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.

There is 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 of defence’ approach to risk governance and have a dedicated Risk function that is integral to co-ordinating, monitoring and advising on control activities. 

risk identification

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.

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 during an unprecedented year.

We are now working to ensure our approach remains aligned with the revision to the three lines of defence approach published by the Chartered Institute of Internal Auditors (IIA) in July 2020.

Risk Appetite Framework

Our risk management approach is supported by the use of 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 140 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 six areas of risk management and put measures in place to stop them affecting our services.

Residual Value

With over £7.5bn 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 make sure 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


  • 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 £4bn. 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


  • 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 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 in the event that 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
  • Information Security framework aligned to best practice and industry standards

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
  • 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