Description

COVID-19 continues to impact our economy, our clients, and the way people live and work around the world. The negative effects of COVID-19 on the economy have reduced with mass roll-out of vaccines and trial drugs, as well as the global shift in ways of working and managing the pandemic.

This could lead to clients-scaling back or cancelling projects. Changes in the working environment for our people whilst working remotely heightens cyber and data security risk, as processes are adapted and consumer demand evolves.

Mitigating activities

Our agile, digital ways of working enable Kin + Carta to adapt quickly to change.

Cost management programmes in place across the business.

Regular dialogue with employees and wellbeing initiatives.

New business targets in industries that have not been negatively impacted by COVID-19.

Utilising pandemic-specific government schemes, if required.

Kin + Carta continues to adapt its business continuity plans to respond to future shocks.

As well as posing risks, Kin + Carta has been well placed to take advantage of the opportunities where businesses are increasing their investment in digital capabilities.

Trend

Decrease

Strategic priorities

1, 5

Description

Challenging economic and political conditions may inhibit growth and create uncertainty. This could lead to volatility in earnings. It could also impact the outcome of strategic priorities set by the Board.

While the business has long-term contracts with clients, the level of spend is predominantly at the client's discretion rather than being derived from guaranteed sales volumes.

A worsening of the economic and political situation in Latin America could, in the short term, impact our cost base since Kin + Carta has nearshore resources that support the business there.

Mitigating activities

Diversification into markets that are capable of delivering growth with an increasing number of diverse companies.

Diversification of client geography, including through growth in new US markets and other international locations.

Offering a highly relevant suite of digital transformation service lines across areas of Cloud + Platforms, Data + AI, Products + Services, Strategy + Innovation, and Managed Services to our clients, collaborating with strategic partners where appropriate.

Set up pilot offices in Greece and Colombia, and an ongoing review of Kin + Carta's cost base and options to provide additional nearshore capability within Europe and other Latin American countries.

Secure more long-term client relationships and contracts with a greater emphasis on recurring revenue.

Trend

No change

Strategic priorities

1, 2, 6

Description

Growth is core to Kin + Carta's long-term strategy. This includes organic growth driven by strategic initiatives and inorganic growth driven by acquisitions.

Growth channels may be underinvested or not pursued in the right sectors or locations, and may, therefore, fail to deliver growth.

Failure to adhere to additional compliance imposed by public sector contracts.

As Kin + Carta scales its operations internationally, it is subject to a range of local legislation and regulations.

Mitigating activities

Investment in our Expansion Platform to define framework and criteria for local and international expansion. Targeting clients from new geographic markets through the acquisition of businesses with similar ethos to Kin + Carta. Our priorities are the US, southern Europe and expanding nearshore delivery capabilities in Latin America.

Investment in our people, bringing new service lines to market and targeting new locations.

Linking growth targets to incentives for the majority of our people within the business.

Monitoring three distinct but complementary growth channels which focus on:

•    Existing Enterprise client base

•    New business channel

•    Partnerships channel

These channels are underpinned by four growth levers: Services, Partner, Sector and Territory (see pages 28 to 33 for further information on our growth strategy).

As part of our Operations Platform, Kin + Carta maintains in-house Data Protection, Finance, Corporate Governance, CDS (IT) and Legal functions, and also uses external consultants to advise on local legal and regulatory requirements.

Trend

Increase

Strategic priorities

1, 2, 6

Description

Achieving scalability is important in order to pursue a high-growth strategy in a profitable and sustainable way. While included as a risk, achieving greater scalability is also an opportunity for the business.

Scale requires investment in sales, systems and tools, people and operations. This adds cost and complexity in the near term, which is expected to earn a payback with growth.

Digital Transformation businesses may not have sufficient scale within their sectors to secure substantial customer contracts. Without sufficient scale, our businesses may find it more challenging to secure larger client contracts.

Mitigating activities

Implementing a regional operating model under a singular management team in the Americas and Europe regions.

Implementing common Operations, People and Responsibility Platforms across the Americas and Europe regions. The Platforms introduce common practices and governance, which provide efficiency and thus a scalable offering.

Continued investment in our Service and Expansion Platforms, acquisition of high-growth digital transformation businesses and greater focus on securing longer-term contracts and revenue from partner-aligned managed services.

Trend

No change

Strategic priorities

1, 2, 5, 6

Description

Continuing to embed the regional operating model under a singular management team in the Americas and Europe regions, coupled with implementation of our common Platforms - Growth, Services, People, Responsibility, Operations and Expansion - across the two regions requires greater collaboration.

In addition to the above, short-term impacts from integrating acquisitions into the business operating model require careful planning and could manifest in the form of temporary challenges as cultures are merged and best practices are implemented as expectations need to be managed.

Mitigating activities

Establishment of a leadership team for our Americas and Europe regions with succession planning and identifying the next level of management.

Assigning leaders to each of our six Platforms and driving the implementation of the Platforms across both regions.

Investing in the digitalisation of the processes under the Operations Platform to achieve efficiencies and drive best practices.

Identifying and facilitating resource requirements to manage the changes.

Stringent selection criteria for pursuing acquisitions that fit within the Kin + Carta strategy and culture. A defined, structured plan for the integration of new acquisitions.

Focus on a highly relevant suite of digital transformation service lines to complement the talent of our People.

Our Responsible Business initiatives encourage greater collaboration across Kin + Carta with a common goal, while our employee experience programmes foster an aligned culture with shared values across the business. Kin + Carta continues to identify areas for assimilation and integration to create a solid platform for growth through a responsible business lens.

Trend

No change

Strategic priorities

1, 2, 3, 5, 6

Description

Services may not meet clients' expectations or Kin + Carta may not be able to stay ahead of the technological advances in its three core domains: Technology, Data and Experience.

By providing new innovation solutions to our clients, there is a risk of failure to deliver and embed new capabilities with the business.

Mitigating activities

Acquisitions can complement or expand Kin + Carta's service offerings.

Focus on our three key areas of technology, data and experience. Providing new innovative solutions in support of our clients' evolving technology needs. Also we continue to work with clients to understand their future requirements and viability of the new technology to ensure we are investing in relevant services.

The Chief Strategy Officer along with leaders of the Services Platform are focused on continuous evolution of our service lines. In addition, we continue to invest in our People with an emphasis on improving and developing our capability.

Trend

NEW

Strategic priorities

1, 2, 6

Description

Kin + Carta holds relationships with a number of key clients and is a strategic partner to these clients. Should Kin + Carta lose several of its largest key clients in a short time period, this could have a significant impact on its revenue, profits and people.

For the year ended 31 July 2021, the top 30 clients represented 73% of Kin + Carta's Net revenue.

Mitigating activities

We encourage our clients to think strategically about their future direction and differentiation and how, together, we can make the world work better for their customers. This approach also distinguishes Kin + Carta's offering from its competitors.

Our largest clients have multiple bespoke services and solutions being delivered to different client stakeholders, and usually with different budgets. These services also typically have various statements of work associated with them, with varying lengths of time and completion dates.

Achieve or exceed service level agreements with clients.

Avoid over reliance on any single client by diversifying the range of clients across its key operating territories and sectors.

Continuous monitoring of Client KPIs such as net revenue predictability and top 30 clients' spend.

Trend

No change

Strategic priorities

1

Description

Kin + Carta's growth has included geographic expansion of delivery teams and operations in new territories, such as Greece and Colombia. As a result, Kin + Carta is subject to a range of local and international laws and regulations.

Introducing new service lines, entering into new sectors, as well as retaining B Corp certification requires Kin + Carta to adhere to additional regulations.

Complying with and implementing our policies and procedures updated in relation to the varying COVID-19 regulations.

Failure to comply with, or promptly respond to, the applicable laws and regulation could lead to fines, penalties, restriction in trading activities and would cause reputational and financial damage to Kin + Carta.

Mitigating activities

Kin + Carta maintains in-house Data Protection, Finance, Corporate Governance, CDS (IT) and Legal functions and also uses external consultants to advise on local legal and regulatory requirements.

Our policies, such as Code of Ethics and Code of Conduct, provide guidance to our People on "Positive Impact Approach" to behave ethically, comply with all applicable local and international laws and regulations, and adhere to the mandatory requirements as defined in the policies at all times.

A framework and governance process has been implemented when moving into a new geographic area working with local consultants when required.

Trend

NEW

Strategic priorities

1, 5, 6

Description

Attracting and retaining talent is a key priority for Kin + Carta as it continues to expand and invest in new and innovative service lines and fulfil client demand.

The risk of not being able to attract and retain people is heightened due to the highly competitive environment for top talent.

This would impact the ability of the business to deliver the services sought by our clients and support the growth of the business.

Our flexible working initiatives and expanding geographic footprint could lead to non-compliance of existing or new local regulatory requirements.

Mitigating activities

Strong emphasis on people and responsibility, which are part of our strategic priorities where initiatives are focused on supporting a diverse, inclusive and responsible business, with an exceptional employee experience.

Introduction of the Employee Value Proposition ("EVP") Framework, which outlines our vision for the value we aspire to deliver for our people. The EVP supports four building blocks:

•    Recognition and Reward

•    Personal Wellbeing

•    Professional Growth

•    Purpose and Culture

Increased investment in long-term incentive plans to retain top talent.

Succession planning for senior management.

Investment in our HR, Talent Acquisition teams, which form part of our Operations Platform.

Kin + Carta continues its journey to digitise and harmonise HR processes and policies with specific emphasis on adherence to local laws and regulations.

Trend

Increase

Strategic priorities

1, 2, 3, 4, 5, 6

Description

It is vital that the brand and culture is cohesive and easily understood by clients and talent globally.

If the brand and culture do not resonate with stakeholders, business opportunities may be lost.

Our culture must attract and retain our employees whilst fostering an environment for people to do their best work.

A misalignment between our current and prospective employees' values and our business model may result in difficulties to attract, develop and retain people with the necessary talent.

Underachievement of our triple bottom line initiatives could result in the loss of talent and clients.

Mitigating activities

Alignment throughout the business to demonstrate that Kin + Carta's purpose is to build a world that works better for everyone.

People and Responsibility Platforms that span across Kin + Carta, covering employee experience, B Corp and IDEA initiatives, which are embedded into Kin + Carta's culture through grass roots participation across the business.

Monitoring of the Responsible Business KPIs that are set out in the Being a Responsible Business Section (pages 74 to 78).

Trend

No change

Strategic priorities

3, 4, 5

Description

The loss or theft of critical and sensitive data, such as personally identifiable information, could have a significant impact from a reputational, contractual, regulatory and financial standpoint. This, combined with the changes in working practices and behaviour, has significantly increased the risk profile of our business.

Mitigating activities

The Data Protection Officer is responsible for Group-wide compliance with data protection legislation, and putting in place guidance, training and processes.

Our data protection framework is closely linked to our Connective Digital Services ("CDS") IT platform with continuous efforts to ensure the data we process remains secure and confidential. The framework is reviewed on an ongoing basis to ensure Kin + Carta has robust processes to adhere to local regulations.

Investment in our IT systems and tools, such as single sign-on and mandating the implementation of multi-factor authentication on all core systems are keystones in the implementation of technology to reduce risk.

Onboarding training for new hires and employee training reinforce awareness and proper processes
are followed.

Trend

No change

Strategic priorities

2, 5

Description

As a digital transformation business, we are increasingly exposed to the impact of hacking and ransomware. This, combined with changing practices and behaviour, has increased the risk profile of our business.

Failure to adequately protect, prevent or respond to a cyber threat or unauthorised access to our systems and devices would expose Kin + Carta to non-compliance with the applicable local data protection laws, reputational damage, fines, compensation or damages, disruption to the business and/or the loss of information for our clients and our people.

Kin + Carta relies on multiple third-party platforms to communicate and deliver the services to our clients. A disruption to the availability of multiple services at a point in time could have a significant impact on Kin + Carta's finances and reputation.

Mitigating activities

The CDS team is responsible for actively identifying risks, designing internal controls and implementing change across all parts of the Company. The risk-based approach balances controls that prevent the majority of attacks, detect events and respond quickly to reduce the impact.

The ongoing efforts from our CDS IT platform to modernise and strengthen the IT infrastructure of Kin + Carta, including through implementing solutions such as multi-factor authentications on key systems, encryptions of devices, and single sign-on solutions.

The evolution of our digital ecosystem incorporates a degree of platform diversity to provide availability of data and communication tools, thereby reducing reliance and impact from a single vendor or system. Accompanied with an independent cloud backup for our core platforms, the additional focus to utilise our client environments reduces impact to project timelines due to unforeseen outages.

Trend

NEW

Strategic priorities

2, 5

Description

Kin + Carta's ability to trade may be compromised by a lack of cash funds.

Being able to finance working capital and carry out operations is fundamental to the business.

Restricted to finance selective acquisitions or reinvest in Growth, Services, People, Responsibility and Operations Platforms.

Mitigating activities

Kin + Carta secured a revolving credit facility of £85 million until September 2025. Should there be strain on Kin + Carta's liquidity, there are cost management programmes in place to limit the impact.

The leadership team prioritises areas of investment that align with our strategic priorities set by the Board.

The management undertakes the following activities to monitor the liquidity of the business:

•    Reviews to assess the headroom on liquidity and banking covenants for potential acquisition targets

•    Conduct half-yearly going concern reviews and longer-term viability assessments

•    Ongoing monitoring of Kin + Carta's performance against its banking covenants with a target of net debt/EBITDA ratio below 2.0x

•    Monthly reviews of forecasts, working capital, cash forecasts and headroom on banking covenants

•    Periodically review Kin + Carta's financial KPIs with its bankers.

Trend

Decrease

Strategic priorities

1, 2, 5, 6

Description

Scheme deficit is impacted by changes in scheme asset values, and by changes in other financial assumptions - most significantly the expected inflation rate and the discount rate derived from UK Government gilt yields, as well as changes in demographic assumptions, such as expected mortality, rates of pension commutation and transfers of members out of the Scheme. An increase in the deficit could lead to an increase in cash contributions required by the Scheme.

The strength of the sponsoring employer's covenant in relation to the Scheme could be adversely impacted by the shortfall of the consolidated net assets of the Group (£83.2 million) versus the Scheme's solvency deficit, a measure of the deficit in an insolvency scenario (£237 million as per 2019 valuation).

Mitigating activities

The Scheme is now fully hedged against interest and inflation risks. The proportion of its assets invested in assets that match the variation in the value of the Scheme liabilities, or which match expected cash flows in order to limit deficit volatility, increased in the year from 35% to 60%, following a substantial reduction in the technical deficit. The volatility of the deficit has reduced as a result. The solvency deficit reduces as the Scheme matures, as the deferred members - whose liabilities are substantially higher on an insolvency basis versus a solvency basis - become pensioners. The consolidated net assets of the Group will increase over time with profitable growth, so that the shortfall to the solvency deficit will decrease to zero with time.

A new deficit recovery plan was agreed with the Scheme Trustees, which commenced in September 2020 and aligns cash contributions with the Company's cash generation.

Regular engagement with the Trustee Directors in discussions on Kin + Carta's performance. Exploration of member liability exercises which reduce the deficit volatility.

Work with an external advisor and follow regulatory compliance.

Trend

No change

Strategic priorities

1, 6