Page 31 - RFU Annual Report 2018

2
MAJOR RISKS AND
UNCERTAINTIES

9

Governance and integrity improve the quality of experience for sure that covenants can be achieved
Strong governance procedures within guests and improve crowd flows. in the event of financial performance
the game are crucial to maintaining the The RFU also continues to diversify falling below expectations, and to enable
integrity of the sport in England, as well revenues through opportunities to bring timely remedial action if necessary.
as the RFU’s reputation as the governing other events, such as music concerts and All covenants are expected to be
body and the continuance of sponsors’ other sporting events, to the stadium. achieved based on the Group’s current
and other partners’ involvement. A forecasts for the next five years.
lack of governance would risk poor England senior men’s XV
operational, financial and strategic performance Cyber risk and data security
decisions being made, impacting on the Many of the revenue streams of the There are a wide number of potential
long term sustainability of the game as RFU depend on the performance of the cyber and data risks including, for
a whole. men’s senior team and should the level example, phishing emails introducing
of performance of the team fall for an viruses into the RFU IT systems and
The proposed changes to RFU extended period of time, it is possible data breaches. Extensive work has
governance, outlined in the 2017 Annual that this could affect revenues (tickets, been carried out in the year to ensure
Report, were implemented during the broadcast, sponsorship) which are used compliance with GDPR requirements
year. They have improved the RFU’s to reinvest in the game. The Board of and more broadly to understand and
governance, providing transparency Directors and Professional Game Board mitigate against a range of potential
over the roles and responsibilities of regularly review professional rugby cyber risks. Policies have been
each body involved in the decision strategies and financial performance to implemented to enhance security
making process, and ensuring that the manage this risk; the Professional Game protocols, including Data Protection and
right decisions are made by the right Agreement is in place to make sure that Privacy Notices being refreshed and
people. there is sufficient access to the players to communicated to the organisation and
be able to sustain performance. wider game, mandatory introduction of
Disciplinary, safeguarding and anti- GDPR training for all RFU employees
doping frameworks are reviewed Operating Twickenham Stadium and network changes.
regularly to ensure they remain robust for matches and events
and relevant. Gambling and doping Twickenham Stadium events form a The RFU has a GDPR steering
are critical risks to the integrity of significant part of the Group’s revenues. committee in place to ensure that
the game and the RFU governs these There is a risk that if the stadium is it is complying with ever-evolving
both by providing clear and regular not operational, for example for health requirements for data security.
information to people within rugby and safety reasons, those revenues will
so that everyone understands their be impacted. The RFU works closely Interest and foreign exchange
responsibilities, and by implementing with all relevant authorities, including rate risk
disciplinary proceedings in all cases of government and the local council, to The RFU receives some of its income in
non-compliance. manage this potential risk, and also has Euros from the Six Nations broadcasting
relevant insurance contracts in place to and sponsorship agreements and so
Strong and sustainable insure against stadium related losses or there is a risk that adverse exchange
commercial assets loss of revenue. rates impact on that income. The
The RFU’s ability to invest in rugby at adverse impact of currency fluctuations
all levels relies on driving sustained The RFU has a designated health and is reduced by the use of participating
value from all commercial assets. There safety lead to ensure that the Group forward contracts, purchased in line with
is a risk that the revenues achieved works at all times to improve the the Group hedging policy.
from those commercial assets reduces environment safety and comply with
and therefore that rugby investment is regulations. The RFU is investing in this Interest rate rises remain a risk for the
reduced. A strong men’s team and an area; works currently being undertaken Group in relation to the £50m term loan
effective and operational Twickenham include investment in Hostile Vehicle and £25m revolving credit facility, which
Stadium are both critical to those Mitigation defences and an extended have interest rates linked to LIBOR and
revenues and are discussed further and more secure perimeter fence. the £25m overdraft facility which has an
below. interest rate linked to base rate.
Availability of borrowing for
In order to mitigate revenue risk, major capital projects Customer or supplier
the RFU concentrates on securing The RFU has combined available bankruptcy
longer-term commercial contracts with facilities of £100m. The terms of There is a risk that the bankruptcy of a
sponsors and broadcasters to bring borrowing on these facilities (see note large customer or supplier could cause
certainty around future revenues. This 22) include certain financial covenants. significant revenue or operational and
year, the RFU has also invested heavily The key risks related to this borrowing project delivery issues. These issues
in the East Stand, and as part of this are the failure to meet those covenants are mitigated by conducting due
hospitality at Twickenham Stadium will and potential interest rate rises. diligence reviews during the negotiation
be brought fully in house. and procurement processes and by
The risk around covenants is managed reviewing the financial soundness of
This will increase revenues generated through downside modelling to make principal suppliers on a regular basis.
from matches at Twickenham, as well as

Annual
Report
2018