1 Risk Description Management actions Competitive environment The digital media and communication The Group’s competitors include large The Group’s strategy is to build a purely services industry is highly competitive. multinational advertising and marketing digital multinational advertising and The Group’s revenues and/or margins communication companies, regional and marketing services business, initially could be reduced if clients are lost to national marketing services companies by combinations. competitors, competition erodes the and new market participants, such as In order to differentiate itself from Group’s pricing power or the economic consultancy businesses and technology competitors, the Group is focused on purely environment results in lower demand for companies. digital, end-to-end marketing services. advertising and marketing services of It is part of the Group’s strategy to exploit the The Group has combined best-in-class the type which the Group provides. current disruption of the advertising and businesses on a single profit-centre basis, The advertising and marketing services marketing services industry. Nevertheless, promoting alignment, an integrated service industry is subject to significant and there is a risk that future trends in the offering and emphasising transparency to rapid change. advertising and marketing services industry clients. As one of the first such businesses will present challenges to the Group as an in the advertising and marketing sectors, incumbent and corresponding opportunities the Group therefore seeks to capitalise on to disruptive competitors. first-mover advantage and establish durable client relationships that will mitigate against competitive threats in the sector. Any negative impact on the reputation The execution of the Group’s strategy may The Group safeguards reputational risk in of and value associated with any of the fail to maintain the reputation of the Group’s other risk disciplines. In addition, the Group Group’s trading names could have a trading names. Adverse media comment or works with a transparent and stable material adverse effect on its business difficulty in the provision of the Group’s business model with solid ratios. and results of operations. services may damage its reputation. IT and data security The Group is subject to a number of laws The privacy laws to which the Group is The Group has developed guidelines for relating to privacy and data protection subject could, in addition to increasing compliance with data privacy laws in the governing its ability to collect and use compliance costs, result in investigative or territories in which it operates and has personal information. These data enforcement action against the Group, legal structured its service offerings around a protection and privacy-related laws and claims, damage to the Group’s reputation core of compliance with data protection regulations are becoming increasingly and the loss of clients. and privacy laws. The Group ensures that restrictive and complex and may result in To the extent that data protection regulation its people are properly trained on the greater regulatory oversight and and legislation, in the UK, EU or in any other implications of applicable data privacy increased levels of enforcement and territory, restricts or prevents the Group’s legislation. sanctions. clients from using underlying customer data The Group has in place security measures in The European Union’s General Data to tailor and target marketing and an effort to prevent malicious cyber attacks. Protection Regulation (GDPR) and, advertisements, their digital marketing following Brexit, the UK version of GDPR, budget and/or expenditure on the Group’s both provide for fines of up to 4% of services could decrease. global turnover to be levied for breaches. A failure of, or breach in, cybersecurity may cause the Group to lose proprietary information, suffer data corruption, or lose operational capacity. The Group may be vulnerable to hacking, Cyber incidents may cause disruption and The Group has in place security measures identity theft and fraud. impact business operations, potentially and guidelines in an effort to prevent resulting in financial losses, impediments to hacking, identity theft and fraud, including trading, violations of applicable privacy and the loss of intellectual property. other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. The intellectual property rights of the Employees, sub-contractors or licensors may The Group has developed confidentiality Group are important to its business. take action to enforce intellectual property and proprietary information agreements There is a risk that title to the relevant rights against the Group and/or its respective with our employees and partners. intellectual property rights has not been clients. Should such risks materialise the properly assigned to the Group. There is Group may be subject to litigation or incur a risk that third-party distributors of reputational damage which could have a intellectual property could allege that material adverse effect on the Group. the Group has not complied with the conditions of a licence. S4Capital Annual Report and Accounts 2021 37