Carphone Warehouse 2008 Annual Report Download - page 33

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www.cpwplc.com 21
Business Review
Potential ImpactOperational Risks Mitigation
Loss of market share and erosion in
margins from increased competition.
Competitive
environment
We have always focused on reinvesting the benefits of our increasing scale
into our customer proposition to keep barriers to entry high and to maximise
value for our customers. Our pricing in both mobile retail and broadband
reflects this strategy.
Reduction in customer loyalty and
higher churn in our fixed line operations
as a result of poor customer service.
Brand
perception
We have made significant improvements to customer service, and external
surveys indicate that brand perception is improving.
Failure to provide adequate service
levels to customers or to manage
back office processes.
Capacity and
functionality
of our IT and
telecoms
infrastructure
Our investment in IT continues to grow in line with the increasing scale
and complexity of our business. Telecoms investment has peaked with
the completion of our network roll-out, with further investment in future
years addressing the increasing bandwidth demands of customers.
Lack of necessary expertise or continuity
to execute strategy.
Retention
of key
management
We have successfully attracted and retained high quality executive management
through attractive incentive packages and wide-ranging career opportunities.
To find out more about our risk management processes and internal controls, please refer to page 30.
Potential ImpactFinancial Risks Mitigation
Profits and cash flow
reduced through high levels
of non-paying customers.
Revenue
assurance
We have dedicated credit control functions to manage both residential and
corporate debt, and credit checking processes that are continuously developed
to minimise the risk of non-payment. Our network operator debtors are highly
cash generative, well capitalised businesses.
Financial results impacted by obsolete
retail stock.
Stock
management
We have a very high turnover of stock and the subsidised business model
stimulates end demand.
Reported profits distorted by exchange
rate movements; value of assets and
liabilities similarly affected.
Exchange
rates
Exchange rate exposures are primarily to the Euro and Swiss Franc. Exposures
to exchange rate movements are continuously monitored and transactional
exposures to exchange rate movements are hedged, where material, to avoid
volatility in the income statement.
Principal Risks and Uncertainties