SSE (SSEZY) Risk Analysis

Material influencing factors: • Severe adverse weather that causes damage or interrupts energy supply or generation. • Government policy regarding the operation of the energy network which relates to security of supply. • Transition to net zero. • Failures in any aspect of the GB national critical infrastructure. • Continuing access to the European energy markets and continued inclusion of Northern Ireland in the all-island Single Electricity Market. Material influencing factors most impacted by coronavirus: • Appropriate asset management and necessary upgrading works of both generation and network assets. • Malicious attack on the GB energy infrastructure. • Energy network balancing mechanisms. • Continued availability of competent personnel. • Continued availability of key systems. Key developments: • Continued progress in developing and building electricity network flexibility and infrastructure to facilitate net zero. Key developments associated with coronavirus: • The successful implementation and continuation of comprehensive crisis management and business continuity plans designed to protect and ensure the ongoing security of energy supplies. The frontline healthcare response was prioritised, with connections accelerated for temporary hospitals and research centres, and a dedicated phone line set up for hospitals, health centres and cares homes to ensure optimisation of incident response. • SSE’s electricity networks business continues to use its well established Priority Services Register to provide additional support to vulnerable customers, working closely with local agencies to ensure those who are vulnerable, or shielding can be reached as quickly as possible in the event of an electricity network fault. A dedicated team was also established to proactively call customers who may have been at risk of social isolation during the periods of lockdown. Key mitigations: • Policy Link: Business Unit Asset Management Policies. • SSE’s dedicated Engineering Centre of Excellence reviews and develops plans to ensure the ongoing integrity of its generation assets is maintained. • Targeted investment plans to ensure the ongoing health and integrity of network assets. • Crisis management and business continuity plans are in place across the Group. These are tested regularly and are designed for the management of, and recovery from, significant energy infrastructure failure events. Where there are material changes in infrastructure (or the management of it) additional plans are developed. • SSE continues to be an active participant in national security forums such as the Centre for the Protection of National Infrastructure (CPNI).

Material influencing factors: • Rewarding employee contributions through fair pay and benefits. • Recognition of the value and benefit of having an inclusive and diverse workforce. • A responsible employer ethos. For full details please see the Sustainability Report ?. • Clearly defined roles, responsibilities and accountabilities for all employees. • Availability of career development opportunities and appropriate succession planning that recognises potential future skills shortages. • Clear personal objectives and communication of the SSE SET of values. • A focus on ethical business conduct and creating a culture in which employees feel confident to speak up when they suspect wrongdoing. Material influencing factors most impacted by coronavirus: • The health and wellbeing of all employees. For full details please see the Sustainability Report ?. • Clear and well structured employee communications. Key developments: • “Championing the real living wage” is one of SSE’s 2030 goals and it has been accredited Living Wage employer in the UK since 2013 and since 2016 in Ireland. In March 2021 SSE gained accreditation as a Living Hours employer, this is a new accreditation, currently in a pilot phase, from the Living Wage Foundation in the UK which recognises that people cannot earn a real Living Wage unless fair wages are also accompanied by secure and sufficient work. Further details are available in the Sustainability Report ? and on page 47 ? of this Report. Key developments associated with coronavirus: • In May 2020 a pulse survey completed by around 8,000 employees was conducted in order to understand employee’s immediate concerns and priorities in the new working environment. Targeted actions were agreed and implemented, including: flexible working patterns and caring days; and reminders of the available support offered by the employee assistance programme. Further surveys have been conducted throughout the year the results of which will be used to inform how SSE plans future ways of working. Key mitigations: • Policy Link: SSE Employment Policy and SSE Whistleblowing Policy. • SSE has a detailed Inclusion and Diversity plan, progress against which is reviewed and monitored by SSE’s Group Executive Committee on a regular basis. Further details are available in the Sustainability Report and on pages 126 to 127 ? of the Directors’ Report. • There are a wide range of tools and services available to all employees to support mental health and wellbeing, including those provided as part of the Employee Assistance Programme. Full details are available in the Sustainability Report. • “Doing the Right Thing, a guide to ethical business conduct”, explicitly outlines the steps employees should take to ensure their day-to-day actions and decisions are consistent both with SSE’s values and ethical business principles. SSE employees can report incidents of wrongdoing through both internal and external mechanisms. SSE uses an independent “Speak Up” phone line and email service, hosted externally by SafeCall, through which incidents can be reported. • The Audit Committee reviews all key accounting judgements made as part of the preparation of the Annual Report and Accounts. • SSE’s business leaders are required to undertake regular succession planning reviews. At a Group level, SSE continues to develop its approach to the management of talent.

Material influencing factors: • Technology changes and innovations. • Supply chain cost management. • Public policies, including those aimed at reducing carbon emissions and energy consumption. • Accessibility to energy and related services for all. • Required investment in the upgrading of the UK’s energy infrastructure to achieve net zero. • Political interventions. Material influencing factors most impacted by coronavirus: • Macro-economic impacts on household and business incomes. • Fluctuations in the cost of fuels. • Supplier and customer failures and related bad debt. Key developments: • Ensuring energy consumers are provided with affordable energy and accessible energy services throughout and following the transition to net zero are key objectives of SSE’s Just Transition strategy published in November 2020. Key developments associated with coronavirus: • Following the outbreak of coronavirus in the UK in March 2020, and in line with the commitments of the C-19 Business Pledge, SSE adapted its approach to grant funding to make funds immediately available to communities who required them. By June 2020 over £1m had been provided to 250 communities to support the emergency response to the pandemic. Key mitigations: • Policy Link: SSE Sustainability Policy • During the financial year, SSEN attained the British Standard for inclusive service provision (BS 18477) for the sixth year in a row. This recognition, from business standards company BSI, is achieved through rigorous assessments to ensure SSEN’s policies, procedures and services are accessible and fair to all customers. • SSE Airtricity continues to focus on helping customers reduce their carbon output and to save on energy costs. Through partnerships with local authorities, the Sustainable Energy Authority Of Ireland (SEAI) and others, SSE Airtricity Energy Services has been delivering large-scale energy efficiency retrofit projects for homes across Ireland. • SSE continues to advocate its belief that modernisation of the energy market is best delivered by a cost-effective privatised system that is properly regulated.

Material influencing factors: • Clear and appropriately communicated safety processes. • Regular and documented training. • Adverse weather. • The size, scale, complexity and number of projects under way. • Challenging geographic locations. • Appropriate task and asset risk assessment. Material influencing factors most impacted by coronavirus: • Safety culture – “if it’s not safe, we don’t do it”. • Clear, effective and regular communications of all relevant safety updates. • Competent employees and contractors. Key developments: • During the year 271 Safe Days were achieved, compared to 247 the previous year; in addition the Total Recordable Injury Rate (TRIR) fell to 0.15 per cent per 100,00 hours worked. Further details are available on page 142 ? of the Directors’ Report. Key developments associated with coronavirus: • Following its deployment in early 2020, SSE’s Business Continuity Framework has been used to manage the Group’s response to the pandemic. All employees who can do so continue to work from home. Coronavirus testing was introduced at an early stage when needed for critical workers whose attendance on site was essential to ensure continued operations and, hygiene and social distancing measures were established and maintained in order to ensure safe working conditions. Key mitigations: • Policy Link: SSE Safety and Health Policy and SSE Environment Policy. • Safety is the Group’s number one value with Board oversight being provided by the Safety Health and Environment Advisory Committee. • Crisis management and business continuity plans are in place across the Group. These are tested regularly and are designed for the management of, and recovery from, significant safety and environmental events. • Each business carries out regular SHE assurance reviews of the risks faced, the controls in place and the monitoring that is undertaken. • SSE’s dedicated Engineering Centre of excellence reviews and develops plans to ensure that the integrity of its generation assets is maintained. • Full environmental impact assessments are carried out for all major projects, to ensure adverse environmental impacts are well understood and minimised.

Material influencing factors: • Weather associated seasonal fluctuations in demand, supply and generation capabilities – which may not be in line with historical trends, and which may or may not be associated with climate change – both in GB and globally. Further detail is available on page 27 ? of the Strategic Report. • Generation technology advancements. • Global and domestic political change, including the impacts of Brexit and the implications of a second Scottish Independence Referendum. • European generation outputs and availability. • International and national agreements on climate change. • International flows of fuel. Material influencing factors most impacted by coronavirus: • Fluctuations in foreign exchange values. • Fluctuations in the global supply and demand of fuel. • Global economic growth. • Geopolitical events. Key developments: • Managing the impacts of geopolitical events including those relating to Brexit. Key developments associated with coronavirus: • Managing the impacts of a continued significant reduction in energy demand. • Managing the impacts of significant fluctuations in commodity prices and foreign exchange values. Key mitigations: • Policy Link: An asset-by-asset approach to hedging strategy that ensures trading positions cannot have a material impact on SSE Group earnings. The latest update on SSE’s hedging approach can be found in the Financial Review section of this report. • The Energy Markets Risk Committee monitors the effectiveness of Group hedging arrangements. • SSE uses VaR and PaR measures to monitor and control exposures. Trading limits are reviewed regularly by the Energy Markets Risk Committee, with consideration given to changes in the material influencing factors noted above, before being approved by the Board. • SSE’s Energy Economics team provides commodity price forecasts which are used to inform decisions on trading strategy and asset investment. • SSE utilises hedging instruments to minimise exposure to fluctuations in foreign exchange markets, details of which are available in the Financial Statements section of the Annual Report and Account.

Material influencing factors: • Software or hardware issues, including telecoms network and connectivity and power supplies. • Ineffective operational performance, for example, breach of information security rules or poor management of resilience expertise. • Employee and contractor understanding and awareness of information security requirements. Material influencing factors most impacted by coronavirus: • Geopolitical events. • Malicious cyber attack. Key developments: • Continuation of work to ensure the successful technological separation of systems associated with divestments, including the sale of SSE Energy Services to Ovo, in a secure manner without interruption to services. Key developments associated with coronavirus: • Ensuring the continued security and resilience of Critical National Infrastructure given the heightened threat of malicious cyber attack, particularly the increased volume and sophistication of ransomware attacks. • Continued maintenance of secure onsite systems and facilities in preparation for the gradual return to the office environment of those staff currently working from home. Key mitigations: • Policy Link: SSE Cyber Security Policy and SSE Data and Information Policy. • Key technology and infrastructure risks are incorporated into the design of systems and are regularly appraised with risk mitigation plans recommended. • SSE conducts regular internal and third party testing of the security of its information and operational technology networks and systems. • Continued strengthening and embedding of the cyber risks and controls framework to continue to identify threats and reduce exposures through, for example, improved use of data analytics and further migration from unsupported systems. • Significant longer term Security Programme investment and planning which seeks to strengthen the resilience of the systems on which SSE relies. • IT Service Assurance works with individual business units to form and agree appropriate service level agreements for business critical IT services. • Business continuity plans are reviewed in response to changes in the threat to the Group and regularly tested.

Material influencing factors: • Changes to regulatory frameworks. • International and national agreements such as the 2015 Paris Agreement on Climate Change and The Climate Change Act 2008. Material influencing factors most impacted by coronavirus: • Government intervention into the structure of the energy sector. • Constitutional uncertainty, including relating to any second independence referendum in Scotland. • Changes in financial, employment, safety and consumer legislation and regulation and the impact of these changes on business as usual activities. Key developments: • Publication of the Prime Minister’s ‘Ten point plan for a green industrial revolution’ setting out increased policy ambition to drive a green recovery and the long-awaited Energy White Paper. Key developments associated with coronavirus: • SSE’s Greenprint published in May 2020 outlines SSE’s green recovery policy proposals, highlighting 5 priority areas it believes the UK to focus on in order to build a greener, more resilient economy while driving progress to net zero. These priorities are: net zero by 2040; strategic investment in networks; clean industrial revolution; leading the charge on EVs; and, green buildings for green jobs. Further details are available on page 18 ? of the Strategic Report. Key mitigations: • Policy Link: SSE Political and Regulatory Engagement Policy. • The Group has dedicated Corporate Affairs, Regulation, Legal and Compliance departments that provide advice, guidance and assurance to each business area regarding the interpretation of political, regulatory and legislative change. These teams take the lead in engagement with regulators, politicians, officials, and other such stakeholders. • SSE has a clear Political Engagement Statement that sets out principles for any employees who make representations to institutions of governments or to legislatures on the Company’s behalf. • The Group puts in place dedicated project teams to manage all aspects of significant regulatory and legislative change including those relating to Brexit. • There is regular engagement with the Board and Group Executive Committee on political and regulatory developments which may impact SSE’s operations or strategy. Further details are available on page 111 ? of the Directors’ Report.