Zotefoams’ risk management process supports delivery of the Group’s strategy by improving the likelihood of achieving strategic objectives, keeping employees safe, protecting the interests of shareholders and other key stakeholders, and supporting effective decision-making.
Governance and oversight
The Board has overall responsibility for risk management and internal control, including oversight of the Group’s principal and emerging risks and the nature and extent of the risks it is willing to take in achieving strategic objectives. The Audit Committee supports the Board by reviewing the effectiveness of the risk management framework and the system of internal control, monitoring the quality of financial reporting and considering findings reported by the External Auditor in relation to the Group’s control environment and financial reporting procedures.
Day-to-day ownership of risk sits with management, led by the Group Executive Team (GET). Management reviews principal and emerging risks through structured internal control and risk governance arrangements at least twice a year, with actions tracked and escalated as appropriate.
Framework enhancements
In December 2025, the Board approved a new Risk Management Policy and a programme to simplify the Group’s existing risk framework. Work to develop and embed the updated framework will continue during 2026, with progress reported in the 2026 Annual Report.
Risk management process
The Group’s risk management process operates on a continuous cycle:
- Identify: principal and emerging risks are identified through strategic, operational and functional reviews.
- Assess: risks are assessed for likelihood, impact and trend, with clear ownership assigned.
- Manage: mitigating actions and controls are defined, implemented and monitored.
- Monitor: risks and mitigations are reviewed regularly by management and reported to the Audit Committee and Board.
The Board confirms that it has completed a robust assessment of the Company’s and Group’s principal and emerging risks and uncertainties, and the procedures for managing these are set out below.
Risk appetite
Zotefoams plans over five years, reflecting the capital intensity of its technology and the importance of aligning capacity with demand expectations. The Group accepts appropriate levels of risk where the potential reward is commensurate with the likelihood of success, within clear boundaries recommended by management and approved by the Board. The health and safety of employees remains paramount, with very low tolerance for risk in this area.
Developments during the year
Key developments relevant to the Group’s risk profile included:
- Footwear continued to grow (up 11.5% year‑on-year), representing 47% of Group sales (2024: 45%).
- Progress in international expansion, including investment in Vietnam (with the expectation of being operational in early 2027) and continued progress on an Innovation Centre in South Korea.
- Continued progress under the Group’s alliance with Suzhou Shincell New Materials Co., Ltd (Shincell) (agreement entered into in 2024).
- Changes in leadership during 2025, including the appointment of a new Group CFO (September 2025) and a new Chair of the Audit Committee (December 2025).
- Continued strengthening of internal controls documentation and testing, with the expectation of being in a position to comply with Provision 29 for financial periods starting 1 January 2026.
- Internal audit activity (Poland business controls review and Croydon inventory controls review), with outcomes and improvement plans presented to the Audit Committee.
- Cyber security certifications and ongoing awareness activity; there were no known or reported material cyber security incidents during 2025.
- Monitoring of Board-approved sustainability targets linked to financing arrangements (refer to the ESG report).
Principal risks and uncertainties
The Group discloses those risks and uncertainties considered most likely to affect the achievement of strategic objectives. The risk management framework enables the Group to monitor changes in risk profile and assess the adequacy of mitigating actions.
Following this year’s assessment, the Group identified three new risk categories: Legal and regulatory, Cyber, Data and IT Security, and Human capital. Other emerging risks continue to be captured within the existing risk groupings.
Principal risks at a glance
Operational disruption
Environmental sustainability and climate change (including PFAS)
Global capacity management
Technology displacement
Scaling-up international operations
Customer concentration
External (macro, geopolitical, foreign exchange and tariffs)
Legal and regulatory
Cyber, Data and IT Security
Human capital
Strategy links used in this section
Deliver an improved mix of products
Run at high capacity-utilisation
Increase our operating margins
Improve our return on capital
(over our investment cycle)
Clarify and improve the Group approach to sustainability and climate change
Operational disruption
Strategy
Risk trend
Description
A major disruption at a key manufacturing site, failure of critical equipment or IT systems, or disruption to critical supplies could reduce capacity, delay deliveries and adversely affect financial performance, given the Group’s operational gearing and customer commitments.
Key drivers
- High utilisation at core sites, particularly Croydon, which manufactures the majority of polyolefin foams and almost all high-performance products.
- Potential disruption from safety, health and environmental incidents (including fire), high absenteeism (including pandemic-related), failure of critical equipment, or an IT systems failure.
- Reliance on specialist raw materials and components, including single-source arrangements in some cases.
- Energy availability and pricing volatility, particularly affecting UK and Poland manufacturing facilities.
Key mitigations
- Safety, health and environmental policies and procedures; mandatory reporting of incidents and near misses; internal and external audits; Board reporting.
- Preventive maintenance and asset management; inspections; planned shutdowns; contingency plans for critical equipment.
- Supplier monitoring and dual sourcing where practicable; safety stock where appropriate; ongoing search, testing and approval of alternative suppliers.
- IT resilience and cyber security controls; ISO 27001:2022 accreditation and Cyber Essentials Plus certification; employee training and awareness.
- Insurance programme covering reinstatement and loss of profit; ongoing review of fire protection measures.
- Increased resilience through manufacturing diversification (USA, Poland and Spain) and planned Vietnam investment.
Change during the year
Continued investment in manufacturing diversification and in IT resilience and cyber security measures.
Forward focus
Maintain asset integrity, continuity planning and resilience, recognising the continued importance of asset reliability at core manufacturing sites as the Group’s footprint expands.
Environmental sustainability and climate change (including PFAS)
Strategy
Risk trend
Description
Evolving regulatory requirements and stakeholder expectations related to climate change, plastics and chemical substances could increase compliance costs, affect customer requirements and demand, and impact reputation and access to capital.
Key drivers
- Changes in climate-related regulation and disclosure requirements.
- Increasing restrictions and scrutiny of substances that may be hazardous to the environment, including PFAS.
- Stakeholder and consumer perceptions relating to plastics in certain applications.
Key mitigations
- ESG reporting and disclosures aligned to SASB and TCFD (refer to our ESG report and website disclosures).
- Monitoring of Board-approved sustainability targets linked to financing arrangements (refer to our ESG report).
- Operational initiatives focused on improving efficiency and reducing energy consumption, aligned to ESG targets.
- Regulatory monitoring and product stewardship processes; engagement with advisers and industry bodies where appropriate.
- Zotefoams also provides disclosures in line with the requirements of UKLR 6.6.6R, by including climate‑related financial disclosures that are consistent with the four TCFD pillars and the eleven recommended disclosures that are set out in the recommendations. See the TCFD section.
Change during the year
Continued monitoring of regulatory developments and ongoing enhancement of ESG data quality and disclosures.
Forward focus
Continue strengthening disclosures and readiness for regulatory change, and evaluate technical alternatives where feasible.
PFAS (subset of risk)
We recognise the increasing regulatory focus on PFAS globally. While polymeric PFAS differ in structure and behaviour from other PFAS substances, they remain subject to significant regulatory scrutiny. We continue to sell a limited number of polymeric PFAS‑based products for specialised applications and are actively engaging with customers and other stakeholders, monitoring regulatory developments closely and evaluating potential alternatives. To date, we have not identified substitutes that meet required performance standards, and timelines for viable replacement remain uncertain.
Global capacity management
Strategy
Risk trend
Description
Failure to create capacity in the right geographies and at the right time could constrain growth, reduce service levels and adversely affect financial performance, particularly given long lead times and capital intensity.
Key drivers
- Uncertainty in medium- to long-term demand and timing of growth opportunities.
- Long lead times and high capital costs for capacity expansion.
- Execution risk on major projects and the ability to finance investments.
- Space limitations in the UK site, increasing reliance on overseas investments.
Key mitigations
- Monthly Sales and Operations Planning and regular cross-functional capacity reviews; quarterly management reviews focused on planning and capacity.
- Rigorous Board review and challenge of the five-year strategic plan and major investments.
- Leveraging experience from recent investments in the UK, USA and Poland and insights from the Shincell alliance.
- Planned capacity in Vietnam to support Footwear demand and reduce supply-chain complexity.
- Maintaining financing headroom and covenant compliance; refinancing completed in January 2026 (read our Group CFO's review).
Change during the year
Continued progress on international capacity diversification and financing headroom.
Forward focus
Maintain disciplined project execution and align investment phasing with demand and customer requirements.
Technology displacement
Strategy
Risk trend
Description
Loss of technological advantage could increase competition and adversely affect growth and margins, including through competitors adopting alternative processes or acquiring know-how more quickly.
Key drivers
- Changing competitive landscape in Footwear and increased innovation by new entrants.
- Potential for alternative processes to develop attractive market opportunities.
- Increasing use of AI across industry, which may accelerate competitor learning and increase the risk of inadvertent disclosure of sensitive information.
Key mitigations
- Protecting know-how and intellectual property, including patents where appropriate and confidentiality protections.
- Continued investment in innovation capability (including UK and South Korea innovation facilities) and technical expertise.
- Active monitoring of competitor activity and close engagement with customers and end-users.
- AI governance and practical controls to reduce the risk of inadvertent disclosure of sensitive information.
Change during the year
Ongoing development activity, supported by alliance arrangements and continued investment in innovation.
Forward focus
Continue to protect know-how and focus on differentiated product and process innovation.
Scaling-up international operations
Strategy
Risk trend
Description
International expansion, including the integration of recently expanded or acquired operations, increases operational and compliance risk due to unfamiliar legal environments and cultures, wider supply chains, and the need to build local capability while maintaining consistent governance and controls.
Key drivers
- Expansion in Asia and Europe and increased reliance on overseas assets and teams.
- Integration of acquisitions and new sites into Group systems, processes and culture.
- Challenges in recruiting and retaining the right talent in unfamiliar markets and managing span of control from the UK base.
Key mitigations
- Regular engagement with overseas sites (in-person and virtual), including management oversight and cross-site collaboration.
- Strengthening leadership capability through targeted recruitment and structured onboarding.
- Deployment of Group IT systems, policies and controls across locations; training and translation, where required.
- Focus on embedding culture, ethics and compliance expectations across regions.
Change during the year
Increased scale and complexity of the footprint (including Spain acquisition, Vietnam and Korea investments).
Forward focus
Embed consistent governance, controls and reporting across regions as the footprint expands.
Customer concentration
Strategy
Risk trend
Description
Group performance could be impacted by loss, insolvency or divergence of interest with a key customer, particularly given the proportion of revenue represented by Footwear.
Key drivers
- Footwear represents 47% of Group sales (2024: 45%), under an exclusive partnership with Nike (exclusivity to 31 December 2029).
- High operational gearing increases the importance of maintaining volume through the asset base.
Key mitigations
- Maintaining and developing the Footwear relationship, supported by supply-chain and innovation investments in Asia.
- Portfolio rebalancing through a market‑vertical approach and development of growth opportunities beyond Footwear.
- Robust commercial contracting and senior oversight for key customer relationships.
Change during the year
Footwear continued to grow as a proportion of Group revenue alongside diversification actions.
Forward focus
Continue to diversify the portfolio and customer base over time.
External (macro, geopolitical, foreign exchange and tariffs)
Strategy
Risk trend
Description
Macroeconomic conditions, geopolitical events, foreign exchange movements and tariff changes could increase costs, disrupt supply chains, affect demand and create volatility in returns.
Key drivers
- FX exposure from revenue in US dollar/euro and cost base in sterling/euro, particularly in Footwear.
- Geopolitical conflicts affecting utilities and shipping costs and wider market confidence.
- Ongoing uncertainty regarding tariffs and protectionist measures.
Key mitigations
- Geographic and segment diversification; ongoing monitoring of demand and costs.
- Pricing discipline and internal efficiency measures to manage margin pressure.
- Scenario planning for tariffs and supply chain impacts, including regional manufacturing investments.
- FX policy and hedging of a proportion of transactional exposures; natural hedges where available.
- Maintaining liquidity and covenant headroom; ongoing engagement with lenders.
Change during the year
Continued geopolitical uncertainty and tariff volatility, with increased financing headroom following January 2026 refinancing.
Forward focus
Maintain resilience through scenario planning, liquidity headroom and continued monitoring of geopolitical and tariff developments.
Legal and regulatory
Strategy
Risk trend
Description
The Group faces increasing legal and regulatory complexity across jurisdictions, including chemicals regulation (including PFAS), ESG disclosure regimes, workplace standards, product compliance, competition law and corporate governance requirements. Non-compliance could lead to fines, business interruption or reputational damage.
Key drivers
- Expansion of the Group’s operational footprint increases the number and complexity of applicable legal regimes.
- Increased scrutiny and reporting requirements related to ESG and chemicals regulation.
- Higher focus on competition law and commercial practices in global relationships.
Key mitigations
- Strengthening global compliance frameworks, policies and reporting cycles.
- Building internal capability and using specialist external advisers for horizon scanning and local requirements.
- Embedding compliance into operations through training and oversight, including in product development processes.
Change during the year
Increased complexity due to international expansion and evolving regulatory expectations.
Forward focus
Continue developing consistent multi‑jurisdiction compliance capability and oversight.
Cyber, Data and IT Security
Strategy
Risk trend
Description
Cyber threats, data breaches and IT failures could disrupt operations, compromise sensitive information, expose personal data and trigger regulatory breaches.
Key drivers
- Increased digitisation and external integrations, including third-party connections.
- Rising sophistication of phishing, ransomware and social engineering attacks.
- Increasing regulatory requirements for cyber security, privacy and breach reporting.
Key mitigations
- ISO 27001:2022 accreditation (renewed Q1 2025) and Cyber Essentials Plus certification.
- Ongoing training and awareness activity, including phishing simulations; specialist external support for testing and vulnerability management.
- IT modernisation programme to reduce legacy risk and improve recovery capability.
- Strengthened governance, incident response and supplier/third-party controls.
Change during the year
Continued maturity of certifications, monitoring and training.
Forward focus
Continue to strengthen resilience as data flows and the international footprint expand.
Incident experience
There were no known or reported material cyber security incidents during 2025.
Human capital
Strategy
Risk trend
Description
The Group’s ability to attract, retain and develop leadership, technical and operational talent is critical to delivery of strategy. Failure could constrain growth, increase cost and weaken culture, governance or safety outcomes.
Key drivers
- International expansion and integration of new sites increases leadership and capability requirements.
- Competition for specialist engineering and manufacturing talent.
- Need to maintain consistent culture and safety standards across diverse regions and operating environments.
Key mitigations
- Targeted recruitment and leadership development, supported by structured onboarding.
- Programmes to embed the Group’s purpose, values and governance expectations across sites.
- Training and development programmes (technical, professional and compliance), with systems to support consistent delivery.
- Continued focus on health and safety performance supported by ISO 45001 accreditation.
Change during the year
Expanded footprint and leadership changes increased the focus on talent, culture and capability.
Forward focus
Strengthen succession planning and retain critical technical capability as operations scale up.