Reebok 2014 Annual Report Download - page 171

Group Management Report – Financial Review
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2014
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03.5
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adidas Group
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2014 Annual Report
Risk and Opportunity Report
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Operational Risks
Hazard risks
The adidas Group is exposed to external risks such as natural disasters, unfavourable weather
conditions, epidemics, fire, accidents and malicious acts. Physical damage to our own or our
suppliers’ premises, production units, warehouses and stock in transit can lead to property damage
and business interruption.
These risks are mitigated by loss prevention measures such as working with reliable suppliers
and logistics providers who guarantee high safety standards. In addition to the insurance coverage
we have secured, the Group has implemented loss prevention (e.g. sprinklers in facilities) and
contingency plans to quickly recover business activities in order to minimise potential negative
effects.
IT risks
Key business processes, including product marketing, order management, warehouse management,
invoice processing, customer support and financial reporting, are all dependent on IT systems.
A significant systems outage or application failure could result in considerable disruptions to
our business. Virus or malware attacks could also lead to systems disruption and may result in
the loss of business-critical and/or confidential information. Theft or leakage of confidential and
sensitive information or data (e.g. product data, employee data, consumer data, etc.) could lead to
reputational damage, penalties and higher costs.
To mitigate these risks, our IT organisation proactively engages in system preventive maintenance,
service continuity planning and adherence to applicable IT policies. Data security is managed
by restricting user access based on job description and adhering to data protection regulations.
Additional security measures such as anti-virus software and firewalls are designed to further
protect our systems and critical information. We perform multiple backups at alternating data
centre locations for the Group’s core Enterprise Resource Planning System (ERP) on a daily basis. In
addition, for the ERP system, our contingency solution allows us to quickly switch to a remote site if
necessary – without any loss of data. System security, controls and reliability are regularly reviewed
and tested by the Group’s Internal Audit department.
Project risks
To effectively support further business growth and improve efficiency, the Group continuously
invests in new projects such as the creation, implementation and expansion of IT systems and
distribution centres or the construction of office buildings. Ineffective project management could
delay the execution of critical projects and lead to higher expenditures. Inadequate project planning
and controlling as well as executional mistakes could cause inefficiencies, delays or business
disruption, resulting in higher costs and sales shortfalls. Inappropriate project governance,
prioritisation and oversight of the project portfolio may lead to suboptimal resource allocation and
undesired project results.
We manage projects utilising reviews by project teams as well as project steering committees to
ensure that the progress, quality and costs of those projects are regularly evaluated. To ensure
true end-to-end management of key projects for the Group, we have established a cross-functional
programme board under the leadership of the Group’s Executive Board member responsible for
Global Operations. This approach allows early detection of project risks and quick implementation
of corrective action or timely cancellation of projects with a low chance of success.