b'52 Mercia asset Management PLc Annual Report and Accounts 2021Principal risks and uncertaintiesRisk management frameworkThe Board considers that the risksThere may be additional risks andWe have continued to build on the detailed in this Annual Report representuncertainties that are not known to theopportunities for synergies across our the key potential obstacles to achievingBoard or deemed to be less material,funds landscape and on effective the Groups strategic objectives. The keywhich may also adversely impactrecruitment and talent management, to controls over the Groups principal risksperformance and thus are monitoredensure we mitigate the risk of losing key and uncertainties are documented inwithin the Groups risk managementstaff. We have maintained our focus on Mercias risk register, which includes framework. The framework providesregulatory risk and having successfully an assessment of the risk, likelihood reasonable, but not absolute, assuranceimplemented the Senior Managers and of occurrence, severity of impact andthat the Groups principal risks areCertification Regime. We continue to mitigating actions. An assessment of managed to an acceptable level, whilstmonitor the regulatory landscape withthe strength of mitigating actionsacknowledging that the specialist assetthe Financial Conduct Authority (FCA) determines the net risk score and anymanagement sectors in which Merciaproposing capital changes, as well as further actions required. operates have investment risk inherentpotential additional measures in relation to within them. Mercias risk framework isthe promotion of higher risk investments. The Group considers identified risks undertherefore constructed to identify and three main categories with sub categoriesnavigate downside risks, whilst seeking toA third-party supplier risk has been added as appropriate: take advantage of upside risk, particularlyto our risk register in acknowledgement of when investing in young companies. our impending change of custodian for our internalincluding the Groups strategyEnterprise Investment Scheme (EIS) and business planning The risks associated with the COVID-19funds, as well as the future planned move pandemic have remained the highestto a depositary arrangement in externalincluding cyber, regulatory,priority during the year, given the range compliance with our continued growth in competitor, legal, force majeure andof potential impacts on our staff andfunds under management (FuM). We specifically, the current COVID-19portfolio companies. Staff welfare hashave also captured the risk of failure to pandemic risks been of paramount importance and wefully embrace the Environmental, Social have deployed a range of tools to helpand Governance (ESG) agenda and have operationalincluding internal systemsmaintain staff engagement whilst workingappointed Jill Williams, Investment and controls, people and talent, andat home. With the success of the vaccineDirector, to lead our awareness and compliance risks such as financial crime programme and the phased exit from themitigation in respect of this increasingly latest lock down period, we are embracingimportant risk.The Board monitors, evaluates anda gradual return to office working whilst mitigates risks to ensure that appropriatecontinuing to take precautionaryThe Groups Compliance Director reports measures are in place to minimise themeasures. Similarly, we have had a strongon the current risks being monitored and likely occurrence and impact of those focus on our portfolio companies,new or emerging risks to each meeting of risks identified. providing support in the form of topicalthe Board. Operational level monitoring is webinars etc. whilst monitoring andconducted through the Senior Leadership supporting their funding requirementsTeam and immediately escalated to the and helping to source additionalExecutive Team when appropriate.management expertise where needed.The Groups principal risks and uncertainties, their possible consequences and mitigating actions are set out in the following pages.rosie BhattacharjeeGroup Compliance Director'