In common with other international businesses, the Group is exposed to a number of potential risks which may have a material effect on its reputation and financial or operational performance including product liability, credit risk, reliance on customers’ commitments and other usual commercial risks. We have a wide portfolio of products and operate in a number of market sectors. It is not possible to identify or anticipate every risk that may affect us, or the materiality of that risk. However, there are established control procedures in place to manage such risks, including production quality control, management and financial control procedures and insurance with reliable insurers, which are considered appropriate to the risk involved and the marketplace in which the exposure arises. The Board has overall responsibility for risk management and internal controls, supported by the Risk Committee and the Audit Committee.

The Risk Committee of the Board holds monthly meetings to review risks and assess and monitor actions to mitigate those risks. This provides a framework for managing risks throughout the Group. During the year the Committee was chaired by the Group Chief Executive and included the Group Finance Director, the Group Legal Counsel, the Group Internal Controls Executive and up to four senior executives from within the Group. Business risk evaluation including the nature, likelihood and materiality of the risks affecting each Group business is assessed by operational management on a monthly basis during the year and a Principal Risk Register maintained for each business. On the basis of these assessments, the Risk Committee produces a Group Risk Register and a Group Risk Map. Minutes of the Risk Committee meetings, together with the Group Risk Register and Risk Map, are circulated to the Board and to the Audit Committee.

The Risk Committee monitors the effectiveness of risk management with the assistance of the Group Internal Controls Executive who conducts a series of internal audits in line with an annual plan approved by the Audit Committee. After each site visit, a report is prepared and presented to local entity and divisional management and to the Chairman of the Audit Committee. A copy is also made available to the external auditors. Further details of the Group’s system of internal controls are contained in the Directors’ report on corporate governance.

As described in the Corporate governance report, there is an embedded process for monitoring and managing risks through monthly financial and operational reporting procedures. In addition, appropriate levels of cover are maintained under the Group insurance programme in respect of insurable risks.

The risk management procedures and systems of internal control are designed to identify and assess the significant risks which the Group faces and to manage them appropriately. It should be recognised that such systems can only provide reasonable and not absolute protection against risk, material misstatement or loss.

The ongoing effects of the global financial crisis continue to present significant challenges to the Group, principally related to the level of demand.

The Group directly and indirectly serves large automotive OEM customers. This exposes the Group to several risks including fluctuating manufacturing volumes, the potential for significant quality and recall claims and customer default. In the event that one of the larger automotive manufacturers or suppliers defaults or seeks protection from its creditors, the Group may not recover all of the amounts owed to it.

In addition, the Group is exposed to risks of product liability, credit risk, supply chain issues, reliance on customers’ commitments and other usual commercial risks in all of its businesses, including those identified as Principal Risks in the above table. The Group has a wide portfolio of products and operates in a number of market sectors.

There are established procedures in place to manage such risks, including production quality control procedures and insurance with reliable insurers, which have been put in place taking into account the risk involved and the marketplace in which the exposure arises. In addition, major contracts are reviewed by the Group Legal Counsel.

The Group has contractual and other arrangements with numerous third parties in support of its business activities. This report does not contain information about any of these third parties as none of the arrangements with them are considered essential to the business of the Group.

As an international business, the major financial risks faced by the Group are liquidity risk, currency risk and interest rate risk and these are regularly reviewed by the Board.

Liquidity

The current economic conditions continue to create uncertainty regarding the availability of bank financing and consequently there is a risk that the Group may have insufficient resources to meet its financial liabilities as they fall due. The Group addresses this risk by maintaining adequate banking facilities and by continuously monitoring forecast and actual cash flows to ensure that bank covenants and liquidity requirements will be met. The Group regularly discusses its requirements with its principal bankers and it is considered unlikely that the Group will face any significant funding issues in the foreseeable future.

Foreign currency

The Group’s main foreign exchange exposures relate to the translation of profits and net assets denominated in overseas currencies into sterling and transactions in foreign currencies. The Group’s policy is to use hedges to reduce these risks. These hedges are achieved through forward currency contracts and currency borrowings.

Interest cost

Interest cost risk is mitigated by the use of a combination of short and medium-term debt at both fixed and floating rates and by the use of interest rate caps where appropriate.

The Directors have reviewed the effectiveness of risk management and internal control during the year to 31 December 2009 and the period since then to the date of this report and have taken appropriate actions for improvement where necessary.