Tesco 2006 Annual Report Download - page 17

15Tesco plc
innovations and better ways to help customers act responsibly
towards the environment.
Product safety The safety and quality of our products is
of paramount importance to Tesco as well as being essential
for maintaining customer trust and confidence. A breach in
confidence could affect the size of our customer base and
hence our financial results.
Tesco has detailed and established procedures for ensuring
product integrity at all times, especially for our own label
products. There are strict product safety processes and regular
management reports. We work in partnership with suppliers to
ensuremutual understanding of the standards required. The
business also monitors developments in areas such as health,
safety and nutrition in order to respond appropriately to
changing customer trends and new legislation. We have clear
processes for crisis management, pulling together expert
teams should we need to respond quickly on issues.
Ethical risks in the supply chain We do business with a large
number of own-brand suppliers in over 90 countries and the
supply chain is made of complex relationships – from individual
farmers and growers through to processors, manufacturers and
distributors. There is a risk that any part of the supply chain
might notadhere with the Group’s high ethical standards,
which are set out on our website.
Tominimisethis risk we have a partnership approach to
working with suppliers, providing a certain and growing market
for their products, regular payments and payments on time,
and our commitment to sharing our understanding of
customersand changing consumer behaviour. We also have
aprogramme of risk assessment and internal and external
auditing of suppliers on ethical issues to complement our
compliancework on product safety, quality and capability.
Fraud and compliance Asthe businessgrows in size and
geographical spread, the risk of occurrence of fraudulent
behaviour of its employees increases. While the vast majority
of our staff are completely honest, there remains the potential
for financial crimes at all levels of the business from shop-floor
to senior management. The Group takes extensive steps to
reduce this risk. Accounting procedures at all levels are clearly
set out and audited acrossthe businessto reduce the risk of
fraud. The Group gives clear guidance on behaviour to
employees through the Values and the Code of Ethics. The
Internal Audit department undertakes detailed investigations
into all areas of the business and highlights to the Audit
Committee its findings. The Compliance Committee
formulates and monitors the implementation of, and
compliance with, appropriate policies on key areas of ethical
behaviour, including fraud.
IT systems and infrastructure The business is dependent on
efficient Information Technology (IT) systems. Any significant
failure in the IT processes of our retail operations (e.g. barcode
scanning or supply chain logistics) would impact our ability to
trade. We recognise the essential role that IT plays across the
Group in allowing us to trade efficiently and that we can also
achieve commercial advantage through implementing IT
innovations that improve the shopping trip for customers and
make life easier for employees. We have extensive controls
in place to maintain the integrity and efficiency of our IT
infrastructure and we share world-class systems across our
International operations to ensure consistency of delivery.
Regulatory and political environment We are subject to a
wide variety of regulations in the different countries in which we
operate because of the diverse nature of our business. Tesco is
subject to regulatory changes in key areas such as changes in
planning laws, trading hours and tax rules and to scrutiny by the
competition authorities. We consider these uncertainties in the
external environment when developing strategy and reviewing
performance. We remain vigilant to future changes in the UK and
abroad. Aspart of our day-to-day operations we engage with
governmental and non-governmental organisations to ensure the
views of our customers and employees are represented and try to
anticipateand contribute to important changes in public policy.
Activism and terrorism Amajor incident or terrorist event
incapacitating management, systems or stores could impact on
the Group’sability to trade. In addition to excellent contingency
plans we have security systems and processes that reflect
bestpractice.
Pension risks The Group’s pension arrangements are an
important part of our employees’ overall benefits package,
especially in the UK. We see them as a strong contributor
to our ability to attract and retain good people, our Group’s
greatest asset.
The Tesco PLC Pension Scheme is a defined benefit scheme
with around 150,000 members and about 15,000 pensioners.
3
In South Korea
we launched
the MeliMelo
children’s
clothing brand.
4
We offer 130 chart
DVDs in-store with a
full range of 32,000
on-line.