Reebok 2013 Annual Report Download - page 167

adidas Group
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2013 Annual Report
Group Management Report – Financial Review
163
2013
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03.5
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Risk and Opportunity Report
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Strategic Risks
Strategic Risks
Macroeconomic, socio-political and regulatory risks
Growth in the sporting goods industry is highly dependent on consumer
spending and consumer confidence. Economic downturns and socio-
political factors such as civil unrest, nationalisation or expropriation, in
particular in regions where the Group is highly represented, therefore
pose a significant risk to sales development. In addition, significant
changes in the regulatory environment (e.g. trade restrictions, tax
legislation, product quality and safety standards, etc.) could lead
to potential sales shortfalls or cost increases. To mitigate these
macroeconomic, socio-political and regulatory risks, the Group strives to
balance sales across key global regions and also between developed and
emerging markets. We also continuously monitor the macroeconomic,
political and regulatory landscape in all our key markets to anticipate
potential problem areas, so that we are able to quickly adjust our
business activities accordingly upon any change in conditions. Potential
adjustments may be more conservative product purchasing, tight
working capital management and an increased focus on cost control.
Furthermore, a core element of our positioning in performance sports
is the utilisation of an extensive global event and partnership portfolio
where demand is more predictable and less sensitive to macroeconomic
influences. In addition, by building on our leading position within the
sporting goods industry, we actively engage in supporting policymakers
and regulators to liberalise global trade, curtail trade barriers and
proactively adapt to significant changes in the regulatory environment.
In 2014, we expect the global economy to grow, albeit with varying
degrees of performance geographically
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SEE SUBSEQUENT EVENTS
AND OUTLOOK, P. 151. However, as a result of the still challenging
macroeconomic environment in many European countries, slowing
economic growth rates in the emerging markets as well as political
and regulatory uncertainty in certain countries in Latin America, the
Middle East and Southeast Asia, we still regard the potential impact of
macroeconomic, socio-political and regulatory factors as major. Given
our broad-based risk mitigation, we now assess the likelihood that
adverse macroeconomic, socio-political or regulatory events could
impact our business to that extent as possible (2012: likely).
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Corporate risk overview
Likelihood Potential impact
Strategic risks
Macroeconomic, socio-political and
regulatory risks
Possible Major
Risks related to distribution strategy Possible Significant
Dependency risks Unlikely Significant
Risks related to media and stakeholder
activities
Likely Significant
Customer consolidation and cross-border
expansion/private label risks
Possible Moderate
Competition risks Possible Significant
Risks related to risk and control
environment
Unlikely Major
Consumer demand risks Possible Moderate
Operational risks
Own-retail risks Possible Major
Logistics risks Possible Major
Marketing risks Likely Significant
Customer relationship risks Possible Moderate
Sales and pricing risks Probable Moderate
Supplier risks Unlikely Significant
Inventory risks Likely Moderate
Hazard risks Possible Major
Personnel risks Probable Moderate
IT risks Unlikely Major
Product innovation and development risks Unlikely Moderate
Risks related to rising input costs Likely Moderate
Legal & compliance risks
Legal risks Possible Significant
Risks related to competition, trade and
customs regulations
Possible Major
Social and environmental risks Likely Moderate
Risks related to product counterfeiting and
imitation
Unlikely Significant
Product quality risks Possible Significant
Fraud and corruption risks Unlikely Major
Financial risks
Credit risks Unlikely Major
Financing and liquidity risks Unlikely Minor
Currency risks Likely Major
Interest rate risks Likely Minor
Risk related to impairment of
goodwill/other intangible assets
Unlikely Significant