Tesco 2012 Annual Report Download - page 47

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Principal risks
Change from
2010/11 Key controls and mitigating factors
Product safety
Failures could damage customer
trust and confidence, impacting
our customer base and therefore
financial results
UK and US  Detailed, established procedures, operating globally, to ensure product integrity
 Strict trading law and technical safety testing regime with regular reporting; Group
Compliance Committee reviews compliance with laws and policies
 Partnering with suppliers for mutual understanding of required standards
 Monitoring of developments to respond to changing customer trends and legislation
such as labelling and dietary responsibilities
 Clear and tested crisis management processes
International
(exc. US)
Climate change and
sustainability
The main environmental risk
we face is climate change. It is
essential we work to mitigate it
through energy efficiency, the
sustainable management of
other resources and waste
minimisation. We are also
committed to supporting
customers by giving them the
information they need to make
their own choices
 Engagement with key stakeholders and experts in developing environmental policy,
including through the Sustainable Consumption Institute we endowed at
Manchester University
 Climate change strategy is part of our Community Plan and is reviewed regularly by
our Sustainability Committee and Executive Committee and reported to the Board
 Targets are regularly reviewed as part of the Community segment of the Steering
Wheel balanced scorecard system
Economic and political risks
In each country where we
operate, we may be impacted
by legal, regulatory and tax
changes, increased scrutiny
by competition authorities,
political developments and
the economic environment
Economic  External uncertainties carefully considered when developing strategy and
reviewing performance
 Ongoing monitoring of developments through local CEOs
 We try to anticipate and contribute to important changes in public policy wherever
we operate
 Engagement with governmental and non-governmental organisations to represent
views of our customers and employees
 Business development follows thorough due diligence work
Political
Pension risks
Our IAS 19 deficit could increase
if returns on corporate bonds
are higher than the investment
return on the pension scheme’s
assets. There are also increasing
risks of legal and regulatory
changes introducing more
burdensome requirements
 Diversified investment strategy with increased control and visibility through the
appointment of an in-house investment team
 Changes to benefits proposed which will reduce the scheme’s life expectancy
and inflation risks
 Monthly review by Pensions and Treasury Directors
 External advisors and pension fund trustees fully engaged to consider deficit
and fund performance and legislative and regulatory changes and their impact
Activism and terrorism
A major incident or terrorist
event could impact on staff
safety or the Group’s ability
to trade
 Appropriate contingency plans
 Security systems and processes that reflect best practice
Health and safety
Failure to provide safe
environments for our staff and
customers could lead to injuries
or loss of life
 Operation of stringent processes that reflect best practice; policies are monitored and
audited regularly
 KPIs across the business help prevent incidents with quarterly reporting of performance
against KPIs
 Group Compliance Committee and business unit Compliance Committees regularly
monitor compliance with laws and internal policies
 Lucy Neville-Rolfe is the Executive Director responsible for health and safety issues
Tesco PLC Annual Report and Financial Statements 2012 43
STRATEGIC REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTSOVERVIEW
General information Directors’ remuneration reportBoard of Directors Principal risks and uncertainties Corporate governance