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BAE Systems plc
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=== Government customers, defence spending and terms of trade risks === These risks affect strategies 1, 2, 3, 5 * 95% of sales in 2022 were in defence. Government expenditure on defence can vary based on policy, politics, budgetary constraints as well as national security threats, and some governments have already faced constraints. However, BAE has a geographically well-spread market, many countries within which have announced plans to defence spending in response to the currently elevated global threats. BAE also benefits from a large order backlog, as well as establishment with long-term projects. * BAE systems faces threats to their ability to secure and maintain government contracts. Financial reviews can lead to budgetary reconsiderations and premature termination of contracts. However, BAE is established as being a major contributor to the industrial capabilities of the countries within its market. * BAE also faces a risk with the fact that its cashflows depend on the timing and success in being awarded contracts as well as when they receive the corresponding cash. Not receiving cashflow on time can lead to an inability to focus on their own expenditure without requiring external funding - impacting credit rating. However, BAE manages their balance sheet conservatively, to ensure flexibility, as well as monitoring liquidity to ensure the retrieval of cash needed for operations.
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