Marks and Spencer 2009 Annual Report Download - page 60

56 Marks and Spencer Group plc Annual report and financial statements 2009 Directors’ report
Corporate governance
continued
There are risks and uncertainties which could impact the Group’s long-term performance. The risk assessment process is designed to
identify, manage and mitigate business risk. The table below gives examples of activities across Group functions to mitigate against risks
and uncertainties identified. The Board considers that these are the most significant risks to achieving business goals. The risks listed
do not comprise all those associated with Marks & Spencer and are not set out in any order of priority. Additional risks and uncertainties
not presently known to management, or currently deemed to be less material, may also have an adverse effect on the business.
Risk Impact Examples of mitigating activities
Economic downturn
Our current priorities place a greater emphasis on managing our business through the downturn, underpinning our strong financial position
and continuing to invest for the long term, to be well placed when the market improves.
Strategy
We fail to set the strategic direction to
balance short-term and long-term profitability
Adverse effect on
financial results
– Short-term priorities announced in November 2008
– Significant cost saving initiatives announced in January 2009
– Increased Board discussion concerning strategy with dedicated
away-days in 2009
Finance
We fail to protect brand and profitable
revenues whilst driving cost savings
Adverse effect on
financial performance
and brand reputation
– Regular monitoring of key brand/profit indicators
– Regular monitoring of key service and compliance measures
to ensure operating standards in our stores are maintained
We fail to attract, develop and retain talent
with the correct skills to succeed into senior
positions
Inability to develop
and execute
business plans
Competitive
disadvantage
– Increased responsibilities for the executive team to support succession
plans and appointment of separate Chairman and CEO by July 2011
– New ‘Lead to Succeed’ leadership programme to develop and fast
track current and potential leaders for tomorrow
– Bonus plans linked to individual performance being introduced
in 2009/10
People
As we continue to grow our business and invest for the future, it’s important we keep strengthening our team at every level from the shop
floor to the boardroom.
We fail to react to changes in foreign
currency exchange or inflation rates
Adverse effect on
operating costs or
accounting impact
on operations
– Progressive hedging policy
– Close liaison with suppliers to mitigate adverse currency impact
– Continued drive of economies of scale
We fail to maintain cost efficient funding Increased costs and
tighter conditions
Adverse effect
on business and
financial results
– Ongoing tight cash flow, working capital and cost management
– Tight stock management
– Quarterly cash forecasting and tight management of payment terms
– Tight control of capital expenditure
– Proactive engagement with funding providers and credit agencies
– Development of suite of future funding options if and when necessary
We fail to respond to/recover from key
counterparty failure
Disruption to supply
chain resulting in
financial loss
Adverse effect on
financial performance
and brand reputation
– Open and frequent dialogue with our key suppliers on their ability
to continue to trade
We fail to react to changes in pension
funding requirements
Adverse effect on
financial condition
– Continuing dialogue with Trustee to identify appropriate long-term
funding solutions
We fail to retain the confidence and
motivation of our employees
Poor employee
morale
– Improved communication at all levels to keep employees engaged
and motivated
– Tracking of employee satisfaction surveys and resulting actions
– Tracking of customer perceptions of service and resulting actions
Principal risks and uncertainties