b'Annual Report & Accounts 2022 Mercia Asset Management PLC 43Strategic reportMercias risk framework is therefore constructed to identifyWe have also maintained our focus on regulatory risk and and navigate downside risks, whilst seeking to take advantagechanges to the capital regime for all investment firms, of upside risk, particularly when investing in young companies. having just completed our first returns on the basis of the new rules. In addition, we are monitoring the proposed Geopolitical risk has become a strong focus given Russiaschanges to the categorisation and promotion of funds and invasion of Ukraine, and we are continuing to monitorfocus on appropriate risk disclosures for higher-risk funds. associated risks such as investee supply chain risk andFurthermore, we have assessed and formally adopted a financial risks associated with the interest rate environmentRemuneration Code in compliance with the Financial Conduct and rising inflation. We have also maintained a high focus onAuthoritys (FCA) requirements.risks such as cyber crime, given the increased potential for cyber attacks. We continue to monitor the risk of failure to fully embrace the ESG agenda as set out on page 28. We have focused on The risks associated with the COVID-19 pandemic haveclimate change and undertaken work to assess our carbon remained a high priority during the last financial year, givenfootprint and the measures to reduce it with an objective of the range of potential impacts on our staff and portfolioreaching net-zero. Currently, we have offset our footprint to companies. Staff welfare has continued to be of paramountbecome carbon neutral across the Group.importance and we continue to offer a range of tools to help staff with their mental wellbeing. With the success of theThe Groups Compliance Director reports on the current vaccine programme, we have embraced a phased return torisks being monitored, plus new or emerging risks, to each office working, whilst continuing to trust our staff to workmeeting of the Board and the Audit Committee. Operational-at all times in Mercias best interests whether in the office orlevel monitoring is conducted through the senior leadership working remotely. Similarly, we have maintained a strongof the Group and immediately escalated to the Executives focus on our portfolio companies, providing support inwhen appropriate.the form of topical webinars etc., whilst monitoring and supporting their funding requirements and helping to sourceThe Groups principal risks and uncertainties, their possible additional management, non-executive and venture partnerconsequences and mitigating actions are set out in the expertise, where needed, through our Mercia Nucleus initiative. following pages.We have continued to build an effective recruitment and talent- Rosie Bhattacharjeemanagement framework to help ensure that we mitigate, as farGroup Compliance Directoras reasonably possible, the risk of losing key staff. External 4.00 4.50 5.00 4.00 4.50 5.003.50 5.50 3.50 5.503.00 6.00 3.00 6.002.50 6.50 2.50 6.502.00 Medium 7.00 2.00 Medium 7.001.50 High 7.50 1.50 High 7.501.00 Low 8.00 1.00 Low 8.000.50 8.50 0.50 8.50Very low Very low0 9.00 0 9.00Strategic OperationalInternal3.50 4.00 4.50 5.00 5.50 3.50 4.00 4.50 5.00 5.503.00 6.00 3.00 6.002.50 6.50 2.50 6.502.00 Medium 7.00 2.00 Medium 7.001.50 High 7.50 1.50 High 7.501.00 Low 8.00 1.00 Low 8.000.50 8.50 0.50 8.50Very low Very low0 9.00 0 9.00Strategic Operational'