Marks and Spencer 2016 Annual Report Download - page 46

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MARKS AND SPENCER GROUP PLC
DIRECTORS’ REPORT: GOVERNANCE
The Committee receives a detailed
update from the business at each
committee meeting, with one or more
areas represented. Business updates are
planned on a rolling 12-month basis and
reviewed at every meeting. Any matter
identifi ed by internal audit as in need
of discussion is added to the agenda of
a future meeting. Some of the 2015/16
updates are listed below:
CASTLE DONINGTON DISTRIBUTION
CENTRE RESILIENCE
> Updated on Business Continuity,
including contingency options
and embedding the plan for
e-commerce fulfi lment.
> Discussed the triggers to the business
continuity action plan and the service
standards required to protect the
Company in the situation of a triggered
event, as well as consideration of
customer expectations.
> Discussed the link between Castle
Donington and store inventories.
CYBER SECURITY
> Updated on the cyber security measures
in place at M&S, and noted the proactive
approach adopted by the business.
> Discussed the protection around
customer data, including encryption
and regular reviews of the security
measures in place.
> Updated on the external review of the
company’s cyber security systems,
which were assessed against an
external framework, and considered
the proposed improvement plan.
> Agreed regular updates be provided
to the Committee throughout the year.
BUSINESS CONTINUITY
> Updated on progress made in the
international business following the
implementation of several initiatives,
including the increased levels of crisis
management training.
> Discussed the current national threat
level, level of preparedness with the
introduction of shopping centre/retail
park preparedness assessments, and
key areas of improvement.
> Discussed the strategy and focus for
2016/17 which includes international
retail and sourcing, cyber security,
and global terrorism.
PROPERTY, FIRE, HEALTH, AND SAFETY
> Updated on the property Fire Health
and Safety Management (FHSM) Plan
which includes safety arrangements,
monitoring performance, and
performance targets.
> Discussed the management of electrical
safety and the policies and
arrangements in place.
> Updated on the improvements to
international governance, including
a third-party FHSM inspection plan, and
our global minimum standard for FHSM.
> Noted the continued partnership with
Birmingham City Council for Health
& Safety and the West Midlands
Fire Service for fi re safety, as well as
partnerships with local NHS Ambulance
Trusts and emergency responders.
GROSS MARGIN AND
ETHICAL SOURCING
> Updated on the improvements in gross
margin and sourcing strategy, key drivers
to delivering the target growth in the
plan, and key areas of risk.
> Noted the internal risks and impacts of
external factors, including wage infl ation
and currency volatility risk, and
discussed mitigating actions.
> Discussed supplier relationships and
changes to team structure within our
Sourcing O ces, leading to a change
in culture.
> Updated on the ethical trading
approach, including M&S standards and
auditing, noting independent ethical
audits undertaken by an accredited third
party on all factories used by M&S.
> Discussed the ethical compliance
monitoring process, reporting structure,
and escalation procedures, and
improvements made in this area.
GOVERNANCE AND COMPLIANCE
> Updated on the improvements to the
whistleblowing policy, anti-bribery
policy, and Code of ethics and
behaviours, including stronger employee
awareness and compliance monitoring.
> Discussed and reviewed the process
undertaken by the Board to assess the
long-term viability of the business.
> Updated on international compliance,
and noted key risks and mitigating
actions, and the continued support
from Head O ce to the local teams.
AUDIT COMMITTEE UPDATES SIGNIFICANT ISSUES
ACCOUNTABILITY
AUDIT COMMITTEE REPORT CONTINUED
The Audit Committee has assessed whether
suitable accounting policies have been
adopted and whether management has made
appropriate judgements and estimates.
Throughout the year, the fi nance team has
worked closely with Deloitte to ensure that
the business is transparent and provides the
required level of disclosure regarding signifi cant
issues considered by the Committee in relation
to the fi nancial statements, as well as how these
issues were addressed, whilst being mindful of
matters that may be business sensitive.
The main areas of judgement that have been
considered by the Committee to ensure that
appropriate rigour has been applied are
outlined in this section. All accounting policies
can be found in note 1 on pages 90-94.
Where further information is provided in the
notes to the fi nancial statements, we have
included the note reference.
Each of the areas of judgement below has
been identifi ed as an area of focus and
therefore the Committee has also received
detailed reporting from Deloitte.
IMPAIRMENT OF GOODWILL, BRANDS
TANGIBLE AND INTANGIBLE ASSETS
The Committee has considered the
assessments made in relation to the
impairment of goodwill, brands, tangible
and intangible fi xed assets, including land
and buildings, store assets and software assets.
The Committee received detailed reports
from management outlining the treatment
At the request of the Board, the Committee has
considered whether, in its opinion, the 2015/16
Annual Report and Financial Statements is fair,
balanced and understandable, and whether it
provides the information necessary for
shareholders to assess the Group’s position
and performance, business model and strategy.
The structure of the report continues to
provide a strong focus on the key strategic
messages in the Strategic Report, whilst
ensuring these changes do not dilute the level
of transparency in disclosure that we know is
useful for stakeholders, and that the business
continues to provide a clear message that is
refl ective of the Company as a whole.
A broad outline of the structure the Annual
Report was given to the Committee early in
the planning process, along with a similarly
broad indication of content. The Committee
received a full draft of the report some two
weeks prior to the meeting at which it would
be requested to provide its fi nal opinion.
Feedback was provided by the Committee in
advance of that meeting, highlighting any areas
where the Committee believed further clarity
was required. The draft report was then
FAIR, BALANCED AND UNDERSTANDABLE