Risk management


At Motability Operations, we recognise that sound risk management is fundamental to the successful and sustainable operation of the business. Our dynamic, robust approach protects the interests of customers and seeks to make sure risks are managed properly to avoid financial, reputational and operational shocks to the business.

We identify, quantify and manage all material risks. Our risk framework is embedded within our day-to-day activities and our governance framework, which is overseen and managed by our Risk Management Committees.

We have a Director with specific responsibility for risk, as well as a dedicated Risk Management function. The business’s appetite for risk is managed through a comprehensive and independently verified Risk Appetite Framework.

Through our policies, our approach and our activities, we make sure that we meet standards of behaviour that fall within our agreed level of risk appetite.

Risk identification and monitoring

We have designed our risk management framework around the ‘three lines model’ for risk governance and have a dedicated Risk function that is integral to co-ordinating, monitoring and advising on control activities.


This holistic approach encompasses all material risks, with clearly identified accountabilities and responsibilities for risk management, control and assurance. As such, risk management is a core part of our business planning and effective capital management.

The responsibility for managing risks and control activities sits firmly within the first line responsibilities.

We regularly review our risk management framework to ensure that it remains appropriate to the business and its strategy. These updates include assessments of risks and controls, the update of risk registers, and early identification of any emerging risks to the achievement of our objectives.

The framework is designed to identify and mitigate risks to the business and its operation, which has been proven through yet another challenging year as the Covid pandemic continues.

We have ensured our approach remains aligned with the revision to the three lines model published by the Chartered Institute of Internal Auditors (IIA) in July 2020.

In line with the business strategy for a ‘Glide Path to Green’, we are enhancing the risk management framework and support to ensure the business remains focused on risk and controls through strategic change and transition activity.

Risk Appetite Framework

Our risk management approach is supported using a clearly defined Risk Appetite Framework (RAF), which formalises risk reporting to provide an effective ‘line of sight’ to management.

The framework builds on our strong risk management culture and aligns our strategic and risk management activities. The RAF captures the business’s risk appetite against all key risk components and leverages our governance culture to provide an alert system against the set appetite levels. This includes over 160 risk metrics.

The development of this framework drew on best practice and is subject to periodic internal and external review.

The responsibility for monitoring and review of the RAF has been included within our governance framework. Our risk appetite is reviewed and set by Directors on at least an annual basis, using information from strategic planning, risk management activity and business objectives.


Strategic plan infographic


Risk Management

See how we assess ten areas of risk management and put measures in place to stop them affecting our services.

Residual Value

With nearly £8.8bn of vehicle assets on our Balance Sheet, managing their residual value is key to our financial stability and helps us provide a sustainable and affordable proposition for customers.

Potential impact

  • Volatility in profitability, reserves and pricing.
  • Potential impact on affordability and choice


  • Sophisticated in-house residual value setting and forecasting process
  • Risk Capital management for asset risk using Economic Capital principles
  • Market-leading remarketing approach

Relevance to strategy

  • The setting of residual values is one of our core competencies. Our strategic approach ensures we invest appropriately to maintain a market-leading capability (in terms of people, methodology and technology)


Since 1 October 2013, we have kept a proportion of insurance premium exposure through our A rate reinsurance captive MO Reinsurance Ltd. The effective management of insurance risk is essential to provide stable prices and affordable mobility to our customers.

Potential impact

  • Financial impact of claims higher than expectations
  • Failure of a reinsurer could transfer risk back to Motability Operations
  • Potential operational, financial and reputational risk


  • Conservatively placed reinsurance programme effectively limits the Group’s net risk
  • Risk Capital in place to cover net risk
  • Access to extensive expertise
  • Diversification of supply across highly rated reinsurers

Relevance to strategy

Our revised insurance arrangement has been carefully designed to make sure the structure delivers value for customers and is sustainable into the long term


We are financed through a combination of Debt Capital Market financing and bank term-borrowing, with aggregate committed facilities exceeding £5bn. Managing the diversity, maturity profile and exposure to interest or exchange rate movements, is our Treasury function’s prime focus.

Potential impact

  • Potential impacts include volatility in funding costs, with knock-on effects on lease pricing, and lack of availability of growth funding


  • Successful execution of a dual tranche bond issuance in January 2021. Positive feedback from investors on robust response to Covid-19 and interest in the newly established Social Bond Framework
  • Majority of funding on fixed rates or fixed through interest rate and/or foreign currency swaps
  • Balanced portfolio of funding maturities and diversification into bond market
  • Maintenance of good credit rating
  • Good treasury system, controls and governance

Relevance to strategy

  • The strategic pillar of ensuring long-term sustainability guides our approach to treasury policy, which is designed to be 'vanilla' and risk averse

Supplier Failure

If a key manufacturer or Scheme supplier fails

Potential impact

  • Our customer service may be compromised and potential financial impact of finding alternative supplier
  • In case of manufacturer failure, likely impairment of residual values and threatened availability of parts and warranties


  • Active monitoring of credit ratings and market announcements
  • Strong supplier relationships and communication
  • Diversification of supply
  • Diversified portfolio

Relevance to strategy

  • Through our annual strategic review, we assess the performance and stability of all main Scheme suppliers, including contingency planning if a major failure occurred


Risk of default of key income streams and exposure to bad debt

Potential impact

  • Potential impact on cash inflows and consequent write-off to Income Statement


  • Principal income stream directly from DWP – therefore minimal credit risk
  • Residual credit risks are managed through credit assessments and an effective credit control function

Relevance to strategy

  • The assignment of customers’ allowances directly to the Group is a fundamental strategic underpinning of the effective and efficient operation of the Scheme


Risk of key systems, controls or processes failing

Potential impact

  • Potential financial and reputational risk
  • Risk of business disruption


  • Robust control environment
  • Active monitoring of Business Continuity and Disaster Recovery plans
  • Focus and investment in IT infrastructure providing a stable and resilient operating platform

Relevance to strategy

  • We ensure that we make appropriate strategic investments in our infrastructure, systems and processes

Cyber Risk & Information Security

The loss or harm related to unauthorised access to infrastructure or data

Potential impact

  • Potential impacts to customer and stakeholder confidence
  • Potential financial and reputational risk
  • Risk of business disruption


  • Information security framework aligned to best practice and industry standards
  • Dedicated security operations model in place monitoring threats 24/7
  • Designated data protection officer
  • Ongoing employee awareness programme
  • Cyber Insurance and Incident Response plan in place

Relevance to strategy

  • Customer confidence in the Scheme underpins our strategy
  • The strategic pillar of ensuring long-term sustainability involves complying with key regulations

Business Continuity

Business operations are reliant upon people and the systems and activities performed by our employees in conjunction with our key suppliers and partners.

Potential impact

  • Impact of a continuity event could have severe operational, financial and reputational effects on our ability to operate the Scheme


  • Well established continuity response plans including homeworking, system resilience and disaster recovery
  • Dedicated cross-functional Business Continuity Committee in place
  • Designated data protection officer
  • Controlled and governed process changes to support the business through continuity events

Relevance to strategy

  • Investment in our infrastructure ensures the effective and efficient operation of the Scheme and long-term sustainability in providing excellent customer service

Climate Risk

Climate change and sustainability are key issues for UK businesses. Losses and/or reputational damage may result as a consequence of climate change.

Potential impact

  • Potential financial and reputational risk
  • Risk of business disruption
  • Volatility in funding costs, with knock-on effects on lease pricing, and lack of availability of growth or replacement funding


  • The Company strategy process has identified key areas of focus, including the transition to battery electric vehicles (BEV); they will underpin the Scheme proposition over the long term
  • We established a working group to look at the wider green agenda and define the key considerations for the business
  • The management approach and oversight being taken to ensure strategic opportunities are maximised through balanced risk-based decisions

Relevance to strategy

  • The Glide Path to Green will underpin the strategic approach and initiatives that will support the development of the long-term customer proposition

Inadequate Skills

Loss of highly skilled employees and/or inability to develop, retain or attract skilled employees to support operations and growth activity.

Potential impact

  • Potential operational risk
  • Delays to project and strategic activity
  • Volatility in funding costs, with knock-on effects on lease pricing, and lack of availability of growth or replacement funding
  • Could lead to failure to deliver Scheme KPIs


  • Business transitioned to hybrid working post-Covid, offering greater flexibility
  • Remuneration Committee oversees pay and benefits packages with market benchmarking
  • Diversity and Inclusion and Gender Pay Gap reviewed with defined action plans
  • Ethnicity, Diversity and Inclusion Committee established reporting to the Executive
  • Training and support delivered for employees in supporting mental health and wellbeing

Relevance to strategy

  • Delivery of the operational and strategic activity is dependent on highly skilled people