Reputational and financial loss could occur if we fail to address adequately issues identified by incidents, audits, complaints, PROMs, National Registries, Raising Concerns, workforce feedback and the internal Patient Safety Quality Reviews and Care Quality Commission.

There is a global shortage of nursing and allied healthcare practitioners. As the economy opened up in 2021, shortages of staff in new areas, for example hotel services, have arisen. In addition, we have an ageing workforce.

Our ability to attract and retain clinical and non-clinical staff is affected by:

-  Growth of waiting lists affecting more nurses required in NHS/IS reducing availability of colleagues.

-  Demand for nursing and healthcare workers increases resulting in higher or more competitive pay rates.

-  UK Government's pay policy in the NHS.

-  Government immigration policy and the post Brexit labour market.

-  Our business strategy of increasing complexity of medical procedures that requires a higher skilled workforce.

-  The requirement of mandatory vaccination (subject to the outcome of HM Government's consultation) from 1 April 2021 may result in Spire Healthcare having to release some patient-facing staff.

-  The reduction in elective activity within Trusts reducing the training opportunities for new Consultants.

-  New expectations for hybrid working.

In the short term, we are able to provide safe patient care only with delays to treatment because of scarce resources.

Over the medium to long term, wage inflation and resource scarcity could result in a decline in our profits and affect expected revenue growth from more complex surgical procedures and treatment of higher-risk patients.

Climate-related risks have been identified through the emerging risk process. Our climate-related risks include:

-  Severe Storm Weather events e.g. damage to roofs or flooding.

-  Prolonged spells of extreme ambient temperatures.

-  Energy price fluctuation (Decarbonisation requires changing our energy sources: moving to more expensive zero-carbon electricity tariffs and replacing gas-fired heat sources with more expensive electricity).

-  Changes in laws and regulation, including failure to meet net zero targets and obligations (e.g. in financial covenants).

The PMI market remains concentrated, with the top four companies (Bupa, AXA, Aviva and VitalityHealth) having a market share estimated at over 85%.

We have individual contractual relationships for the provision of its services with all the major PMI providers. These contracts come up for renewal on a recurring basis. There is a risk that renewal of contract terms cannot be secured on historical terms.

Service line tenders and the introduction of triage services are expected to continue medium term as PMIs look to reduce costs. We also expect an increase in directional networks.

Loss of, or renewal at lower tariffs, of an existing contractual relationship with any of the key insurers could significantly reduce revenue and profit for Spire Healthcare.

A slower recovery of the PMI market could reduce revenues and profits in the short term.

Following the end of the 2020 NHS COVID-19 contract, the business returned to normal trading channels (Private and NHS), albeit that these continue to be impacted by the pandemic (e.g. access to GP, NHS commissioning levels due to funding uncertainty).

The wider economic outlook remains unclear, with the expectation of inflation remaining higher than recent levels throughout 2022, increased tax burden, volatile energy prices, and GDP affected by social restrictions because of the Omicron variant.

Despite these macroeconomic headwinds, the expectation is that the primary growth drivers for healthcare will remain medium term, namely record NHS waiting lists, stable/growing PMI lives covered and a growing self-pay market.

Reduction of Private patients and associated revenue and profit contributions.

NHS commissioning volumes remain below historical levels.

We operate in a highly competitive market. New or existing competitors may enter the market of one or more of our existing hospitals, or offer new services.

In the current economic environment, there is a risk that the pressures on competitors results in irrational market behaviour manifesting itself in low pricing on tenders or self-pay.

The potential impact would be the loss of market share because of aggressive competitor activity leading to reduced profitability and cash flow.

We procure insurance from global insurers and syndicates with a presence in the Lloyds of London insurance market.

We could be subject to litigation for actions by third parties or may be found liable for damages which may not be covered by its insurance policies, if:

-  the claims are in excess of cover,

-  are not covered by our insurance due to other policy limitations or exclusions, or

-  where we have failed to comply with the terms of the policy.

Our insurance premiums may increase and, if there is a significant deterioration in its claims experience, insurance may not be available on acceptable terms.

There may also be costs relating to damages and defence costs.

As a substantive buyer of corporate insurance, we could be faced with increased premiums, reduced cover or withdrawal of cover because of hardening global insurance markets.

We may not have sufficient liquidity to meet our financial liabilities as they fall due, or breach financial covenants linked to its borrowings.

We may not be able to refinance on favourable terms.

Failure to meet our obligations or covenants would have a substantial adverse effect on our reputation and may lead to borrowings becoming repayable earlier than contracted.

We expect NHS England (NHSE) to complete the establishment of regional Integrated Care Systems (ICS) over the coming 18 months. Meanwhile Scotland and Wales will broadly remain unchanged.

It remains unclear what the new NHSE commissioning models and/or changes in the tariff structures will be post pandemic. Our expectation is this will become a combination of direct referrals from GPs, waiting list transfers and an increasing use of block contracts.

There is a risk that wider HM Government policy is unfavourable to the independent healthcare sector as a whole, e.g. future economic or employment policy.

Changes to NHS commissioning models, if adverse, could lead to reduced access to patients, reduced tariffs, or reduced prices adversely affecting revenues and/or margins.

A reduction in patient volumes could lead to a reduction in the operational efficiency of our existing hospital network.

Changes in HM Government fiscal policy or spending policy towards corporate organisations, or the healthcare sector in particular, could materially affect our profitability.

The widely reported disruption in the Global and UK supply chains because of a variety of factors, could lead to shortages of critical components or products within:

-  Medicines

-  Consumables

-  Prostheses

-  Food

Spire hospitals are reliant on a wide range of products in order to be able to conduct operations and procedures. Shortfalls in order fulfilment of fresh food for example, could result in hospitals having to cancel inpatient operations and procedures.

We are heavily reliant on medical consumables, which in turn are heavily reliant on the availability of plastics, to carry out even the most basic procedures (e.g. taking blood samples). Shortages in raw materials or disruption in the supply chain from the manufacturer could result in hospitals having to cancel operations and procedures.

We have to maintain and manage a range of physical and digital data assets including patient records, commercial information and staff data.

Personal data has to be managed in compliance with the principles set out in the Data Protection Act 2018 and the General Data Protection Regulations (GDPR).

The level of risk to Spire Healthcare's IT architecture and systems continues to grow as the volume of cyber security threats are increasing and becoming more sophisticated.

Healthcare and pharmaceutical organisations saw increased hostile cyber activity in 2020-21 because of the COVID-19 pandemic. We anticipate that the Healthcare sector will remain a higher risk sector from cyber-attacks.

Our business could be disrupted if its information systems fail, are breached, destroyed or damaged.

Staff and patient data could be stolen or compromised. We could also be subject to litigation by third-parties and law enforcement agencies.

A successful cyber-attack and a breach of data security could result in:

-  material costs to recover operations;

-  material financial penalties for breaches of Data Protection law;

-  compensation for patients or staff if personal data is compromised; and,

-  reputational damage.

Repeated waves of infection occur from current or future variants of COVID-19 that risk overwhelming the NHS and forcing HM Government to re-introduce severe lockdown measures regionally or nationally.

Further lockdown measures could adversely impact Spire Healthcare's operations and its profitability by:

-  Reducing the amount of elective procedures the hospitals can carry out because of additional Infection Prevention Control measures or patients reluctance to attend hospital.

-  Increased costs to support Infection Prevention Control measures and from staff absence and patient cancellations.

-  A substantive number of staff have to self-isolate because they or household members show symptoms or test positive.

-  Spire Healthcare hospitals are required to support local NHS trusts that declare Surge, preventing them from treating private patients.

-  Consultants and anaesthetists are required to support their NHS trusts to treat COVID-19 patients or the backlog in waiting lists, reducing their availability to undertake work in Spire Healthcare facilities.

The COVID-19 pandemic has resulted in a substantial amount of positive media coverage for Spire Healthcare.

Our brand presence within the consumer, NHS & HM Government environments is higher than at any point.

Our brand reputation is interconnected with a number of other Principal Risks, e.g. Clinical Quality and Patient Safety, Information Governance and Security.

Our future growth depends upon our ability to maintain, and continue to enhance, our reputation amongst patients, clinicians and other stakeholders.

As our brand presence grows, the risk increases that adverse events such as:

-  patient notifications and recalls;

-  mishandling of patient data; or,

-  a breach of law or regulation will have a more material impact on Spire Healthcare.

If we fail to protect or grow the brand it may harm our ability:

-  to maintain or grow income

-  to attract and retain the best staff and clinicians

-  to win new contracts

-  to raise capital at competitive rates

-  to meet our regulatory obligations.

The increasing range and complexity of the legislation and regulation which impact on Spire Healthcare, and our expectation that the legal and regulatory landscape in which we operate will change and become more onerous, means that this is an area of potential risk for Spire Healthcare.

In addition, as the UK makes the legal and regulatory transition from being part of the EU, there will be flux in legal and regulatory developments, potentially arising from the interpretation of retained EU law by the UK courts or from the direction taken by the UK following the end of the transition period. It is not possible to determine with any degree of certainty the speed, impact or direction of forthcoming legal or regulatory change. This will therefore require monitoring, compliance and assurance.

Failure to comply with laws, regulations or regulatory standards may expose us to claims, fines, penalties, and damage to reputation, suspension from the treatment of NHS patients, loss of hospital licence and loss of private patients.

New laws and regulations may require new compliance programmes to provide assurance that we are in compliance increasing overhead costs.

There is a risk that transformation programmes to digitalise and standardise processes fail to deliver on budget, on time and to scope because of;

-  the complex and divergent operating environment across the hospital and central sites;

-  changes to working practices required by both employees and Consultants (non-employees);

-  poor execution of change projects.

Expected efficiency gains and business benefits are not realised leading to lower profitability than is forecast.