Marks and Spencer 2011 Annual Report Download - page 47

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This year we have maintained a simple and practical
approach to risk management, while driving key
improvements to the process and quality of risk
information produced.
Our focus has centred around three key themes:
1. Alignment with the three-year plan
Each business area underwent a robust business planning
process earlier in the year, setting out key initiatives required
to support the delivery of our overall strategy. As part of this,
each area identified their key risks to the achievement of the
three-year plan and business objectives, ensuring that we are
focusing on the things that really matter. In light of this, new
risks relating to the delivery of the new online platform;
improvements to our store environment; and engagement
with our core clothing customers have been disclosed this year.
2. Clearer risk descriptions
The business areas have been challenged to state where
their key areas of concern lie. For example, last year the risks
relating to ‘economic outlook’ and ‘product costs’ were
combined as one. This year they have been captured
separately, recognising that different events could impact
our sales plan and profitability.
3. Action plans for key risks
Through development of clearer risk descriptions, the
business has built more focused action plans to address each
risk with defined ownership and timeframes for completion.
Action plans against our principal risks have been signed off
by the Executive Board and will be monitored and reported on
a quarterly basis.
Each of the above initiatives further strengthens our risk
process and enables the Board to make informed decisions
on strategy with assurance that our risks are being managed.
Key areas of focus
We believe that effective risk management is critical
to the achievement of our strategic objectives and the
long-term sustainable growth of our business.
What is our approach to risk management?
The Board has overall accountability for ensuring that risk is
effectively managed across the Group and, on behalf of the
Board, the Audit Committee reviews the effectiveness of the
Group Risk Process.
Risks are reviewed by all business areas on a half-yearly basis and
measured against a defined set of likelihood and impact criteria.
This is captured in consistent reporting formats, enabling Internal
Audit & Risk to consolidate the risk information and summarise
the key risks in the form of the Group Risk Profile. Our Executive
Board discusses the Group Risk Profile ahead of it being
submitted to Group Board for final approval.
To ensure our risk process drives improvement across the
business, the Executive Board monitors ongoing status and
progress of key action plans against each risk on a quarterly
basis. Furthermore, the discussions on risk have strengthened
at Board level with risk being a key consideration in all strategic
decision-making.
Our principal risks and uncertainties
As with any business, we face risk and uncertainties on a daily
basis. It is the effective management of these that places us in a
better position to be able to achieve our strategic objectives and
to embrace opportunities as they arise.
In order to achieve a holistic view of the risks facing our business,
both now and in the future, we have taken into consideration those
risks that are:
– external to our business;
– core to our day-to-day operation;
– related to business change activity underway across the Group;
and
– those that could emerge in the future.
The ‘risk radar’ below maps our principal risks against these
categories. This tool is also used to facilitate wider Executive and
Board level discussions on risk.
Overleaf, further information is provided on our principal risks
and the mitigating activities underway to address them. It is
recognised that the Group is exposed to a number of risks, wider
than those listed. However, a conscious effort has been made to
disclose those risks of most concern to the business at this
moment in time and those that have been the subject of debate
at recent Board or Audit Committee meetings.
External
Core external risk Emerging areas
Business change
Stable / known
Changing / new
Internal
Core operations
Food
competition
Economic
outlook
Product
costs
Supply chain
management
Corporate
reputation Stock
management
IT security
Food safety
Our
customers
International
Our people Store
environment
Programme and
workstream management
M&S Direct
Key supplier
failure
Financial
position
Risks highlighted
anddocumented in
acentrally managed
Risk Register
Required actions are
agreed and assigned,
with target deadlines
and quarterly status
updates
Gross risk assessed
before mitigation
Net risk assessed
after mitigation
LIKELIHOOD
IMPACT
Almost certainLikelyPossibleUnlikely
Minor Moderate Major Critical
G
G
NN
G
N
G
N
G
N
GN
1 Risk identification
3 Risk mitigation
2 Risk assessment
Strategy Performance & Marketplace Operating review Financial review
Financial statements & other informationGovernanceOverview
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