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Marks and Spencer Group plc Annual report and financial statements 2010 Directors’ report 56
Our principal risks
Our risk process is designed to identify, evaluate and manage key business risks. The table below gives examples of what we do to
manage these risks. The Board considers these to be the most significant risks to achieving our 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 not presently known to
management, or currently deemed to be less material, may also have an adverse effect on the business.
Risk and Impact Mitigating activities
Strategy and finance
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.
Economic outlook Poor outlook for
the UK and global economy impacts
our ability to deliver our market share
and margin ambitions
Regular review of pricing, promotion and marketing strategies for appropriateness and their –
ability to adapt to a changing consumer market
Ongoing close working with suppliers to help them take cost out of their supply base –
Adapting product ranges to meet changing customer needs –
Competition Increasing competitor
activity impacts our ability to increase
or maintain UK market share across
GM, Food and/or online
Comparative shops and feedback with core customer panels –
Targeted marketing strategy in place to respond to new competitors in key locations –
Maintenance of our opening price point values –
Financial position Deterioration in
our financial position limits our
flexibility and ability to grow the
business
Regular forecasting of debt capacity, financial covenants and other rating metrics within –
current rating bands
Key management and external advisers fully engaged in formulating strategy for agreeing –
the pension deficit and funding plan
Ongoing communication with rating agencies and brokers –
Brand and reputation
We are proud of our brand values of Quality, Value, Service, Innovation and Trust which differentiate our products and services.
We have also set ourselves the goal through Plan A to be the most sustainable major retailer in the world by 2015.
Brand/reputation Failure to meet
customer and/or external stakeholder
expectations impacts the M&S brand
Brand values reinvigorated through ‘quality worth every penny’ –
Customer Insight Unit obtains monthly customer feedback and regularly presents findings –
to the Group Board, Management Board and the business to drive improvement
Code of ethics communicated to the Group and third parties to make sure business is carried –
out in line with our policies and procedures
Clear communications plan in place to respond to a major crisis, which is tested annually –
Plan A Failure to meet our
commitments reduces stakeholder
trust and confidence
Plan A team in place supported by a dedicated programme manager –
Clear accountabilities set at director level to ensure delivery against our Plan A commitments –
Regular reporting to the How we do business Committee and the Group Board with –
independent assurance from Ernst & Young
Example: Risk profile reporting
LIKELIHOOD
IMPACT
Almost certainLikelyPossibleUnlikely
Minor ModerateMajor Critical
G
G
G
NN
G
N
G
N
G
Gross risk
assessed
before
mitigation
Net risk
assessed
after mitigation
N
N
Our approach to risk management
Seeking opportunity and managing risk is at the heart of what we
do and is an integral part of day-to-day management.
We capture and report risk in a consistent manner across each
business area enabling Internal Audit and Risk to build a bottom
up and top down picture of the key risks facing the Group in
consolidated form of the Group Risk Profile (‘GRP’).
The example given opposite illustrates how we report risk.
It includes both ‘Gross’ and ‘Net’ risk positions with arrows to show
how management has reduced risks through appropriate controls
and mitigating activity. This prioritises the Internal Audit plan to
make sure we test the effectiveness of the most important controls.
The Board reviews the GRP every six months and the
Management Board reviews progress quarterly against agreed
actions to keep a close watch on how we are managing our
risks. The executives give regular reports to the Group Board,
Management Board and Audit Committee which give them a more
focused approach to identifying and managing their key risks.
Governance report
Principal risks and uncertainties