Our materiality, material risks and opportunities

Determination of materiality

The matters included in our integrated annual report are principally aimed at providers of financial capital in order to support their financial capital allocation assessments. The interests of the providers of financial capital are, however, largely aligned with other key stakeholders in that they also are focused on the creation of value in the long term.

In determining which matters are material for disclosure in our integrated annual report we have considered whether the matter substantively affects, or has the potential to substantively affect, our strategy, our business model or the forms of capital we utilise and ultimately our ability to create value over time.

The assessment of the magnitude of the impact and the likelihood of the occurrence of the group’s top risks and opportunities included below informed the identification and prioritisation of the material matters for inclusion in the integrated annual report. The matters identified were compared with those being reported on by organisations in the same or similar industries to ensure that relevant matters have not been excluded from the report.

Material risks and opportunities

The risk management process followed in identifying the group’s top risks and opportunities is included in the Corporate governance section. The matrix reflecting the assessment of movement in the magnitude of the impact and the likelihood of the occurrence of the group’s top risks and opportunities over the year is as follows:

The principal risks and opportunities facing the group and considered by the board are detailed below:

Principal risk landscapes		Specific risks we face		Potential impact		Risk responses		Associated strategic priorities
Macro-economic environment		Reduced gaming spend Reduction in travel spend Growth negatively affected by macro-economic factors Concentration of operations in South Africa		Lower revenue growth and profitability		Revised strategic priorities Review organisational structures Further focus on cost reduction Renewed and focused marketing Reward programmes		Sustainability – Financial strength and durability Growth – Organic growth
Regulatory change and compliance		Additional casino licences or relocation of existing casino licences Changes in casino licensing conditions Loss of casino licences Changes in labour legislation Not meeting changing BBBEE requirements Increased complexity of compliance, e.g. POPI, CPA and FICA Smoking legislation Advertising restrictions		Lower revenue, higher costs and reduced profitability		Engage authorities, including gambling boards Submit comments to law makers through formal comment structures Robust compliance procedures Engage law makers through employer and industry bodies Litigate where required		Sustainability – Deliver to our beneficiaries Sustainability – Regulatory compliance
Adverse tax environment		Potential increased national and provincial gaming taxes Increased rates and property taxes Possible VAT increases		Reduced profitability Uncertain operating environment resulting in frozen investment spend		Lobby government through CASA Educate legislators regarding gaming impact through direct lobbying Lodge of appeals on assessments and property valuations Ensure property values are always accurate and at the disposal of municipalities		Sustainability – Deliver to our beneficiaries Sustainability – Regulatory compliance Growth – Organic growth
Portfolio management		Nodal shifts Product relevance in target markets Customers choose other leisure options		Reduced income and profitability Obsolete hotel stock Reduced footfall and customers		Overview of markets Interaction with local authorities Investment in facilities to ensure relevance Market research to timeously spot trends Partnerships with other leisure suppliers		Sustainability – Product relevance to customer experience Growth – Organic growth
Capacity issues		Fixed cost nature of the business Casino capacity constraints Hotels oversupply in certain markets		Lower revenue growth and profitability		Review organisational structures Further focus on cost reduction Interaction with gambling boards and city officials Renewed focus on reward programmes		Growth – Organic growth
Missed opportunities		New gaming opportunities Hotels opportunities, local and offshore Investments in expansion not yielding expected returns Ineffective integration of acquired businesses		Lower revenue growth and profitability Missed revenue opportunities Wasted investment		Proper and robust evaluation of all new opportunities Non-financial due diligence of opportunities Review of plans and opportunities		Growth – Organic growth Growth – Inorganic growth
Human resources		Employment equity challenges at senior levels Lifestyle diseases, including HIV/Aids, hypertension and diabetes Unrealistic expectations, social pressure and/or unresolved industrial relations issues leading to violent strikes and unrest Limited pool of qualified, trained and talented staff		Failure to meet BBBEE targets Reduced customer satisfaction, disruption to operations and reduced profitability Work stoppages, reduced profitability and reputational impacts		Retention of staff through appropriate remuneration structures Engage with and empower staff Fast track and develop talented staff Performance-driven culture Focused employment equity strategy		Sustainability – Human resources Sustainability – Deliver to our beneficiaries
Unreliable and costly utilities		Unreliable water supplies Unreliable electrical supply Rise in electricity and water costs Increased diesel usage during load shedding		Disruption to operations and reduced profitability Machinery breakdown		Demand-side management programmes to reduce consumption Water handling/storage capacity for emergency supply Self-reliance on generators for emergency electricity supply Audits of the status of switchgear		Sustainability – Product relevance to customer experience Growth – Organic growth
Crime and security		Casino and hotel robberies Follow home robberies Fraud by employees Fraud from external sources		Lower revenue and profitability Reputational risk		Physical security and surveillance procedures Coordination with the South African Police Service Crime intelligence Internal control frameworks Internal audit procedures		Sustainability – Regulatory compliance
Cyber, IT and information management		Hacking, Payment Card Industry Data Security Standards and hacktivism POPI legislation Sub-optimal online transacting		Reputational risk Fines and penalties Reduced income and profitability		IT security Payment card industry standard compliance Appointment of Information Officer Review of online transaction opportunities Increased IT auditing and assurance Website rewrite		Sustainability – Regulatory compliance Growth – Organic growth