Tesco 2014 Annual Report Download - page 25

Principal risks Key controls and mitigating factors
Property
The acquisition, development and management of
property sites carry inherent risk. Challenges may arise
in relation to obtaining planning or other consents;
compliance with varying country safety, design and
construction standards; tenant management; and
maintaining a cost-effective estate with the right
balance of freehold and leasehold sites
•Calling an end to the ‘space race’ and our change of strategy in markets
such as China has reduced property acquisition and development risk.
There is now greater focus on repurposing space and managing our
freehold and leasehold balance wisely and profitably
•Group Property Strategy, Property Acquisition and related committees
regularly review, and closely control, property acquisition, planning,
construction and repurposing processes to ensure standards are met
and risks are minimised
•Group Property Blueprints are adopted to ensure consistency of approach
•Group and country Compliance Committees monitor legal and
regulatory compliance in property activities
• Mall management systems are in place to assist site management
Economic
In each country where we operate, we are impacted by
the underlying economic environment, the impact of
austerity programmes on consumer spending and the
fiscal measures that apply to the retail sector
• The external economic outlook is carefully considered when developing
strategy and is continuously monitored through the Executive Committee’s
review of performance
•Country developments are continuously monitored through local CEOs
• A central Euro Disaster Committee monitors developments in the Eurozone
•We try to anticipate and contribute to important changes in public policy
wherever we operate
Political and regulatory
In each country where we operate, we may be impacted
by legal and regulatory changes, increased scrutiny by
competition authorities and political developments
relevant to domestic trade and the retail sector
The regulatory landscape is becoming more restrictive
in many markets, which may impact how we trade.
Examples include stricter rules regarding opening hours,
customer, supplier and data protection, corporate crime
and heightened banking regulation
•Engagement with governmental and non-governmental organisations
in a positive and supportive way allows us to represent the views of our
customers and employees and to manage the impact of political and
regulatory changes. We try to anticipate and contribute to important
changes in public policy wherever we operate
•Country developments are continuously monitored through local CEOs
•Group and country Compliance Committees, with support from our
Regulatory Ethics and Compliance Team, monitor and guide legal and
regulatory compliance
•The Tesco Bank Executive and Treating Customers Fairly Board oversee
Tesco Bank’s compliance with regulatory requirements
•Compliance with the UK Groceries Supply Code of Practice (‘Code’) is
carefully monitored by our Code Compliance Officer
Product safety and ethical trading
Failures could damage customer trust and
confidence, impacting our customer base
and therefore financial results
•Our Group Product Policy is implemented and monitored across the
business by Group technical teams
•We have changed the way we work, following the horsemeat crisis,
to be more vigilant and to improve our capabilities on anticipating
and managing emerging issues; we have also appointed an Incident
Management expert to build expertise across the business
• Appropriate controls are in place around key risks including product
development; the approval and management of supplier sites; standards
in distribution; the monitoring of labour standards in our supplier base;
the competency of our people; and management of crises, emerging issues
and changes in regulatory standards
•Detailed, established procedures are operating globally to ensure
product integrity
•Product surveillance programmes are in place, including DNA
traceability programmes
•Group and country Compliance Committees monitor the management
of risks associated with products, suppliers and operations
22 Tesco PLC Annual Report and Financial Statements 2014
Principal risks and uncertainties continued