Marks and Spencer 2016 Annual Report Download - page 29

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ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
GOVERNANCEFINANCIAL STATEMENTS OUR BUSINESSOUR PERFORMANCE
Identifi cation Risks
highlighted and
documented in a
centrally managed
risk register
Assessment
Risks assessed in
terms of likelihood
of occurrence and
potential impact
on the Group
Mitigation
Required actions
are agreed and
assigned, with
target deadlines
and quarterly
status updates
GROSS RISK LEVEL BEFORE MITIGATION NET RISK LEVEL AFTER MITIGATION
IMPACT
LIKELIHOOD
CRITICALMAJORMODERATEMINOR
UNLIKELY POSSIBLE LIKELY ALMOST CERTAIN
G
N
N
N
N
N
N
G
G
GG
G
RISK AND OUR BUSINESS MODELRISK LIKELIHOOD AND IMPACT
APPROACH TO RISK MANAGEMENT
The Board is accountable for carrying
out a robust assessment of the principal
risks facing the Company, including those
threatening its business model, future
performance, solvency and liquidity.
On behalf of the Board, the Audit
Committee reviews the e ectiveness
of the Group risk management processes.
Each business area is responsible for
formally identifying and assessing their
risks half-yearly, measuring them against
a defi ned set of criteria, and considering
likelihood of occurrence and potential
impact to the Group. The Group Risk
function facilitates a similar exercise with
Executive Board members, combining
information to provide a consolidated
view. The top risks (based on likelihood
and impact as illustrated below) form our
Group Risk Profi le, which is reported to the
Executive Board for review and challenge,
ahead of fi nal review and approval by the
Group Board. These principal risks are then
subject to Board discussion during the
course of the year, as appropriate.
To drive continuous improvement across
the business, the Executive Board monitors
the ongoing status of action plans against
key risks quarterly.
KEY AREAS OF FOCUS
This year the Group Board has placed
signifi cant focus on defi ning our risk
appetite. At the highest level, this is an
expression of the types and amount of
risk we are willing to take or accept to
achieve our strategic and operational
objectives. It is a key consideration in
decision-making across the Group and
helps us defi ne the mitigating activities
required to manage our risks.
Following on from last year’s progress,
we have taken our risk appetite work
a step further and the Board has agreed
a set of Group-level appetite statements.
The purpose of these is to articulate the
Board’s desired risk-taking approach,
and to support the business in its
management of a number of principal risks.
The current statements summarise normal
risk parameters within which the Group
already operates; as our business evolves
we will continue to refi ne our risk appetite
statements and approach. Further detail
can be found on page 48.
During 2015/16, the directors also assessed
the long-term viability of the Company
in the context of its principal risks. The
inclusion of a Viability Statement in Annual
Reports from 2016 is a new requirement
under the UK Corporate Governance Code.
The statement is designed to strengthen
stewardship and to encourage directors
to focus on the longer term. Further detail
on this can be found on page 47.
PRINCIPAL RISKS AND UNCERTAINTIES
Overleaf are details of our principal risks
and uncertainties and the key mitigating
activities in place to address them. It is
recognised that the Group is exposed to
risks wider than those listed. We disclose
those we believe are likely to have the
greatest impact on our business at this
moment in time and which have been
the subject of debate at recent Board
or Audit Committee meetings.
To achieve a holistic view of the risks
facing our business, we consider those
that are external to our business, core
to our day-to-day operation, related to
business change activity, and those that
could emerge in the future.
The diagram below maps our principal risks
to our business model. This mapping helps
us assess and manage risk, and provides a
greater understanding of our principal risks
in the context of our business operations,
including their broader infl uence on
viability, as discussed above.
OUR PERFORMANCE
RISK MANAGEMENT
As with any business, we face risks and uncertainties
on a daily basis. E ective risk management
places us in a better position to be able to achieve
our strategic objectives.
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INSPIRATION
Aim to excite
and inspire our
customers
INTEGRITY
Strive to do
the right thing
CORE
PURPOSE
MAKING
EVERY
MOMENT
SPECIAL
1
CLOTHING & HOME
TRANSFORMATION
2
CHANGING
CONSUMER
BEHAVIOURS
4
CLOTHING &
HOME SUPPLY
CHAIN AND
LOGISTICS
NETWORK
3
BUSINESS
TRANSFORMATION
5
IT
INTEGRATION
6
FOOD
COMPETITION
7
FOOD SAFETY
AND INTEGRITY
8
CLOTHING &
HOME ETHICAL
SOURCING
9
CYBER/
INFORMATION
SECURITY
10
INTERNATIONAL
11
M&S.COM
BUSINESS
RESILIENCE
PLAN A
PLAN A
IN TOUCH
Listen
actively
and act
thoughtfully
INNOVATION
Aim to
improve
things for
the better