Share Name Share Symbol Market Type Share ISIN Share Description
Balfour Beatty Plc LSE:BBY London Ordinary Share GB0000961622 ORD 50P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  1.60 0.52% 312.00 311.80 312.20 315.80 308.80 315.80 1,616,574 15:09:08
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Construction & Materials 8,593.0 48.0 4.4 70.9 2,129

Balfour Beatty PLC Annual Financial Report

14/04/2021 10:00am

UK Regulatory (RNS & others)

Balfour Beatty (LSE:BBY)
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RNS Number : 4434V

Balfour Beatty PLC

14 April 2021

Balfour Beatty plc (the "Company")

Notice of 2021 AGM, Forms of Proxy and Annual Report and Accounts

The Company announces that today it has made available to shareholders the following documents:

-- Notice of 2021 Annual General Meeting ("Notice of 2021 AGM");

-- Forms of Proxy for the AGM; and

-- Annual Report and Accounts for the year ended 31 December 2020 ("2020 ARA") .

The documents listed above are available on the Company's website at . Paper copies will be mailed to shareholders who have elected to receive them.

In compliance with Listing Rule 9.6.1, these documents have been submitted to the Financial Conduct Authority, and will shortly be available for inspection at .

Format of the 2021 AGM

The Company's 2021 AGM will be held at 10.00am on Thursday 13 May 2021 at The Curve Building, Axis Business Park, Langley, Berkshire, SL3 8AG.

According to current government guidance, restrictions will still be in place on the date of the 2021 AGM that prohibit indoor group gatherings, restrict travel and mandate a policy of social distancing due to the risk of Covid-19. It is therefore currently intended that the 2021 AGM will be held as a closed meeting convened with the minimum quorum stated in the Company's Articles of Association. The Company intends to facilitate the quorum of shareholders for this meeting. All other shareholders should not attempt to attend the 2021 AGM in person, in order to protect the health and safety of fellow shareholders and our staff, and will not currently be permitted admission if they intend to do so.

As the 2021 AGM will be a closed meeting, shareholders are strongly encouraged to appoint the Chair of the meeting as their proxy to exercise their right to vote at the 2021 AGM in accordance with their instructions. Further details including how shareholders can vote by proxy and ask questions in advance of the meeting can be found in the Notice of 2021 AGM. The Company will continue to closely monitor government guidance and legislation in relation to Covid-19 and any changes to the arrangements will be notified to shareholders through our website.

2020 ARA

A condensed set of financial statements were appended to the Company's full year results announcement, issued on 10 March 2021, which included an indication of important events that occurred during the year. That information, together with the information set out in the Appendix to this announcement regarding the Company's principal risks and uncertainties, related party transactions and directors' responsibility statement, as extracted from the 2020 ARA, constitute regulated information which is to be communicated to the market in full unedited text through a Regulatory Information Service in accordance with DTR 6.3.5R.

Page and note references within the Appendix below refer to page numbers in the 2020 ARA. To view the full year results announcement, please visit the Company's website at / .

This material should be read in conjunction with, and is not a substitute for, the full 2020 ARA.

General enquiries:

Contact and telephone number for queries /

Duly authorised officer of issuer responsible for making notification:

Tracey Wood, Group General Counsel and Company Secretary

Tel. +44 (0)20 7216 6800

Analyst/investor enquiries:

Angus Barry

Tel. +44 (0)7966 281 635

Media enquiries:

Antonia Walton

Tel. +44 (0) 7966 929 633

Notes to editors:

-- Balfour Beatty is a leading international infrastructure group with 26,000 employees driving the delivery of powerful new solutions, shaping thinking, creating skylines and inspiring a new generation of talent to be the change-makers of tomorrow.

-- We finance, develop, build, maintain and operate the increasingly complex and critical infrastructure that supports national economies and deliver projects at the heart of local communities.

-- Over the last 112 years we have created iconic buildings and infrastructure all over the world including: the GBP1.5 billion A14 improvement scheme - Britain's biggest road project; Hong Kong's HK$5.5 billion world-class harbour theatre project for the West Kowloon Cultural District Authority; and the 12.5 mile $429 million North Metro Commuter Rail line in Colorado, US.


1) Principal risks

Removing uncertainty through understanding

Balfour Beatty's decision-making is centred on a comprehensive and detailed understanding of the exposures faced by the organisation. The identification of risks to achieving business and strategic objectives, alongside the use of detailed analysis to inform and prioritise responses, remains key to balancing risk taken in line with risk appetite. The principal and emerging risks are mapped to strategic business plans to ensure a comprehensive coverage of risks, allowing the Board to undertake a robust assessment of the potential exposures faced by the Group and whether these represent new, increased or decreased threats and the level of response required to manage them. The risk profile comprises both interconnected and discrete risks at strategic, operational and project level and focuses on understanding the worst-case scenarios that could threaten the Group's strategy and business model. As a result, changes in the Group's risk profile and movements in some of the principal risks have been identified and are described on pages 94 to 101.

Description and impact                                       Causes                                                       Mitigation 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
1 Health and safety 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
The Group works on                                           Some common themes                                           Balfour Beatty's Zero                                        Owner 
 and delivers significant,                                   which could drive                                             Harm Strategy and its                                       Safety and 
 complex and potentially                                     health and safety                                             supporting policies and                                     Sustainability 
 hazardous projects                                          risks include:                                                procedures remain embedded                                  Committee 
 which require continuous                                     *    inadequate risk identification/assessment;              and act as a key control                                    Risk movement 
 monitoring and management                                                                                                 in managing the risk.                                       - 
 of health and safety                                                                                                      The strategy and associated                                 No movement 
 risks.                                                       *    lack of competence;                                     action plans are reviewed                                   Well-established 
 What impact it might                                                                                                      and monitored by management                                 controls and 
 have                                                                                                                      and external accreditation                                  mitigations 
 Failure to manage                                            *    processes that fail to deliver risk elimination or      bodies.                                                     continue to 
 these risks presents                                              mitigation;                                             Experienced and competent                                   remain in place 
 the potential for                                                                                                         health and safety professionals                             throughout the 
 significant harm,                                                                                                         provide advice and support,                                 Group and 
 including fatal or                                           *    lack of clear safety leadership, impacting broader      monitor culture and undertake                               represent 
 life-changing injuries                                            safety culture;                                         regular reviews.                                            a stable control 
 to employees, subcontractor                                                                                               The Safety and Sustainability                               environment. 
 staff, third parties                                                                                                      Committee of the Board                                      Multiple 
 or members of the                                            *    ineffective management of subcontractors, JV partners   and business Health and                                     failures 
 public. It also presents                                          and other third parties;                                Safety executive leadership                                 within this 
 the threat of potential                                                                                                   teams, meet regularly                                       environment 
 criminal prosecutions,                                                                                                    throughout the year to                                      would be 
 significant fines,                                           *    failure to cascade and follow Health and Safety         capture lessons learned                                     required 
 debarring from contract                                           procedures; and/or                                      and develop a consistent                                    for the risk 
 bidding and reputational                                                                                                  approach to health and                                      to be realised. 
 damage.                                                                                                                   safety best practice. 
                                                              *    lack of focus on the wellbeing and mental health of     Training programmes (including 
                                                                   staff faced by daily work and life pressures.           behavioural) are in operation 
                                                                                                                           across the business. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
2 Managing Commercial 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
The Group delivers                                           Key causes that could                                        The Group Tender and Investment                              Owner 
 high profile, complex                                       drive this risk include:                                      Committee reviews and                                       Group Tender 
 projects that can                                            *    lack of clearly defined bid strategy;                   challenges all proposals                                    and Investment 
 often carry specialised                                                                                                   in line with minimum commercial                             Committee 
 deliverables together                                                                                                     expectations. 
 with intricate, multifaceted                                 *    misalignment between Balfour Beatty and client          Defined delegated authority                                 Risk movement 
 and sometimes onerous                                             approach;                                               levels are in place for                                     - 
 commercial terms.                                                                                                         approving all tenders                                       No movement 
 Delivering contract                                                                                                       and infrastructure investments.                             Current controls 
 obligations alongside                                        *    working with a new or unknown customer with no known    Customer adoption of the                                    champion a more 
 the supply chain,                                                 established relationship;                               UK Government Construction                                  collaborative 
 for Balfour Beatty's                                                                                                      Playbook steers an approach                                 approach with 
 customers, whilst                                                                                                         towards increased collaboration,                            customers to 
 protecting the interests                                     *    supply chain lacking the capability to accept and       which results in reduced                                    manage the risk. 
 of all parties, maintaining                                       manage back-to-back terms, resulting in increased       risk, and an increased                                      Controls to 
 a profitable and                                                  risk carried by Balfour Beatty;                         focus on quality of bid                                     mitigate the 
 sustainable order                                                                                                         rather than being solely                                    likelihood and 
 book, and delivering                                                                                                      cost focused.                                               impact by 
 stakeholder value,                                           *    failure to engage in an early collaborative approach    A 'getting left early'                                      preventing 
 can pose an element                                               with the customer;                                      approach adopted prior                                      the Group from 
 of risk.                                                                                                                  to the procurement process                                  bidding for 
 What impact it might                                                                                                      enables influence over                                      unsustainable 
 have                                                         *    lack of balanced approach to allocation or sharing of   contracting and procurement                                 work and 
 Failure to fully                                                  risk; and/or                                            model to two-stage tender,                                  therefore 
 understand or manage                                                                                                      supports an early collaborative,                            limiting any 
 the application of                                                                                                        solution-based approach                                     potential 
 commercial terms                                             *    lack of early identification of a contracting           with customers and minimises                                exposure, 
 across contracts                                                  strategy between all parties.                           risk on both sides.                                         remain key. 
 can result in the                                                                                                         A wide and ongoing range                                    Following a 
 use of valued time                                                                                                        of work winning initiatives                                 review of the 
 and associated cost                                                                                                       (including Cash is our                                      Work Winning 
 of resource to manage                                                                                                     Compass, High Value Selling                                 risk, this has 
 any disputes, potential                                                                                                   and the Win Business Leadership                             now been 
 losses or reduction                                                                                                       community of practice)                                      refocused 
 in profits and damage                                                                                                     are in place across the                                     on understanding 
 to relationships                                                                                                          Group to drive increased                                    and managing 
 with key customers                                                                                                        commercial and customer                                     commercial 
 and supply chain                                                                                                          awareness and further                                       terms. 
 partners.                                                                                                                 embed an understanding 
 Failure to effectively                                                                                                    of expectations on margins 
 engage and collaborate                                                                                                    and cost. 
 with customers and                                                                                                        The Gateway review process 
 supply chain around                                                                                                       highlights key commercial 
 managing terms could                                                                                                      risks closely aligned 
 also result in the                                                                                                        to Group Circles of Risk 
 Group opting out                                                                                                          to ensure adequate qualification 
 of certain works                                                                                                          and mitigation of key 
 or even may limit                                                                                                         exposures. 
 access to targeted                                                                                                        Monthly business reviews 
 markets in the future.                                                                                                    pick up any early indicators 
                                                                                                                           with potential for disputes 
                                                                                                                           arising on contracts, 
                                                                                                                           including across the subcontractor 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
3 Project delivery 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
Failure to deliver                                           Failure to implement,                                        A continued focus on identifying                             Owner 
 projects in line                                            maintain and challenge                                        and reporting risks, including                              Group management 
 with customer expectations                                  operational and commercial                                    planning, programme accuracy                                Risk movement 
 and required specifications,                                controls (as detailed                                         of cost and cash forecasting                                - 
 on time and on budget                                       within checklists                                             and resource reviews is                                     No movement 
 and minimise the                                            at Gateway reviews)                                           maintained through the                                      Consistent 
 risk of increased                                           allowing:                                                     Gated Business Lifecycle.                                   application 
 costs, delay related                                         *    unrealistic programming targets;                        Early engagement of integrated                              of the Group's 
 damages and defect                                                                                                        work winning and project                                    reporting 
 liabilities.                                                                                                              delivery teams across                                       systems 
 What impact it might                                         *    inadequate resource (people, plant and materials) or    the Gateway processes                                       and diligent 
 have                                                              competency of resource;                                 to ensure customer expectations                             use of short 
 Failure to manage                                                                                                         are understood and realistic.                               interval control 
 and/or deliver against                                                                                                    Deployment and ongoing                                      processes remain 
 customer expectations,                                       *    lack of comprehensive understanding of contract         monitoring of strong commercial                             in place across 
 scope specifications                                              obligations;                                            management and contract                                     all stages of 
 and key deliverables                                                                                                      administration processes                                    project 
 in line with schedule                                                                                                     through the project lifecycle.                              delivery, 
 and budget could                                             *    unrealistic progress assessments and cost to complete   Optimal scheduling of                                       providing 
 result in issues                                                  judgements which could arise due to poor training,      key staff and associated                                    greater 
 such as design issues,                                            lack of supervision, lack of accountability or fear     competencies within project                                 certainty of 
 contract disputes,                                                of reporting bad news;                                  delivery teams and senior                                   operational 
 rejected claims,                                                                                                          management, with ongoing                                    outcomes. 
 liquidated damages,                                                                                                       and focused training.                                       However 
 cost overruns and                                            *    overly optimistic claim recovery assumptions;           The site mobilisation                                       it is 
 failure to achieve                                                                                                        hub facilitates early                                       acknowledged 
 anticipated customer                                                                                                      and effective start-up                                      that continued 
 savings which in                                             *    incomplete visibility and appreciation of scale of      on site.                                                    verification 
 turn could reduce                                                 commercial judgements;                                  Use of innovative and                                       of the 
 the Group's profitability                                                                                                 cost-effective engineering                                  effectiveness 
 and damage its reputation.                                                                                                and technical solutions                                     of controls 
 The Group may also                                           *    failings in administering the contract terms to         (including the vision                                       remains key 
 be exposed to long-term                                           safeguard or protect future claims, change orders and   for 25% offsite fabrication                                 to managing 
 obligations including                                             extensions of time (EOTs); and/or                       by 2025).                                                   this risk, hence 
 litigation and costs                                                                                                      Drive for defect-free                                       no reduction 
 to rectify defective                                                                                                      delivery including digital                                  in risk 
 or unsafe work.                                              *    poor management and selection of subcontractors.        progressive assurance                                       exposure. 
 Delivery failure                                                                                                          of project delivery. 
 on a high-profile                                                                                                         Professional indemnity 
 project could result                                        Customer intervention                                         cover in place to provide 
 in significant reputational                                 and additional pressure                                       further financial safeguards. 
 damage, debarring                                           to complete a project                                         Prequalification and competency/capacity 
 from future work                                            may also contribute                                           verification of supply 
 and significant associated                                  to realisation of                                             chain partners, with performance 
 costs of rectification                                      this risk.                                                    of subcontractors and 
 or dispute resolution.                                                                                                    suppliers monitored closely 
                                                                                                                           throughout the project 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
4 Joint ventures 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
Failure to implement                                         The risk could be                                            The Group Tender and Investment                              Owner 
 robust controls around                                       realised through:                                            Committee process also                                      Group Tender 
 the selection of                                              *    ineffective assessment of potential JV partners        applies to all joint venture                                and Investment 
 joint venture (JV)                                                 including liquidity, capacity and capability;          proposals.                                                  Committee 
 partners, define                                                                                                          The Group's primary course                                  Risk movement 
 a clear governance                                                                                                        is to self-deliver projects                                 - 
 structure or establish                                        *    failure to ensure 'fit for purpose' terms with the     where possible rather                                       No movement 
 a 'one team' culture                                               right JV partner;                                      than as part of a JV,                                       Whilst there 
 may result in failure                                                                                                     whilst recognising that                                     has been 
 to deliver expected                                                                                                       establishing the right                                      significant 
 returns and minimise                                          *    lack of clarity of the delegated levels of authority   partnership can be an                                       improvement 
 the risk of unexpected                                             between partners;                                      opportunity to deliver                                      in the process 
 liabilities.                                                                                                              work.                                                       for entering 
 What impact it might                                                                                                      Appointment of an appropriately                             JVs, the 
 have                                                          *    delayed and fettered decision-making process between   constituted JV Board to                                     longer-term 
 Not selecting the                                                  partners;                                              act as the main governance                                  effect of this 
 right JV partner                                                                                                          vehicle for the Group.                                      on the risk 
 who aligns to Balfour                                                                                                     The Gated Business Lifecycle                                remains to be 
 Beatty's culture                                              *    segregation of management systems (financial and       provides governance over                                    seen - ongoing 
 and values could                                                   operational);                                          the selection of JV partners,                               exposure 
 result in a mismatch                                                                                                      and highlights partner                                      continues. 
 of partner objectives,                                                                                                    related risks, closely 
 which flows through                                           *    lack of understanding of contract requirements and     aligned to Group Circles 
 to ineffective delivery                                            expectations;                                          of Risk including those 
 of contract requirements                                                                                                  related to capacity, capability, 
 and a misalignment                                                                                                        previous experience with 
 in approach resulting                                         *    lack of oversight over JV reporting and application    the Group and liquidity. 
 in a significant                                                   of processes implemented across the project; and/or    Experienced project directors 
 impact to profitability                                                                                                   are appointed to manage 
 and reputational                                                                                                          the JV and provide an 
 damage.                                                       *    failure to align Balfour Beatty and JV partner         ongoing assessment of 
 The failure of a                                                   cultures, values and practices.                        operational delivery risk. 
 JV partner may expose                                                                                                     Good practice, including 
 the Group to increased                                                                                                    the use of joint reporting 
 resourcing costs                                                                                                          systems where appropriate, 
 and ongoing liability,                                                                                                    is shared between all 
 warranty and insurance                                                                                                    partners to embed the 
 risks.                                                                                                                    Group's expectations and 
 Disputes with JV                                                                                                          culture throughout JV 
 partners could impact                                                                                                     delivery teams. 
 the Group's ability                                                                                                       Balfour Beatty monitors 
 to operate successfully                                                                                                   the performance of its 
 and/or expand within                                                                                                      JV partners throughout 
 its chosen markets.                                                                                                       the lifecycle of a project. 
 Failure to share 
 and meet the Group's 
 health and safety 
 management expectations 
 could result in increased 
 potential for injury 
 and/or fatality. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
5 Data protection 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
The Group is exposed                                         A data breach may                                            HR Data Protection Coordinators                              Owner 
to a significant                                              be experienced due                                           and Data Privacy Champions                                  Group management 
data breach that                                              to:                                                          remain embedded throughout                                  Risk movement 
results in a breach                                            *    ineffective training/lack of competency;               the business to ensure                                      V 
of the General Data                                                                                                        breaches are reported                                       Decreased 
Protection Regulation                                                                                                      promptly and risks are                                      Implementation 
(GDPR).                                                        *    third-party error;                                     appropriately escalated                                     of increased 
What impact it might                                                                                                       to the Group Data Protection                                controls since 
have                                                                                                                       Officer (GDPO) for consideration                            the introduction 
Crystallisation of                                             *    system failure, lack of system capability or system    and assessment.                                             of GDPR has 
this risk has the                                                   breach;                                                Senior Information Risk                                     reduced overall 
potential for:                                                                                                             Officer acts as Executive                                   exposure. 
 *    legal and regulatory proceedings, investigations or                                                                  Committee representative 
      disputes and associated costs;                           *    malicious act (internal/external);                     for data protection. 
                                                                                                                           All employees undertake 
                                                                                                                           annual training in data 
 *    operational impact (disruption to business as usual);    *    lack of awareness;                                     protection and information 
                                                                                                                           security management. 
                                                                                                                           Implementation of standardised 
 *    costs and losses, fines and penalties;                   *    unforeseen or sudden increase in data handling;        systems (including One 
                                                                                                                           Trust for managing data 
                                                                                                                           subject access requests 
 *    reputational harm and potential debarment; and           *    human error; and/or                                    (DSAR) and incidents) 
                                                                                                                           and appropriate policies, 
                                                                                                                           procedures and standard 
 *    data subject rights process failure.                     *    lack of corporate accountability.                      templates driving a culture 
                                                                                                                           of privacy across the 
                                                                                                                           Increased engagement with 
                                                                                                                           Site of the Future teams 
                                                                                                                           allows for early involvement 
                                                                                                                           in IT initiatives from 
                                                                                                                           a privacy and data governance 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
6 Cybersecurity 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
A failure to protect                                         Several internal                                             The risk is managed via                                      Owner 
 key Company and employee                                    and external factors                                         the following controls:                                      Group management 
 data or other confidential                                  could contribute                                              *    network and endpoint protection, encryption, patching  Risk movement 
 information resulting                                       to the realisation                                                 and data back-up;                                      - 
 from a breach of                                            of this risk such                                                                                                         No movement 
 system security.                                            as:                                                                                                                       Whilst a 
 What impact it might                                         *    poor internal governance;                               *    awareness training with mandated annual refresher in   potential 
 have                                                                                                                           place across all users;                                impact increase 
 Realisation of this                                                                                                                                                                   in line with 
 risk could result                                            *    failure to embed preventative culture;                                                                              increased 
 in:                                                                                                                       *    employee vetting;                                      attempts 
  *    reputational harm (loss of market and customer                                                                                                                                  is being seen 
       confidence);                                           *    increased exposure to phishing attacks and ransomware                                                               more broadly 
                                                                   due to increased use of personal devices and remote     *    data governance framework regularly reviewed, and      across other 
                                                                   working;                                                     supported by policies and certifications;              sectors and 
  *    potential fines and prosecution;                                                                                                                                                organisations, 
                                                              *    lack of retention policy applied to data;               *    incident management feedback mechanism (embeds         resilience 
  *    loss of intellectual property and competitive                                                                            lessons learned);                                      as a result 
       advantage; and                                                                                                                                                                  of improved 
                                                              *    operational failure.                                                                                                controls and 
                                                                                                                           *    partner and supplier controls in place including       ongoing 
  *    operational impact restricting ability to carry out                                                                      vendor risk management assessments and established     governance 
       business critical activities (disruption to business   *    inconsistent approach to data security with joint            relationships with external security authorities;      has meant no 
       as usual).                                                  venture / external partners;                                                                                        material change 
                                                                                                                                                                                       to this risk. 
                                                                                                                           *    roll out of One Drive to all users across the estate, 
                                                              *    increased use of cloud services without equivalent           enabling secure data storage in Microsoft cloud; 
                                                                   investment in modern threat prevention; and/or 
                                                                                                                           *    infoSec actively monitoring for security incidents 
                                                              *    cyber attack.                                                and remediating where necessary; 
                                                                                                                           *    privileged access to all core systems subject to 
                                                                                                                                multi-factor authentication; 
                                                                                                                           *    systems run security agents for additional (24x7) 
                                                                                                                                monitoring; and 
                                                                                                                           *    legacy operating systems removed or minimised, 
                                                                                                                                including upgrade and removal of employee legacy 
                                                                                                                                mobile devices. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
7 People and talent 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
Inability to attract                                         A failure to effectively                                     Providing a positive working                                 Owner 
 and retain the required                                     mitigate the Group's                                         environment to support                                       The Board 
 levels of skilled                                           people risks may                                             the development of its                                       Risk movement 
 and competent staff                                         arise through:                                               employees has been central                                   - 
 and key talent to                                            *    overbidding or ineffective workload and location       to Build to Last.                                            No movement 
 deliver project commitments                                       scheduling;                                            Specific controls to mitigate                                Through Build 
 and meet the Group's                                                                                                     this risk include:                                           to Last, Balfour 
 objectives.                                                                                                               *    implementation of HR strategy and plan and associated  Beatty has 
 What impact it might                                         *    overheating of market causing significant increase in        measurement of KPIs to inform decision making against  created 
 have                                                              demand or competition for people, specifically in            budgets;                                               a culture with 
 Failure to recruit                                                certain sectors and regions;                                                                                        strong people 
 and retain appropriately                                                                                                                                                              policies and 
 skilled people or                                                                                                         *    a focus on strategic workforce planning protocol to    processes which 
 grow in-house talent                                         *    lack of visibility of long-term pipeline or perceived        prevent resource conflicts;                            continue to 
 could harm the Group's                                            career progression resulting in existing workforce                                                                  mitigate this 
 ability to win or                                                 leaving the Group or sector;                                                                                        risk. 
 perform specific                                                                                                          *    work winning and project delivery aligned to internal  The Group will 
 contracts, manage                                                                                                              and external recruitment activities, with early        monitor the 
 delivery cost increases,                                     *    inability to recruit and retain strong performers;           review of people and resourcing needs via GBL to       impact that 
 grow business and/or                                                                                                           ensure adequate capability and capacity to deliver     any delays to 
 meet strategic objectives                                                                                                      work prior to bidding;                                 strategic 
 including acquisition                                        *    failure to maintain a culture of pride and advocacy                                                                 projects 
 of future order book.                                             across the workforce;                                                                                               has on the 
 A high level of staff                                                                                                     *    competency frameworks within core job families         availability 
 turnover or low employee                                                                                                       identify and support the development of key knowledge  of skilled 
 engagement could                                             *    ineffective and or lack of adequate investment and     ,                                                            resource. 
 result in a loss                                                  decision making in the development of existing skills        skills and expertise; 
 of competency, reducing                                           and capabilities; 
 business confidence 
 within the market,                                                                                                        *    recruitment and retention rates are measured and 
 a loss of stakeholder                                        *    lack of a diverse workforce; and/or                          regularly reviewed across all parts of the business, 
 confidence and an                                                                                                              with succession plans identified for core 
 inability to drive                                                                                                             disciplines; 
 business growth or                                           *    issues throughout labour supply chain including 
 improvements.                                                     impact of Brexit/ onerous immigration controls. 
                                                                                                                           *    annual PPR (people and talent reviews), with regular 
                                                                                                                                reviews of remuneration and incentive arrangements to 
                                                                                                                                ensure they are appropriate to help the Group attract 
                                                                                                                                motivate and retain key employees; 
                                                                                                                           *    Group-wide employee engagement surveys are undertaken 
                                                                                                                                to measure engagement and appropriate actions are 
                                                                                                                                developed and communicated; 
                                                                                                                           *    the Balfour Beatty Academy has been established in 
                                                                                                                                the UK to support professional and personal 
                                                                                                                                development in line with role requirements; 
                                                                                                                           *    Training Needs Analysis and competency tools (COMEA) 
                                                                                                                                identifies role capability requirements and 
                                                                                                                                highlights development gaps to inform investment 
                                                                                                                                decision making; 
                                                                                                                           *    strong employee communication channels are in place 
                                                                                                                                celebrating individual, business and Group-level 
                                                                                                                                successes and increasing visibility of future 
                                                                                                                                pipeline and opportunities; 
                                                                                                                           *    affinity networks established to create a diverse and 
                                                                                                                                inclusive working environment; and 
                                                                                                                           *    emerging talent is supported by strong graduate, 
                                                                                                                                apprenticeship, trainee and industrial 
                                                                                                                                placement/internship schemes. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
8 Sustaining focus on build to last strategy 
The Group does not                                           Failure to deliver                                           Ensuring Build to Last                                       Owner 
 sustain and build                                           and/or demonstrate                                           continues to deliver and                                     The Board 
 upon the strong foundation                                  sustained focus and                                          demonstrate value is a                                       Risk movement 
 and culture created                                         momentum could arise                                         strategic priority for                                       V 
 through its Build                                           from:                                                        the Group and is led by                                      Decreased 
 to Last strategy.                                            *    complacency and/or localised adaptations within core   the Group Chief Executive.                                   The recent 
 What impact it might                                              disciplines or siloed cultures;                        Controls include:                                            launch 
 have                                                                                                                      *    continuous measurement and reporting of KPIs aligned   of the refreshed 
 Inconsistency in                                                                                                               to Lean (cash flow and profit from operations),        Cultural 
 working practices                                            *    ineffective communication and reinforcement of               Expert (employee engagement), Trusted (customer        framework 
 and siloed cultures                                               messaging through a lack of leadership;                      satisfaction), Safe (Zero Harm) and Sustainable        and associated 
 could drive inefficiencies                                                                                                     (carbon emissions) within each business unit;          values and 
 including increased                                                                                                                                                                   behaviours 
 costs and operational                                        *    inadequate resourcing (financial, physical assets and                                                               has strengthened 
 errors resulting                                                  people);                                                *    refreshed cultural framework under Build to Last with  and reinforced 
 in reputational harm                                                                                                           associated engagement and embedment in systems and     Build to Last 
 impacting all of                                                                                                               processes aligning the UK and US under one unified     principles and 
 the Group's stakeholders                                     *    new systems and processes being used without                 cultural framework and reinforcing expected values     disciplines 
 as well as an impact                                              appropriate controls being in place and/or tested;           and behaviours                                         across the 
 on the Group's ability                                            and /or                                                                                                             business 
 to deliver sustainable                                                                                                                                                                - improved 
 profitable growth.                                                                                                        *    senior leadership team well experienced in delivering  oversight 
                                                              *    new people joining the organisation (including in            business transformation successfully with clear and    via regular 
                                                                   leadership roles).                                           frequent senior leadership engagement across the       reporting and 
                                                                                                                                businesses;                                            discussion 
                                                                                                                                                                                       KPIs has reduced 
                                                                                                                           *    upskilling, training and development initiatives at    risk overall. 
                                                                                                                                key levels throughout the business to reinforce Build  Continuous 
                                                                                                                                to Last principles in key job families i.e.            messaging 
                                                                                                                                commercial, project management, engineering etc; and   and 
                                                                                                                                                                                       across all 
                                                                                                                           *    induction, recognition and PDR approach heavily        employee 
                                                                                                                                weighted around Build to Last principles and culture   touch points 
                                                                                                                                including expected values and behaviours.              remains key. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
9 Financial strength 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
The Group's inability                                        Failure to manage                                            The Group continues to                                       Owner 
to maintain the financial                                    financial risks,                                              operate within a low financial                              The Board 
strength required                                            including forecasting                                         risk environment. On 1                                      Risk movement 
to operate its business                                      material exposures,                                           July 2020 the Group redeemed                                - 
and deliver its objectives.                                  and the financial                                             in full its preference                                      No movement 
What impact it might                                         resources of the                                              shares for GBP112m, reflecting                              Controls within 
have                                                         Group that underpin                                           its continued strong liquidity                              Finance and 
Failure to protect                                           its ability to:                                               position.                                                   Treasury 
and effectively deliver                                       *    meet ongoing liquidity obligations so that it remains   The Group operates with                                     functions 
the required financial                                             a going concern; and/or                                 a centralised Treasury                                      continue to 
strength will mean                                                                                                         function that is responsible                                demonstrate 
the Group:                                                                                                                 for managing key financial                                  a clear ability 
 *    fails to meet financial covenant tests, as set out in   *    meet financial covenants as set out in financing        risks, cash resources                                       to manage 
      its financing facility agreements, leading to a              facility agreements.                                    and the availability of                                     existing 
      default event if not remedied within a specific grace                                                                liquidity and credit capacity.                              and anticipated 
      period;                                                                                                              The Group maintains significant                             risk. 
                                                                                                                           undrawn term committed 
                                                                                                                           bank facilities with a 
 *    fails to pass the required tests that allow it to                                                                    banking group of high 
      continue to use the going concern basis of accounting                                                                credit quality to underpin 
      in preparing its financial statements;                                                                               the liquidity requirements 
                                                                                                                           of the Group. 
                                                                                                                           The Group maintains significant 
 *    loses the confidence of its chosen markets; and/or                                                                   bank and surety bonding 
                                                                                                                           facilities to deliver 
                                                                                                                           trade finance requirements 
 *    loses the ability to compete for key long-term                                                                       of the Group on an ongoing 
      contracts that are critical to its viability and                                                                     basis. 
      delivery of its long-term objectives.                                                                                The Group operates standardised 
                                                                                                                           reporting, forecasting 
                                                                                                                           and budgeting financial 
                                                                                                                           processes. This allows 
                                                                                                                           monitoring of the impact 
                                                                                                                           of business decisions 
                                                                                                                           on financial performance 
                                                                                                                           over future time horizons. 
                                                                                                                           Assets from the Investments 
                                                                                                                           portfolio can be sold 
                                                                                                                           to generate cash. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
10 Supply chain 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
Supply chain partners                                        Crystallisation of                                           The Group aims to develop                                    Owner 
 fail to meet the                                            capacity, competency                                          long-term relationships                                     Group management 
 Group's operational                                         and stability risks                                           with key subcontractors,                                    Risk movement 
 expectations and                                            to the Group's supply                                         working closely with them                                   - 
 requirements in relation                                    chain may arise through:                                      to understand their operations                              No movement 
 to capacity, competency,                                     *    lack of capacity or failing to retain subcontractors    and dependencies. This                                      The Group 
 quality, financial                                                in a buoyant market over-reliance on a limited         includes relationship                                       continues 
 stability, safety,                                                number of suppliers or a failure of key supplier        mapping with strategic                                      to be diligent 
 environmental, social                                             relationships;                                          suppliers, lessons learned                                  in its 
 and ethical.                                                                                                              from previous projects                                      assessment 
 What impact it might                                                                                                      together and briefing                                       of its supply 
 have                                                         *    failure to embed the Group's expectations within the    on order book requirements.                                 chain. The 
 Failure in delivery                                               procurement process;                                    The Group has undertaken                                    reduction 
 by, or management                                                                                                         significant work to identify                                in the number 
 of a subcontractor                                                                                                        and understand who its                                      of active 
 or supplier, would                                           *    inadequate assessment of supply chain partner           key supply chain partners                                   suppliers 
 result in the Group                                               capabilities, capacity and process (including           are, reducing the number                                    and increased 
 becoming involved                                                 liquidity, quality, safety, ethics, materials           to 40 known core partnerships.                              system solutions 
 in disputes, having                                               stewardship, child labour, forced labour and modern     The risk management framework                               to track 
 to find a replacement                                             slavery);                                               and the Gateway review                                      performance 
 or undertaking the                                                                                                        process allow for early                                     and metrics 
 task itself. This                                                                                                         (Gates 1-4) and ongoing                                     throughout 
 could result in delays,                                      *    lack of supplier resilience (due to economic            (Gate 6) assessment of                                      operational 
 business disruption,                                              uncertainty including Brexit or any lagging effects     the appropriateness of                                      delivery improve 
 additional costs                                                  seen as a result of COVID-19 and artificial 'propping   resource allocation and                                     oversight. 
 or a reduction in                                                 up' from the furlough scheme);                          dependencies and development 
 quality/increased                                                                                                         of procurement strategies. 
 defects owing to                                                                                                          Pre-qualification accreditation 
 lack of expertise                                            *    failure to accurately assess project resource           in place for core suppliers 
 or competency.                                                    requirements and key deliverables;                      (validated in Gates 1-3), 
 Mistreatment of suppliers,                                                                                                with oversight of supplier 
 subcontractors and                                                                                                        metrics and overall 'health'. 
 their staff, or poor                                         *    impact from Brexit including increased tariffs and      Contingency plans address 
 ethical standards                                                 delays;                                                 potential subcontractor 
 in the supply chain,                                                                                                      failure, including replacement 
 could lead to legal                                                                                                       supplier list. 
 proceedings, investigations                                  *    lack of adequate oversight, supervision or management   A central database tracks 
 or disputes resulting                                             during delivery; and/or                                 individual subcontractor 
 in business disruption,                                                                                                   scoring in relation to 
 losses, fines and                                                                                                         capacity, compliance, 
 penalties, reputational                                      *    unethical treatment of the supply chain.                performance and financial 
 damage and debarment.                                                                                                     health. 
                                                                                                                           The Group obtains project 
                                                                                                                           retentions, bonds and/or 
                                                                                                                           letters of credit from 
                                                                                                                           subcontractors, where 
                                                                                                                           appropriate to mitigate 
                                                                                                                           the impact of any insolvency. 
                                                                                                                           Suppliers and subcontractors 
                                                                                                                           reviewed for third-party 
                                                                                                                           suitability compliance 
                                                                                                                           via PAS 91 Assessment 
                                                                                                                           (Industry Standard). 
                                                                                                                           Group-wide Code of Conduct 
                                                                                                                           and Supplier Code of Conduct, 
                                                                                                                           targeted training programmes 
                                                                                                                           and related policies and 
                                                                                                                           procedures in place. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
11 code of conduct compliance 
Failure to comply                                            Failure to comply                                            A Group-wide Code of Conduct                                 Owner 
 with the Code of                                             with the Code of                                             and Supplier Code of Conduct,                               The Board 
 Conduct across the                                           Conduct and Balfour                                          and related policies,                                       Risk movement 
 Group including employees,                                   Beatty values could                                          procedures and training                                     V 
 JV partners, and                                             arise from:                                                  are in place, promoted,                                     Decreased 
 within the supply                                             *    failure to adopt a risk-based approach;                monitored and assessed                                      The Business 
 chain.                                                                                                                    by the Business Integrity                                   Integrity 
 What impact it might                                                                                                      function.                                                   function 
 have                                                          *    failure to establish appropriate corporate culture;    The function provides                                       continues to 
 Failure to comply                                                                                                         business integrity reports                                  actively promote 
 with the Code of                                                                                                          to the Board biannually                                     the required 
 Conduct and Balfour                                           *    failure to embed the Company's values and behaviours   and has its full support.                                   behaviours and 
 Beatty values could                                                through the organisation;                              Each business unit, supported                               learning tools 
 leave the Group exposed                                                                                                   by the Business Integrity                                   to 
 to:                                                                                                                       function, is responsible                                    comprehensively 
  *    instances of bribery and corruption;                    *    lack of effective training programme and compliance    for embedding the Code                                      support the 
                                                                    monitoring;                                            of Conduct and the Company's                                Group's conduct 
                                                                                                                           values and behaviours                                       and compliance 
  *    fraud, deception, false claims or false accounting;                                                                 within its operations.                                      objectives. 
                                                               *    failure to have a robust testing and monitoring        The Group has a range                                       The risk is 
                                                                    programme in place;                                    of operational controls                                     assessed as 
  *    unfair competition practices;                                                                                       (commercial, including                                      having reduced 
                                                                                                                           procurement, due diligence                                  due to the 
                                                               *    lack of appropriate whistle blowing processes          and risk assessment) that                                   consistent 
  *    human rights abuses, such as child and other labour          including ensuring awareness of such outlets across    are designed to identify                                    application 
       standards generally, illegal workers, human                  the organisation; and/or                               and manage risks internally                                 of these 
       trafficking and modern slavery;                                                                                     and with third parties.                                     controls. 
                                                                                                                           An independent third-party 
                                                               *    deliberate or reckless non-compliance.                 whistleblowing helpline 
  *    unethical treatment of and by the supply chain;                                                                     and dedicated email contact 
       and/or                                                                                                              are in place and actively 
                                                                                                                           promoted. All in-scope 
                                                                                                                           complaints are independently 
  *    ethics and values being compromised as a result of                                                                  investigated by the Business 
       commercial pressures.                                                                                               Integrity function and 
                                                                                                                           appropriate action is 
                                                                                                                           taken, where necessary. 
 Failures could result                                                                                                     Balfour Beatty works with 
 in legal proceedings                                                                                                      a limited number of agents, 
 (including prosecution                                                                                                    all of whom are, in addition 
 under the UK Bribery                                                                                                      to the Group's due diligence 
 Act), investigations                                                                                                      and approval process, 
 or disputes resulting                                                                                                     subject to specific contractual 
 in business disruption,                                                                                                   clauses, policies and 
 losses, fines and                                                                                                         agreements. 
 penalties, reputational                                                                                                   Use of a central database 
 damage and debarment.                                                                                                     to track supplier and 
                                                                                                                           subcontractor performance 
                                                                                                                           history providing insight 
                                                                                                                           into their internal operating 
                                                                                                                           processes, governance 
                                                                                                                           and values. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
12 Legal and regulatory 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
The Group does not                                           A failure to recognise                                       The Group monitors and                                       Owner 
 respond to any change                                        or adapt to potential                                        responds to tax, legal                                      The Board 
 in relevant legal,                                           impacts arising from                                         and regulatory developments                                 Risk movement 
 tax and regulatory                                           changes in applicable                                        and requirements in the                                     - 
 requirements in a                                            laws affecting the                                           territories in which it                                     No movement 
 timely manner.                                               Group's businesses                                           operates.                                                   Unforeseen 
 What impact it might                                         may result from:                                             Changes in the law and                                      exposure 
 have                                                          *    lack of awareness of any changes in law or             the requirements of them                                    to legal and 
 The Group could face                                               regulations made;                                      are clearly cascaded to                                     regulatory 
 legal proceedings,                                                                                                        all affected businesses.                                    change 
 investigations or                                                                                                         Local legal and regulatory                                  is considered 
 disputes resulting                                            *    ineffective communication of the requirements across   frameworks are considered                                   extremely 
 in business disruption,                                            relevant business units; and/or                        as part of any decision                                     unlikely- 
 losses, fines and                                                                                                         to conduct business in                                      the controls 
 penalties, reputational                                                                                                   a new territory.                                            embedded across 
 damage and exclusion                                         entering into new                                            Appropriate and responsive                                  the Group are 
 from bidding.                                                markets and/ or sections                                     policies, procedures,                                       considered 
 Such action could                                            with limited expertise                                       training and risk management                                effective 
 also impact upon                                             and due diligence.                                           processes are in place                                      in managing 
 the valuation of                                                                                                          throughout the business.                                    this risk. 
 assets within the 
 affected territory 
 as well as have an 
 impact on shareholder 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
13 Legacy pension liabilities 
The Group is exposed                                         The Group is unable                                          The Group constructively                                     Owner 
 to and must therefore                                        to ensure that the                                           and regularly engages                                       The Board 
 effectively manage                                           trustees of the pension                                      with the trustees of the                                    Risk movement 
 significant defined                                          funds react effectively                                      pension funds to ensure                                     - 
 benefit pension risks.                                       to or manage:                                                that they are taking appropriate                            No movement 
 What impact it might                                          *    changes in interest rates or outlook for inflation;    advice and the funds'                                       Triennial 
 have                                                                                                                      assets and liabilities                                      funding 
 Failure to manage                                                                                                         are being managed appropriately.                            review of the 
 these risks adequately                                        *    an increase in life expectancies;                      This includes quarterly                                     main UK fund 
 could lead to the                                                                                                         performance reporting                                       was completed 
 Group being exposed                                                                                                       and investment committee                                    in January 2020. 
 to significant additional                                     *    regulatory intervention or legislative change;         meetings in which the                                       Diverse 
 liabilities due to                                                                                                        Company is represented.                                     investment 
 increased pension                                                                                                         The funding and investment                                  portfolio 
 deficits.                                                     *    prudent funding assumptions; and/or                    arrangements of the pension                                 remains 
 This has the potential                                                                                                    funds are subject to an                                     in place, with 
 to affect the ongoing                                                                                                     in-depth triennial valuation                                regular review 
 sustainability of                                             *    investment performance of the funds' assets.           and funding review with                                     on the trade 
 the Group as well                                                                                                         regular monitoring in                                       off between 
 as incur reputational                                                                                                     years between.                                              risk and cost. 
 harm.                                                                                                                     The Group's main UK fund                                    No change in 
                                                                                                                           has hedged in excess of                                     risk. 
                                                                                                                           80% of its exposure to 
                                                                                                                           interest rate and inflation 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
14 Economic uncertainty 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 
The effects of national                                      Potentially negative                                         The Group primarily operates                                 Owner 
 or market trends                                             impacts related to                                           across three geographies                                    The Board 
 including political                                          the effects of:                                              (UK, US and Hong Kong)                                      Risk movement 
 or regulatory change,                                         *    customers postponing, reducing or changing             and three sectors (Construction                             - 
 may cause customers                                                expenditure plans including any delays in funding or   Services, Support Services                                  No movement 
 to re-evaluate existing                                            planning associated with COVID-19;                     and Infrastructure Investments).                            Whilst there 
 or future infrastructure                                                                                                  This balanced portfolio                                     has been some 
 expenditure and the                                                                                                       of projects provides resilience                             shorter-term 
 procurement of services.                                      *    wider than expected fluctuations in inflation;         and stability as the Group                                  movement seen, 
 It may also lead                                                                                                          is less exposed to a downturn                               including 
 to changes in the                                                                                                         in a single geography                                       opportunities 
 price and availability                                        *    lagging effects from Brexit - e.g. inflation, exits    or sector.                                                  associated with 
 of labour and products.                                            from market or lack of UK investment having a          The Group continues to                                      government 
 What impact it might                                               knock-on effect;                                       actively monitor market                                     infrastructure 
 have                                                                                                                      trends and potential impacts.                               spend, the 
 Any significant delay                                                                                                     A well-established cross-functional                         longer-term 
 or reduction in the                                           *    increased competition (e.g. in the UK from foreign     Brexit working group remains                                outlook remains 
 level of customer                                                  investors acquiring competitors);                      in place following the                                      uncertain. 
 spending or investment                                                                                                    end of the transition 
 plans could adversely                                                                                                     period. 
 impact the Group's                                            *    political change in both the UK and the US (new US     The financial solvency 
 strategy and order                                                 administration may have potential impact on Federal    and strength of counterparties 
 book, reduce revenue                                               spend);                                                is always considered before 
 or profitability                                                                                                          contracts are signed and 
 in the near or medium                                                                                                     assessments are updated 
 term, and negatively                                          *    increased supply chain risks (e.g. solvency, people    and reviewed whenever 
 impact the longer-term                                             and materials); and/or                                 possible during the project 
 viability of the                                                                                                          lifecycle. The business 
 Group.                                                                                                                    also seeks to ensure that 
 Restrictions on the                                           *    reduced revenue or pressure on margins.                it is not over-reliant 
 availability of skilled                                                                                                   on any one counterparty. 
 labour and competitively                                                                                                  The annual review of market 
 priced materials                                                                                                          forecasts continues to 
 could lead to increased                                                                                                   remain a core part of 
 costs and hence potentially                                                                                               the Group's Budget and 
 a devaluation of                                                                                                          Plan processes, and a 
 the business.                                                                                                             focus on medium-term market 
 Financial failure                                                                                                         outlook is considered 
 of a customer, including                                                                                                  and presented by each 
 any government or                                                                                                         Strategic Business Unit. 
 public sector body, 
 could result in increased 
 financial exposure 
 to counterparty risk. 
-----------------------------------------------------------  -----------------------------------------------------------  -----------------------------------------------------------  ---------------- 

Other risks

Climate change

Whilst climate change is not currently considered to be a principal risk to the business, it has been included as a risk on the Group Risk Register in 2020. The establishment of a sustainability specific functional risk register ensures the identification and management of climate related risks at a granular level to inform any movement or assessment at Group level.

Climate change increasing the intensity and frequency of weather events, infrastructure being deemed incompatible with targets and tightening of environmental legislation are identified as some the key drivers of the risk. It is acknowledged that whilst there remains risk associated with climate change to the Group's business, it also presents a significant opportunity as Balfour Beatty works alongside clients to be part of the solution.

Further commentary on the potential impacts of climate change and Balfour Beatty's approach to managing them is set out in the sustainability section on pages 55 to 70. Climate change risk is on pages 63 and 64.


Following the end of the UK's transition period on 31 December 2020, which ended previous exposures associated with the prolonged uncertainty around the terms of exit, the Group risk register no longer captures Brexit as a stand-alone risk. Any ongoing potential impacts or factors associated with Brexit are reflected as part of broader Group risks around supply chain and economic uncertainty.

Common industry-wide risks

In parallel with those principal and emerging risks identified and managed by the Group, Balfour Beatty faces significant risks and uncertainties that are prevalent to many companies - including financial and treasury, communications and marketing, regulatory reporting, information management, business continuity and disaster recovery, and general hazard risks.

2) Related party transactions

Joint ventures and associates

The Group has contracted with, provided services to, and received management fees from, certain joint ventures and associates amounting to GBP345m (2019: GBP334m). These transactions occurred in the normal course of business at market rates and terms. In addition, the Group procured equipment and labour on behalf of certain joint ventures and associates which were recharged at cost with no mark-up. The amounts due from or to joint ventures and associates at the reporting date are disclosed in Notes 24 and 25 respectively.

Transactions with non-Group members

The Group also entered into transactions and had amounts outstanding with related parties which are not members of the Group as set out below. These companies were related parties as they are or were controlled or jointly controlled by a non-executive director of Balfour Beatty plc.

                                  2020   2019 
                                  GBPm   GBPm 
-------------------------------  -----  ----- 
Sale of goods and services 
Anglian Water Group Ltd(+)           5     19 
URENCO Ltd                           -      2 
Purchase of goods and services 
Anchor QEA, LLC                      1      - 
-------------------------------  -----  ----- 

+ Anglian Water Group Ltd ceased to be a related party of the Group on 31 March 2020 following the retirement of Stephen Billingham as chairman from the board of Anglian Water. The sales of goods and services to Anglian Water Group Ltd represents the sales carried out in periods up until his retirement.

All transactions with these related parties were conducted on normal commercial terms, equivalent to those conducted with external parties. At 31 December 2020, there were no amounts owed by or to these related parties (2019: GBPnil) and no guarantees have been given or received and no expense has been recognised in either year for bad or doubtful debts in respect of amounts owed by related parties.

Compensation of key management personnel of the Company

                        2020   2019 
                        GBPm   GBPm 
---------------------  -----  ----- 
Short-term benefits    2.610  3.034 
Share-based payments   1.278  1.314 
---------------------  -----  ----- 
                       3.888  4.348 
---------------------  -----  ----- 

Key management personnel comprise the executive Directors who are directly responsible for the Group's activities and the non-executive Directors. The compensation included above is in respect of the period of the year during which the individuals were Directors. Further details of Directors' emoluments, post-employment benefits and interests are set out in the Remuneration report on pages 134 to 150.

3) Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the Group and parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law and have elected to prepare the parent Company financial statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the Group's profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:

   --    select suitable accounting policies and then apply them consistently; 
   --    make judgements and estimates that are reasonable, relevant, reliable and prudent; 

-- for the Group financial statements, state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the Group financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (IFRSs as adopted by the EU);

-- for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the parent Company financial statements;

-- assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

-- use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' Remuneration report and Corporate governance statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Balfour Beatty plc's Legal Entity Identifier is CT4UIJ3TUKGYYHMENQ17.

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