Carphone Warehouse 2012 Annual Report Download - page 21

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Carphone Warehouse Group plc Annual Report 2012 17
Overview Business review Governance Financial statements
RISK MITIGATION
CONSUMER ENVIRONMENT
CPW Europe’s major markets have suffered low or negative
economic growth since 2009, and there is uncertainty surrounding
the economic outlook, particularly in the Eurozone markets in
which the business operates. Some of the products and services
offered by the business may be viewed as discretionary, andmay
therefore be particularly affected by consumerconfidence.
The business continues to focus on its structure and on strong
cost control to try to ensure that it is well‑positioned to deal
with anuncertain environment.
DEPENDENCE ON KEY SUPPLIERS
ANDCUSTOMERS
CPW Europe’s principal revenue streams are from mobile
network operators, and any change in their strategy could
affect the revenues and profits of the business. Changes
innetwork ARPU could also have an adverse effect on
therevenues and profits of the business.
The business is also dependent on relationships with key
suppliers to source products on which availability may
belimited.
The business has moved towards commercial arrangements
that provide a closer alignment of interests with the network
operators, whereby the risks and rewards of customer
ownership are shared, and has focused on the high value
postpay and smartphone segments to help to drive economic
value for the networks.
The business seeks to increase and leverage the scale
ofitsoperations to support global strategic relationships.
COMPETITION
CPW Europe operates in markets that are highly competitive,
in which the behaviour of competitors may damage revenues
andmargins.
In some markets CPW Europe may not have the scale required
to compete effectively against increased competition.
The business has sought to differentiate itself through
innovative propositions, high quality customer service,
andagood supply ofscarce products.
The business is working to build partnerships with other
retailers in certain territories in order to achieve
additionalscale.
REGULATION
CPW Europe is subject to regulation in a number of areas,
including insurance operations, information security
andcustomer management.
The business has internal committees and control structures
to manage these requirements, to ensure appropriate
compliance, and to react swiftly should issues arise.
OPERATIONS
CPW Europe’s operations are dependent on internal and
external IT systems which could fail or be unable to keep
pacewith the needs of the business.
A significant investment has been made over recent years
inthe IT infrastructure of the business, supported by testing
processes and ongoing business continuity planning.
FOREIGN EXCHANGE
A material part of CPW Europe’s earnings are denominated in
Euros, giving rise to exposure to foreign currency fluctuations.
The business may hedge a proportion of such earnings,
toprovide certainty of their value.
CPW Europe has a well-established risk management function,
which monitors the key risks facing the business. Thetable below
summarises the most material risks identified, and the ways in
which the business seeks tomitigate them.
CPW EUROPE
RISK MANAGEMENT