported by specialist functions, with governance exercised by the BBC Worldwide Audit Committee, WEx and the BBC Worldwide Board. The risk attitude and behaviour of BBC Worldwide is aligned to the BBC to ensure the company acts as a responsible guardian of the BBC brand.

The Chief Executive of BBC Worldwide is the ultimate sponsor of risk management. Individual WEx members have a risk management responsibility, both as a collective, for example, taking a risk-based approach to executing strategy, and individually to ensure their business manages risks appropriately, complies with the policy framework and delivers effective internal control. Senior management has clearly defined responsibilities, involvement in relevant major decisions and experience, knowledge and expertise in their business, markets and territories.

Our performance management framework, general management control and company values encompass all BBC Worldwide people. This encourages them to take a risk-based approach to their responsibilities, improving the likelihood of successful outcomes by anticipating and minimising risks.

Key to informing senior committees of strategic risks is the Risk Management and Internal Control (RMIC) process. This provides the BBC Worldwide Board with a regular review of the strategic risks facing the business and an assessment of how well these are being managed. A consistently applied methodology, including an evaluation of the financial and reputational impact of each risk, is used to identify risks that could have a significant impact on the ability of BBC Worldwide to achieve strategic objectives. The RMIC process requires each division, international office and international Board to take ownership of local risk management processes, with named risk owners taking responsibility for each individual risk. A specialist Risk Advisory team supports this process.

Reporting and monitoring

1. Risk Management and Internal Control (RMIC) Committee is responsible for discussing, challenging and proposing amendments to strategic risk reports to ensure they represent the key risks emerging from local risk registers and the concerns of the Executive and other risk stakeholders. The RMIC meets quarterly, is chaired by the Chief Financial Officer and includes the General Counsel, Company Secretary, Risk Advisory team and two WEx members who attend on a rotating basis.

2. WEx sponsors, and is responsible for the internal control and risk management framework, discussing, agreeing and endorsing regular updates on the strategic risks facing the company.

3. BBC Worldwide's Audit Committee ensures that risk management arrangements are appropriately sponsored, promoted and developed across the organisation, are sufficiently robust and take place frequently enough to effectively anticipate and detect risks.

4. The BBC Worldwide Board monitors the effectiveness of risk management and financial controls and receives regular updates on the strategic risks facing the company.

Principal risks, impacts and mitigation

Specific Risks to Us		Potential impacts		Mitigation		Owner
Strategic Execution Expansion is in non-traditional markets, territories and businesses where the company has less experience Risk that we fail to prioritise the right territories, the right investments or that we fail to restructure investments in a rapidly changing marketplace		Company fails to deliver against the strategic plans of the business Financial performance not in line with strategic ambitions Investments not delivering projected returns		Ownership of strategic risk held by the CEO; progress on strategic delivery regularly reviewed by WEx and the Board Regular review of the strategy in the context of the market and prompt reshaping of priorities to reflect changing external conditions Diversified portfolio with partnership deals in place to reduce the overall risk exposure in new territories and markets		WEx
International Expansion Lack of leverage or scale in international markets (for example, the key US market with commissioning broadcasters and large multi-service channel operators) Risk that we can't find partners internationally with the right expertise, values and cultural fit to our business		Failure to deliver against the international expansion strategy		US office with a high degree of autonomy implementing a strategy based on its knowledge and insight into the US marketplace Regional Executive Vice Presidents established for Latin America, Asia and Europe, Middle East and Africa region to contribute their insight and market intelligence into regional strategy		WEx
Digital Strategy Risk that we can't scale our digital businesses to generate the necessary return Risk that we don't efficiently execute the shift to business-to-consumer for a company that has historically sold business-to-business		Financial performance below anticipated levels or not delivering adequate returns on investment. Future expansion outside core areas may increase company risk profile.		Ownership of strategic risk held by CEO; progress on strategic delivery regularly reviewed by WEX and the Board. Regular review of strategy in the context of the market and prompt revision of plans to reflect changing circumstances. Diversified business portfolio, with a number of partnership agreements in place, limiting overall risk exposure.		WEx
Financing Limited ability to access capital and reinvest profit adversely impacts growth and business agility		Limited ability to exploit new opportunities in the market Further development of new and traditional businesses inhibited		Rigorous approach to approval of investments, investment committee and investment policy Cash management and monitoring of PBIT with robust cash forecasting Ongoing dialogue with BBC regarding investment needs against the BBC's short and medium-term cash requirements		Chief Financial Officer
Economic Climate Business performance sensitive to economic slowdown in the key territories (USA and Australia) Exposure to fluctuations in major currencies and interest rates, particularly the key currencies of the euro, the US dollar and Australian dollar Loss of routes for bringing product to market due to financial pressures causing failure of key retail groups, consolidation of retail outlets or reduced shelf space dedicated to our product categories		Reduced demand from consumers and trade partners Insolvency of major customers, suppliers and partners limits the routes available to bring our products to market Adverse impact on cash flows and reported financial results		Business is diversified across territories and revenue streams Risk averse approach to the management of foreign currency Close monitoring of counterparties including key suppliers, major customers and partners. Renegotiating payment terms and credit insurance where appropriate. Contractual provisions and contingency plans in place		Chief Financial Officer
Reputation and Standards Audience lose confidence in the integrity of our output and the brand through a breach of Commercial Policy or Editorial Guidelines Potential for failure of Ethical Policy by licensee, agent or other third party Risk that a joint venture or partner generates significant reputational risk exposure through association		Adverse publicity or press coverage Reputational or brand damage Potential loss of business		Comprehensive commercial policy and editorial policy framework, supported by a specialist team with training and knowledge disseminated throughout the organisation Editorial oversight from senior committees. Senior editorial figures with approval authorities. Editorial integrity embedded into the company culture Ethical sourcing and environmental policy with an ethical assurance framework and audit programme (further information is set out in the Corporate Responsibility section) Comprehensive review of potential partners (supported by due-diligence where necessary)		WEx
Content Pipeline Industry consolidation decreasing the content available from Independent Producers Reliance on a continuing pipeline of output from the BBC (at a time of cost reduction) Reliance on a strategic portfolio of brands (e.g. 'Dancing with the Stars')		Loss of rights for commercial exploitation Pressure on market position Competitors target key markets Impact or delayed launch of new services		Wholly-owned production office strategy, including establishing a business in Los Angeles to generate internationally exploitable content Minority investment stakes taken in a limited number of indies to increase access to development deals Output deals in place with key Independent Producers Joined-up content investment process across the organisation to maximise commercial exploitation across media formats		Managing Director, Content & Production
People and Organisation Failure to attract people with the right skills and talent to seize opportunities, achieve challenging returns and fulfil the strategy Complex international reward landscape in a diverse organisation Rapid upward pressure on pay and reward in certain sectors and dynamic growth territories		Failure to attract, retain and motivate causing the company to under-perform against the market		New reward structure to drive achievement and promote succession HR monitoring reward levels supported by benchmarking reviews. Alignment of company performance and personal incentives through the reward structure Values culture reinforced through induction, mandatory training, objectives and performance management		People Director
Technology and Security Multiple systems, platforms and processes with increasing volumes of data Challenges adapting internal legacy systems to accommodate business transformation Risks through technology partners hosting and operating services on our behalf		Information systems fail to support business development or the launch of new services Loss of data leading to reputational damage and adverse publicity Financial penalties		Technology strategy addressing the evolution of core systems		People Director
Regulatory and Compliance Reputational risks attached to non-compliance with both UK, and international, laws and regulations Breach of the UK Bribery Act or local anti-fraud and corruption legislation Data protection risk through custody of increased consumer/audience data Challenge of being fully cognisant of changes/newly introduced legislation and regulatory requirements Risk that compliance capability does not scale to an increasingly internationalised and digitised business, in particular in relation to compliance with local regulations and tax laws		ivil or criminal challenge or severe financial penalties Reputational loss and/or adverse publicity Increased regulation of business operations, imposed service limitations or exclusion from certain territories		General Counsel appointed. Local counsel in place in international key offices. External expertise engaged as required Comprehensive anti-bribery and corruption programme applied to operations, territories, agents and service providers Robust, comprehensive and enforced policy framework including Executive sponsorship, guidelines, regular reporting, mandatory training programme, specialist committees and steering groups Oversight by Audit Committee, Executive and Risk Management and Internal Control Committee Programme of Internal Audits aligned to corporate risks		General Counsel
Business Continuity and Safety Health and Safety incident causing injury or death Increasing number of UK and international live events Risk of disruption to operations, infrastructure and loss of revenue		Disruption to business operations including natural disasters, terrorism and other unforeseen events Reputational damage and adverse publicity or press coverage		Business continuity and safety officers reporting to nominated Executive sponsor Extensive continuity plans encompassing international offices and business operations Rolling plan of rehearsals (including at the disaster recovery site) Safety management arrangements supported by policy framework, communications, forums and guides		Chief Financial Officer

These icons highlight relevant strategic objectives. For more information on our strategic objectives please click on each icon.

Legal Governance and 4 Commercial Criteria

At each Board meeting the General Counsel presents a report on current legal, editorial and fair-trading issues and updates the Board on compliance with the 4 Commercial Criteria.

(i) 4 Commercial Criteria and Fair Trading Framework

BBC Worldwide follows the principles set out in the BBC Royal Charter and Agreement and the Trust Protocol C4 - Commercial Services (May 2010) and the BBC Trust's Commercial Review (November 2009).

In particular, BBC Worldwide must comply with the 4 Commercial Criteria (4CC), which stem from the BBC Royal Charter and Agreement, requiring all the BBC's commercial activities to:

• Be fit with the BBC's Public Purposes.

• Not jeopardise the good reputation of the BBC or the value of the BBC brand.

• Exhibit commercial efficiency.

• Comply with the Trust's Fair Trading Policy, the BBC's Fair Trading Guidelines and, in particular, avoid distorting the market.

The 4CC approvals framework embedded within BBC Worldwide's governance structure ensures that key projects and investments are subject to rigorous evaluation, ensuring compliance with each of the 4CC prior to completion or launch. In addition, a 4CC Compliance Report is submitted annually to the BBC Executive Board and the BBC Trust.

BBC Fair Trading arrangements have been accredited with the ISO 9001:2008 quality standard. In December 2011, the British Standards Institute confirmed that these procedures were continuing to operate effectively. This year the BBC commissioned independent auditors, currently Deloitte, to undertake an annual Fair Trading Audit: this was commissioned this year by the Executive, having previously been commissioned by the BBC Trust. Details of the audit and opinion will be available in the BBC Annual Report and Accounts for 2011/12.

(ii) Editorial standards

The BBC is trusted as a source of high-quality broadcasting and content, renowned for accuracy, insights and some of the most original entertainment in the world. We have set rigorous standards to ensure nothing we do harms this remarkable reputation. All our  people and partners are required to work within our editorial framework and follow our guidelines on editorial integrity and independence from external interest as well as on advertising and sponsorship.

In London, our Editorial Forums have provided an opportunity for editorial figures across the company to come together to discuss topical issues, such as the introduction of product placement to the UK Market or the editorial proposition behind the Global BBC iPlayer.

New online training modules explaining the editorial, commercial and advertising standards we expect have been launched. Staff members across the company, both in the UK and internationally, have participated in these training programmes. In 2012, further training is being developed to ensure everyone working with the BBC brand continues to be aware of the rigorous standards we have put in place.

(iii) Key Legal Issues

Key legal issues addressed during the course of the year include:

UK Bribery Act

BBC Worldwide's Bribery Act compliance programme began in May 2010, building on the organisation's existing anti-fraud and corruption framework (which already included an Anti-Fraud and Corruption Code of Conduct, Fraud Control Policy, a programme of training and targeted due diligence across the company).

Implementation of the programme was managed through the Bribery Act Working Group. Following completion, the project was handed over to the BBC Worldwide Compliance Steering Group (chaired by the BBC Worldwide General Counsel) for continuing oversight and monitoring. The main initiatives of the project have been to develop an anti-bribery risk assessment framework, with the assistance of external specialists, and assess the portfolio of operations and territories against this framework, to ensure all necessary controls are in place. This included: refreshing communications and training to both staff and third parties; updating key policies; revising contracts and taking a more centralised approach to risk assessment of third parties in the supply chain.

In the past 12 months, BBC Worldwide has also engaged independent third-party experts, including one of the big four accountancy firms, to assess and benchmark the programme and to provide advice on further enhancements to the established framework. Monitoring of activities in high corruption risk countries where BBC Worldwide has operations continues to be a high priority for WEx.

Data Protection

BBC Worldwide engages with millions of individuals across the globe on a regular basis including customers, audiences, employees, contributors and talent. We are committed to protecting any personal information entrusted to us and respecting the privacy of all those people with whom we interact.

While data protection rules vary from country to country, BBC Worldwide strives for the best systems in data protection and information security combining legal requirements and a best practice approach. We are committed to ensuring that not only our employees and businesses are compliant at all times but that our partners and those processing data on behalf of BBC Worldwide share our approach.

We recognise that our products and services, especially some of our websites and games, are enjoyed by people of all ages. As a result, we adopt an especially sensitive approach to collecting data from minors. As the business continues to develop in areas such as e-commerce and social media to deliver content and engagement, we will ensure that individuals are always clearly informed as to why we collect personal information and for what purposes it will be used.

BBC Worldwide and a number of our subsidiaries are registered with the Information Commissioner's Office and are regulated by the Data Protection Act 1998 in the UK, the EU Data Protection Directive and by local legislation in other territories where it operates such as COPPA (Children's Online Privacy Protection Act) in the United States and the Privacy Act 1988 in Australia. We are mindful of our obligations under the e-Privacy Directive and we will continue to assess the impact of the draft EU Data Protection Regulation announced this year.

We are focused on ensuring that our strategy for data protection remains sustainable in a world of changing laws, technology, consumer trends and business activities.