Key risks and opportunities

Risk description and context

Life Healthcare is under continuous pricing pressure from healthcare funders in southern Africa looking to manage the overall cost of healthcare. This is primarily driven by a challenging economic environment compounded by COVID-19, which placed pressure on these funders to contain increases in member contributions in an environment where the number of medically insured lives is declining. In response to this, and coupled with escalations in healthcare costs and utilisation, funders instituted managed care initiatives, more affordable plans but with less cover, stringent case management and increased restricted provider networks. There is also the possibility that an increasing number of patients will buy down their medical insurance scheme cover to network options with lower tariffs given the poor economic conditions. Our admission rates could be impacted by our ability to secure preferred network agreements with healthcare funders, and more stringent case management.

Alliance Medical operates across several markets that provide a portfolio of healthcare services. Funding challenges remain prevalent across all the UK and northern European health economies. Alliance Medical has a mix of public and private income streams. Public revenue comprises 90% of total revenue in the UK, 63% in Italy and 41% in Ireland.

Scanmed relies on servicing Poland's National Healthcare Fund, Narodowy Fundusz Zdrowia (NFZ), for a significant 81% portion of its revenue. It has limited diversification in its revenue sources, which places its revenue at risk when the NFZ applies pressure.

Risk description and context

There is a general shortage of doctors in the South African and Polish healthcare markets, and a shortage of radiologists and radiographers in the regions where Alliance Medical operates. These shortages affect the Group's growth prospects, our ability to deliver quality care and services and, ultimately, our operations' sustainability.

The general shortage of healthcare professionals was exacerbated by COVID-19 during the year. Contributing factors include imposed movement restrictions in international countries and fear-related absenteeism, as well as healthcare professionals' illness after contracting COVID-19 or healthcare professionals being quarantined or isolated.

Risk description and context

The threat of cyber-security continues to be a key risk to our business globally. Criminal elements exploit the rapid and widespread adoption of work-from-home tools in light of COVID-19 to launch wide scale cyber-attacks. Remote working is the new norm and, as a result, extra vigilance and cyber-crime awareness is required around data security profiles and the accessibility of data. The balance between securing data behind a firewall and making it readily accessible to employees and business partners has to shift to support new working ways of working while keeping existing business processes and operations moving.

Our southern African business was a victim of a cyberattack during the year. For more information, refer to Cyber-incident

Risk description and context

People are our most important asset and are key to our ongoing success.

The healthcare sector has experienced a general shortage of nursing employees across all categories of nursing with increasing shortages in specialist registered nursing personnel. These shortages were further impacted by COVID-19 over the year. Some contributing factors included:

• Increased infection rates in nursing personnel and frontline employees caring for COVID-19 positive patients requiring employees to go into quarantine or isolation
• Increased demand for nursing skills in the South African public sector in light of the drive to supply resources to public facilities and field hospitals
• Increased demand for additional nursing personnel under COVID-19 surge conditions to treat the influx of COVID-19 positive patients at facilities

Due to the highly specialised nature of the healthcare industry and in light of key growth strategies, certain executive and management employees have a significant impact on the Group's performance. Failure to attract and to retain employees with the appropriate skillsets for these key roles could hamper performance and ultimately achievement of objectives.

As a responsible employer, we are required to provide a safe work environment for all our employees. At the same time, we need to provide care to our patients and fulfil all essential service provider responsibilities.

Risk description and context

The Group is required to comply with all applicable laws and regulations of the countries where we operate. In addition to these general compliance requirements, the global healthcare industry is subject to a growing number of new regulations.

A myriad of laws are being amended or promulgated in South Africa due to COVID-19, with which we are required to keep abreast of and comply with. Regulations issued in terms of the Disaster Management Act, 57 of 2002 (DMA) required that a COVID-19 Compliance Officer be appointed to oversee the implementation of a return-to-work plan and ensure adherence to the standards of hygiene and health protocols relating to COVID-19 at the workplace.

The Protection of Personal Information Act, 4 of 2013 (POPIA) was promulgated as of 1 July 2020, allowing for a one-year transition period for compliance. The National Health Insurance (NHI) Bill, the Medical Schemes Amendment Bill and the Office of Healthcare Standards: Norms and Standards introduced by the Department of Health (DOH) continue to require our attention.

Internationally, we remain committed to adhering to the GDPR, which applies to the European Union (EU) and the European Economic Area (EEA).

Risk description and context

We operate in the global healthcare market, and our operations are spread across different countries. The risk exists that country-specific factors, such as economic and political factors, or government policies, could adversely affect the Group.

Economies worldwide are staggering under the devastating effects of government-imposed lockdowns and social distancing measures to combat the spread of COVID-19. A deep global economic recession could become a reality, which could further exacerbate the current economic conditions in South Africa, impacting the affordability of healthcare.

We also potentially face the implications of a no deal or disruptive Brexit.

Risk description and context

The quality of healthcare services provided by the Group and healthcare professionals and our patients' safety is of utmost importance to us. Failure to consistently deliver safe, high-quality care to our patients is a risk.

Excessive demand arising from a surge in Covid-19 admissions and the resultant employee shortages and capacity constraints could negatively impact on the quality of care at facilities.

We are exposed to the potential risk of medical professionals not meeting their professional obligations in treating patients by following an incorrect or inadequate clinical protocol. This is because no specific treatment is available for COVID-19, and existing treatment is supportive.

With the highly contagious nature of Covid-19 there is the potential risk of a large-scale outbreak at one or multiple of our facilities. No large scale outbreaks were evident over the financial year particularly during the peak of Covid-19 infections.

Risk description and context

Information and information exchange are crucial to the delivery of care on all levels of the health care delivery system - the patient, healthcare funding providers, the Life Healthcare and management teams and healthcare regulators. There is a drive towards electronic health records and digitisation as healthcare becomes more consumer-friendly. Therefore, our IT infrastructure and systems must be appropriate and fit-for-purpose to respond to this cultural shift.

There is also a risk of failure to maintain reliable information systems for business operations in the event of an IT disaster like a data breach.

We are exposed to implementation risk regarding information management projects underway to improve existing infrastructure and ensure better Group-wide integration.

Risk description and context

The Group's reputation and relationships with key stakeholders could be affected by adverse events that occur while healthcare professionals perform clinical procedures or other related activities.

Furthermore, events outside of our control can adversely affect our brand.