Reebok 2015 Annual Report Download - page 169

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GROUP MANAGEMENT REPORT – FINANCIAL REVIEW
Risk and Opportunity Report – Illustration of Material Risks
OPERATIONAL RISKS
Personnel risks
Achieving the adidas Group’s strategic and financial objectives is highly dependent on our employees
and their talents. In that respect, strong leadership and a performance-enhancing culture are critical
to our Group’s success. Therefore, inconsistent or ineffective leadership as well as the failure to instil
and maintain a performance-oriented culture and ensure strong employee engagement amongst our
workforce could also substantially impede our ability to achieve our goals. In addition, global competition
for highly qualified personnel remains fierce. As a result, the loss of key personnel in strategic positions
and the inability to identify, recruit and retain sufficient highly qualified and skilled people who best meet
the specific needs of our Group pose substantial risks to our Group’s business performance. Unattractive
or non-competitive management and employee remuneration may exacerbate these risks. In addition, a
lack of sufficient training measures and inadequate documentation of critical know-how might dilute or
lead to a loss of key capabilities.
Our People Strategy is designed to reduce these risks by creating the corporate culture and work
environment needed to be successful. We continuously invest in improving employer branding activities
to be the ‘employer of choice’ in our industry and as a result attract and retain the right talent. We have
also established a global recruiting organisation to enhance our internal and external recruiting services
and capabilities. In addition, we strengthen employee retention by providing employees development and
career opportunities (e.g. via our Talent Carousel programme) and we focus on promoting from within the
organisation rather than recruiting externally. Attractive reward and incentive schemes are designed to
further support long-term employee commitment.
Business partner risks
The adidas Group interacts and enters into partnerships with various third parties such as promotion
partners, retail partners or suppliers. As a result, the Group is exposed to a multitude of business partner
risks.
Injuries to individual athletes or poor on-field performance on the part of sponsored teams or athletes
could reduce their consumer appeal and eventually result in lower sales and attractiveness of our brands.
Failure to cement and maintain strong relationships with retailers could have substantial negative effects
on our wholesale activities and thus the Group’s business performance. Losing important customers in
key markets due to sub-par relationship management would result in significant sales shortfalls. In a few
individual markets, we work with distributors or strategic partners whose approach might differ from our
own distribution practices and standards, which could also negatively impact the adidas Group’s business
performance. Similarly, failure to maintain strong relationships with suppliers or service providers could
negatively impact the Group’s sales and profitability. Risks may also arise from a dependence on particular
suppliers, customers or service providers. Over-reliance on a supplier for a substantial portion of the
Group’s product volume, or over-dependence on a particular customer, increases the Group’s vulnerability
to delivery and sales shortfalls and could lead to significant margin pressure. Business partner default
or other disruptive events such as strikes may negatively affect the Group’s business activities and result
in additional costs and liabilities as well as lower sales for the Group. Unethical business practices or
improper behaviour on the part of business partners could have a negative spill-over effect on the Group’s
reputation, lead to higher costs or liabilities and disrupt business activities.
see Our People, p. 87