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Top risks to value creation
continued
Risk
rank^ Risk name and impact if not managed
Mitigation and opportunities
1 Foreign exchange volatility and
weakening currencies
Currencies in our operating markets have in
many instances been volatile. This leads to
opex and capex pressures in opcos and
eventually impacts the group’s profitability.
Furthermore, weaker currencies in our
operating markets result in translation losses
on rand-reported results.
•
•
Stress test 2018 to 2020 business plans
against currency volatility to understand
volatile areas and implement responsive
measures.
•
•
Use hedging instruments where available and
economically feasible.
•
•
Use best efforts to maximise levels of local
currency debt as opposed to that denominated
in foreign currency.
•
•
Convert large contracts into local currencies
where possible.
2 Operational and compliance risks
Amid increasing regulatory requirements
(particularly in respect of subscriber
registration, mobile financial services and so
forth) non-compliance could lead to strained
relationships with regulators, reputational
damage, disruption of services and the loss
of customers. Furthermore, weaknesses in the
control environment could lead to operational
risks and losses.
•
•
Implement a model to separate second and
third lines of assurance in the organisation.
•
•
Further embed leading risk, compliance and
control practices and roll out new compliance
framework.
•
•
Enhance control environment in certain
business areas such as enterprise business
unit, MTN Mobile Money and value-added
services.
3 Increased regulatory pressures
We have businesses in a large number of
jurisdictions and must comply with an extensive
range of laws and regulations, including licence
conditions and renewals, subscriber
registration and data privacy requirements.
These pressures continue to increase and are
often elevated by economic conditions and
other difficulties in our markets. The cost of
compliance is very high, impacting revenue
and profitability.
•
•
Continue to build strong relations with key
stakeholders and regulators.
•
•
Implement a dedicated group regulatory
management function and regulatory
framework to improve proactiveness and
maturity of regulatory engagements.
•
•
Strengthen opco regulatory functions by
adding new resources and upskilling
existing ones.
•
•
Continue to strengthen subscriber registration
infrastructure and further embed new data
privacy requirements.
4 Suboptimal cash generation and
upstreaming to the group
In addition to generating profitable returns, it
is also vital for our operations to generate
sufficient cash to fund capital-intensive
programmes and repatriate earnings to the
group. An inability to repatriate earnings (due
to factors such as a shortage of foreign
currency, stringent exchange laws and
sanctions) may impact our ability to keep
adjusted group leverage stable and to increase
distributions to shareholders.
•
•
Focus on attaining double-digit service
revenue growth (in constant currency)
and improving EBITDA margins.
•
•
Manage capex intensity through the
implementation of the new smart capex
programme.
•
•
Optimise working capital and cash
management practices.
•
•
Optimise cash balances in opcos and cash
upstreaming to the group.
^ In 2017 we reviewed our risk universe, which resulted in a change in the categorisation and nomenclature of risks. Therefore a direct comparison
of risks disclosed in 2017, with those reported in 2016, is not possible.
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MTN Group Limited
Integrated Report 2017