59 JERSEY ELECTRICITY Annual Report and Accounts 2023 STRATEGY STAKEHOLDERS GOVERNANCE FINANCIAL STATEMENTS Risk Appetite The Board has determined the risk appetite and risk tolerance for the Group’s principal risks. A set of strategic statements have been developed that reflects the strategic intent and levels of risk that management deems acceptable, whilst risk tolerances set the acceptable level of variation and required action around risk ratings: • Averse – Prepared to accept only the very lowest level of risks, with the preference being for low- risk delivery options, whilst recognising that these will have little or no potential for reward/return. • Cautious - Willing to accept some low risks, while maintaining an overall preference for low risk delivery options that are unlikely to have a significant impact despite the probability of these having mostly restricted potential for reward/ return. • Moderate - Tending towards exposure to only moderate levels of risk in order to achieve acceptable, but possible unambitious outcomes. • Open - Willing to consider all options and choose one most likely to result in successful delivery while providing an acceptable level of benefit. Seek to achieve a balance between a high likelihood of successful delivery and a high degree of benefit and value for money. • Enterprise - Ambitious and willing to be innovative and to choose options that suspend previous held assumptions and accept greater uncertainty. Our principal risks and uncertainties The principal risk heat map provides an indicative view of the current risk exposure (likelihood of occurrence and most likely impact) of each of the principal risks relative to each other. Nine of the 11 principal risks have remained relatively stable in the last 12 months with the following principal risks identified as on the ‘watch list’, resulting in an increase in exposure and additional mitigating actions from the Board and Management: • Market volatility and tariff prices – due to current economic conditions and uncertainty. • Adverse political and regulatory measures – due to increased public and political interest in the energy sector. Principal Risks Heat Map Critical residual risk High residual risk 4 Likely 9 10 6 3 Possible 7 Medium residual risk 9: Data loss or breach 10: Cyber threats 7: Health, Safety & Environment 1: Energy market share growth 5: Secure supply of energy 1 8: Climate change and decarbonisation targets 5 11 6: People and culture 2 Unlikely < 3: Adverse political and regulatory measures 11: Pension liabilities 8 Low residual risk 2: Strategy and disruptive technology Rare <> <> <> <> <> <> <> <> <> Risk exposure: An indication of each principal risk relative to the prior year reported. Minor Moderate Impact Major Severe Decreased <> Stable < Insignificant < Likelihood < 4: Market volatility & tariff prices Almost certain Increased