Financial performance

Financial performance

Financial performance

Our key risks and challenges

The management of risk is an integral part of Transport Scotland strategy, operations and decision making. A risk is anything that can impede or enhance our ability to meet our current or future objectives and the achievement of Transport Scotland's priorities, responsibilities, and outcomes.

Transport Scotland's Senior Management Team review risks monthly, supported by the Transport Scotland Risk Management Group, which includes representatives of each Directorate. The risk register is also reviewed by the Transport Scotland Audit and Risk Committee at each meeting. Our work and responses to identified risks are underpinned by a programme management approach which encourages cross-directorate working to cut across traditional team boundaries and bring together a variety of skills, professions, and knowledge.

Risks are reported and escalated to Ministers, the Portfolio Accountable Officer, and Scottish Government Executive Team, as appropriate.

Following an Internal Audit review of Transport Scotland's Risk Management approach in March 2022, a number of recommendations for improvement were made. These were actioned by management during the 2022-23 financial year and included reviewing and updating our Risk Management Framework, further aligning risk management with business planning, developing terms of reference for risk groups, and ensuring each Directorate has nominated risk leads and deputies.

Key risks

Transport Scotland categorises risk in line with the Orange Book: Management of risk - Principles and Concepts.

During the year, a number of previously reported risks and mitigating actions have been revised to consider recent developments. Examples include:

• Transport Scotland moved from managing the risk of Covid-19 on its operations to the recovery from the pandemic as part of our ongoing objectives.
• Scottish Rail Holdings Ltd became operational on 1 April 2022 and the risks associated with the transition were no longer required to be managed as a corporate risk.
• As the Clyde-Hebrides Ferry Services franchise expiry became closer, the risk of negative impacts on the communities it services were escalated to the corporate level to ensure appropriate actions were implemented and monitored.

The corporate risks below are grouped by category and reflect those considered for escalation to the Portfolio Accountable Officer

Financial

Budgeting

There is a risk of allocated budgets being inadequate to meet ongoing operational requirements, legal commitments, ministerial priorities, and projects. We have mitigated this risk through regular review and updates to financial forecasts, continued dialogue with Ministers and Scottish Government colleagues and seeking to minimise costs wherever possible. Further to this, collaboration with Scottish Government finance is taking place on the development of reporting tools directly linked to the financial ledger, regular scrutiny and update to our forecasts is in place and additional financial controls are in place over non-essential spend and additional funding, through the Accountable Officer approvals process.

Operational

Trunk road maintenance

The trunk road network needs to be maintained to meet the level required for its safe operation and to ensure it can support Scotland's economy. Transport Scotland has worked with Scottish Government finance and Ministers to prioritise assets with greatest potential for significant network disruption and maintain our 10-year Infrastructure Investment Plan to help inform capital investment decisions. This is supported by continuing to review our resilience arrangements across all transport modes as appropriate, maintenance interventions incorporated in STPR2, and developing maintenance programmes to meet statutory and ministerial commitments.

Clyde and Hebrides ferry services

The current Clyde and Hebrides Ferry Service contract (CHFS2) is due to expire on 30 September 2024. We are currently considering the most appropriate route to ensure continuity of ferry services on the CHFS network ensuring quality, value for money, and robust services to our island and remote communities.

Significant incidents

A prompt and effective response to significant incidents is essential to minimise disruption to the strategic transport network. Multi-agency contingency plans are in place across all modes for dealing with both anticipated and unanticipated disruptive events. Key freight flows and lifeline services are given priority in any contingency plans and forums and processes are in place to ensure that lessons learnt from incidents, including severe weather events, are included in future contingency plans and procedures.

Asset management – sponsored bodies

The assets managed by our sponsored bodies are essential parts of the transport network. If Transport Scotland Sponsored Bodies, such as HIAL (Highlands and Islands Airports Ltd.), Scottish Canals and Scottish Rail Holdings, are unable to maintain transport infrastructure to the level required for its safe operation, then this could lead to asset failure and unavailability of significant elements of the network. A phased review is being undertaken of all sponsor bodies' asset management registers to ensure that appropriate assurance is in place at board level, and to identify opportunities to develop reporting best practice and consistency. Our asset management strategies take a risk-based approach to investment in planned and reactive maintenance, having regard to a range of risks including safety, operational impacts, financial and reputational risks.

Project and programme

Climate change plan

The transport emissions reductions required to meet our statutory climate change targets require ambitious new policies for inclusion in the next Climate Change Plan and delivering of existing Climate Change Plan Update transport sector commitments. To achieve this, we are building the evidence base for effective policy development to ensure a just transition to net zero, monitoring policy delivery and taking forward engagement with internal and external stakeholders including public sector organisations, businesses and industry and the public. Transport Scotland has a Climate Change Board with representation from across the agency and external membership to oversee this work commissioned research to build the evidence base to inform identifying policy options.

Reputational

Future transport

Changes to the usage of the transport network following recent societal and economic changes could lead to a medium- to long-term reduction in farebox revenue and impact on service provision that would disproportionally impact on vulnerable communities and groups. The Fair Fares Review is examining how public transport is used and what we need to do now, and in the future, to support the long-term viability of our public transport system. This work is considering both the cost and availability of services and the range of discounts and concessionary schemes which are available on all modes including bus, rail, and ferry to ensure our public transport system is more accessible, available, and affordable, with the costs of transport more fairly shared across government, business, and society.

Security

Cyber resilience

The threat of cyber-attacks requires pro-active action to ensure we secure and have access to our systems and data. Working closely with the Scottish Government, we have cyber resilience policies, systems, procedures, and resources in place, which are supported by staff awareness and training to identify and avoid risk exposure. We also have a Cyber Incident Response Plan in place.

People

Wellbeing

Our people are central to what we do and essential in achieving our organisational objectives. If we do not create the conditions to promote the wellbeing of our staff, then we will reduce our capability and capacity to deliver our business objectives. Our Senior Management Team review management information and discuss issues impacting our people regularly. Work to consider how the agency develops is underway to ensure we are the right size and shape for the challenges ahead.