Publication of the Annual Report

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Risk Description	Impact	Risk Mitigation
Market conditions	Direction
The Group's products are sold to tradesmen and retail customers for a broad range of end uses in the built environment. The performance of the market is affected by general economic conditions and a number of specific drivers of construction and DIY activity, including housing transactions, net disposable income, house price inflation, consumer confidence, interest rates and unemployment.	Adverse effect on financial results	The Board conducts an annual review of strategy, which includes an assessment of likely competitor activity, market forecasts and possible future trends in products, channels of distribution and customer behaviour. The Group maintains a comprehensive tracking system for lead indicators that influence the market for the consumption of building materials in the UK. Significant events including those in the supply chain that may affect the Group are monitored by the Executive Committee and reported to the Board monthly by the Group Chief Executive.
Competitive pressures
Market trends, particularly in respect of customers' preferences for purchasing materials through a range of supply channels and not just through our traditional competitors may affect the Group's performance so making traditional branch based operations less relevant. Public sector buying groups could reduce sales if public bodies chose to buy direct from the manufacturers. Disintermediation may become more of a threat if manufacturers decide to deal directly with the end user.	Adverse effect on financial results.	Changes to market practice are tracked on an on-going basis and reported to the Board each month. We are building our multi-channel capabilities so they compliment our existing operations and provide our customers with the opportunity to transact with the group as they wish. The Group is leading the industry in terms of the development of new and innovative supply solutions, and works closely with customers and suppliers on a programme of continuous improvement of current models. We continue to refine our pricing strategies to ensure we retain our competitiveness. The Group's branding strategy allows it to use sites flexibly. Alternative space utilisation models are possible, including maintaining smaller stores and implanting additional services into existing branches.

Information technology
The operations of the Group depend on a wide range of complex IT systems operating efficiently and effectively. The rapid expansion of the Group together with an increasing demand for IT services, particularly as we embrace modern and future platforms such as multi-channel, could result in development programmes being delayed. Increasing levels of cyber crime represent a significant threat with the potential to cause loss of system availability or financial loss.	Adverse effect on financial results. Adverse effect on the Company's reputation.	The strategic demands of the business, resources available to IT, performance levels of key systems and IT security are kept under review by the Executive Committee. Maintenance is undertaken on an on-going basis to ensure the resilience of group systems, with escalation procedures operating to ensure any performance issues are resolved at an early stage. Our three data centres mirror each other with data processing switched from one to the other on a regular basis. An IT disaster recovery plan exists and is tested regularly together with the business continuity plan with arrangements in place for alternative data sites for both trade and consumer businesses. Off-site back-up routines are in place.
Colleague recruitment, retention and succession
Many colleagues have worked for the Group for some considerable time during which they have gained valuable knowledge and expertise. The ability to recruit, retain and motivate suitably qualified staff is an important driver of the Group's overall performance. Ensuring succession for key positions throughout the Group is important if it is to continue to be successful in the future. Avoiding "recession fatigue" amongst our key management layers and ensuring a continuous flow of innovation in the Group.	Inability to develop and execute our development plans. Competitive disadvantage.	The Group Human Resources Director monitors staff engagement and turnover by job type and reports to the Executive Committee regularly and to the Board annually. Succession plans are established for the most senior positions within the Group and these are reviewed annually. Our reward and recognition systems are actively managed to ensure high levels of employee engagement. A wide-range of training programmes are in place to encourage staff development, whilst management development programmes are used to assist those identified for more senior positions. Salaries and other benefits are benchmarked annually to ensure that the Group remains competitive.
Supplier dependency and direct sourcing
The Group is the largest customer of many of its suppliers. In some cases, those suppliers are large enough to cause significant difficulties to the Group if they become unable to meet their supply obligations. Alternative sourcing is available, but the volumes required and the time it may take those suppliers to increase production could result in significant stock-outs for some considerable time. We have rapidly expanded our direct sourcing capabilities, which has increased the Group's reliance on overseas factories producing product. This increases the Group's exposure to sourcing, quality, trading, warranty and currency issues. Potential for European anti-dumping legislation to be extended to cover further Asian countries so increasing the cost of some imported products.	Adverse affect on financial results. Adverse affect on reputation.	The commercial and financial teams monitor the financial position of the Group's key suppliers. Where possible, contracts exist with more than one supplier for key products. The Group has made a significant investment in a new Far East infrastructure to support its direct sourcing operation. Comprehensive checks are undertaken on the factories producing product, the quality and suitability of that product before it is shipped to the UK.
Defined benefit pension scheme funding
The Group is required by law to maintain a minimum funding level in relation to its on-going obligations to provide current and future pensions for members of its pension schemes who are entitled to defined benefits. Some issues could adversely affect the funding of these obligations including poor performance of the pension fund investments and increasing longevity of pension scheme members. The level of contributions required from the Group to meet the benefits promised in the final salary schemes will vary depending upon the funding position of those schemes.	Adverse effect on financial condition.	All of the Group's final salary pension schemes are closed to new members. For the Travis Perkins scheme, pensionable salary inflation has been capped at 3% per annum. The scheme's investment policy is kept under regular review to ensure asset profiles are kept in line with the profile of liabilities.

	2012 £m	2011 £m
Short term employee benefits	7.9	7.3
Share based payments	4.4	4.9
	12.3	12.2

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Latest directors dealings

Geoff Cooper - Chief Executive
Tony Buffin - Finance Director