Reebok 2014 Annual Report Download - page 174

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2014
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adidas Group
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2014 Annual Report
Group Management Report – Financial Review
Risk and Opportunity Report
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Legal & Compliance Risks
Legal & Compliance Risks
Risks related to competition, trade, customs and tax regulations
Numerous laws and regulations regarding competition, trade, customs and taxes affect the
adidas Group’s business practices worldwide. Non-compliance with regulations concerning fair
competition, pricing, advertising, product imports (including calculation of customs values) or taxes
could lead to substantial financial penalties and additional costs as well as negative media coverage
and therefore reputational damage.
To proactively manage such risks, we constantly seek expert advice from specialised law or tax
advisory firms and provide subject-matter training to our employees (e.g. competition law training).
In addition, our internal legal, customs or tax departments advise our operational management
teams to ensure appropriate and compliant business practices. Furthermore, we work closely with
customs authorities and governments worldwide to make sure we adhere to customs and import
regulations and obtain the required clearance of products to fulfil sales demand. In order to reduce
the financial risk, we also create provisions in our financial statements in accordance with the
relevant accounting regulations to account for potential disputes with customs or tax authorities.
Product quality risks
The adidas Group faces a risk of selling defective products, which may result in injury to consumers
and/or brand and product image impairment. We mitigate this risk by employing dedicated teams
that monitor the quality of our products on all levels of the supply chain through rigorous testing
prior to production, close cooperation with suppliers throughout the manufacturing process, random
testing after retail delivery, open communication about defective products and quick settlement of
product liability claims when necessary. In 2014, we voluntarily recalled two Reebok-CCM Hockey
products – an elbow pad and a goalie neck guard – in North America because they did not meet the
Group’s high product quality standards.
Fraud and corruption risks
We face the risk that our employees and Executive Board breach rules and standards that guide
appropriate and responsible business behaviour. This includes the risks of fraud, financial
misstatements or manipulation, bribery and corruption. Our Group’s Fair Play Compliance
Framework helps us manage these risks in a proactive way and enables us to prevent, detect and
adequately respond in case of fraudulent or corrupt behaviour. Our Global Policy Manual provides a
framework for basic work procedures and processes and our Fair Play Code of Conduct stipulates
that every employee shall act ethically in compliance with the laws and regulations of the legal
systems where they conduct Group business. All of our employees have to participate in a special
Code of Conduct training. In addition, our Compliance Officers across the Group guide and advise our
operating managers regarding fraud and corruption topics. Furthermore, we utilise controls such
as segregation of duties in IT systems and data analytics technology to prevent or detect fraudulent
activities. Whenever reasonable, we actively investigate and, in case of unlawful conduct, we work
with state authorities to ensure rigorous enforcement of criminal law.