Description

The risk that, due to costs rising faster than revenue, NS fails to generate the desired return. As a result, NS fails to generate a satisfactory operating profit or operating cash flow, meaning that it is unable to realise its strategy in the future.

Explanation

NS investigates the effects of external developments on its position in the market. Because of the capital-intensive nature of NS, the company’s cost structure is relatively fixed. Over the next few years, NS will have to invest substantially to facilitate the growth in passenger numbers and fulfil franchise obligations and undertakings to stakeholders.

Measures

NS has started initiatives to ensure improvement of results in the financial column and in the business units. In addition to financial interests, we will also consider social and commercial interests. NS looks at staff, rolling stock and the service model. A stress test for disappointing growth has been worked out; the results will be used in the business planning process. Furthermore, NS prepares scenarios to determine a future strategy based on the risk appetite.

Risk control trend

NS has taken measures to achieve improvements in the results, whereby it aims not only to reduce costs but also to increase productivity and revenues. Improving the result has lower priority though than improving the operational performance, to make sure that the targets for the most important franchise KPIs for 2019 will be met. Many of the measures have not been completed yet, so the effect on the benefits side is still uncertain.

Residual risk

High. The current risk profile does not yet fully match the desired risk profile.