Marks and Spencer 2012 Annual Report Download - page 47

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Overview Strategic review Financial review Governance Financial statements and other information
Governance Marks and Spencer Group plc Annual report and financial statements 2012 45
Accountability
Risks highlighted
and documented in
a centrally managed
Risk Register
Required actions are
agreed and assigned,
with target deadlines
and quarterly status
updates
Risks assessed in
terms of likelihood
of occurrence and
potential impact on
the Group
Gross risk assessed
before mitigation
Net risk assessed
after mitigation
LIKELIHOOD
IMPACT
Almost certainLikelyPossibleUnlikely
Minor Moderate Major Critical
G
G
NN
G
N
G
N
G
N
GN
1 Risk identification
2 Risk assessment
3 Risk mitigation
EXTERNAL
STABLE/KNOWN
CHANGING/NEW
INTERNAL
Business
continuity
Economic
outlook
Corporate
reputation GM stock
management
IT security
Food safety
Our
customersInternational
Our people New
store format IT change
Programme and
workstream management
Distribution centre
restructure Multi-channel
Financial
position
Key supplier
failure
We believe that effective risk management is critical
to the achievement of our strategic objectives and
the long-term sustainable growth of our business.
What is our approach to risk management?
The Board has overall accountability for ensuring that risk is
effectively managed across the Group and, on behalf of the
Board, the Audit Committee reviews the effectiveness of the
Group Risk Process.
Risks are reviewed by all business areas on a half-yearly
basis and measured against a defined set of likelihood and
impact criteria. This is captured in consistent reporting
formats, enabling Internal Audit & Risk to consolidate the risk
information and summarise the key risks in the form of the
Group Risk Profile. Our Executive Board discusses the Group
Risk Profile ahead of it being submitted to Group Board for
final approval.
To ensure our risk process drives improvement across the
business, the Executive Board monitors ongoing status and
progress of key action plans against each risk on a quarterly
basis. Whilst we continue to broaden the debate around
tolerance and appetite, risk is now a key consideration in
all strategic decision-making at a Board level.
We continue to drive improvements to our risk
management process and the quality of risk
information generated, while at the same time
maintaining a simple and practical approach.
Our process continues to be focused on the following
key principles:
1. Alignment with the Group plan
Each business area has clear objectives aligned to the plan.
Risk champions have refreshed their business area risk
registers against the context of these objectives, ensuring
that the risks upon which we are focusing are of strategic
importance to the Group and that key risks to delivery are
highlighted. As a result, we have added two new risks this
year: Distribution centre restructure and Business
continuity.
2. Focused risk descriptions
As our understanding of the Group’s risks develops, we
are refining how these are defined. For example, we have
widened last year’s Economic outlook risk to encompass
achievement of the Group plan rather than focusing on our
sales forecast.
3. Action plans for key risks
We have also improved our distinction between ‘business
as usual’ mitigating controls (incorporated in our net risk
scoring), and additional mitigating actions taken to further
reduce net risk over time.
Key areas of focus
Our principal risks and uncertainties
As with any business, we face risk and uncertainties on
a daily basis. It is the effective management of these that
places us in a better position to be able to achieve our strategic
objectives and to embrace opportunities as they arise.
To achieve a holistic view of the risks facing our business,
both now and in the future, we consider those that are:
– external to our business;
– core to our day-to-day operation;
– related to business change activity; and
– those that could emerge in the future.
The ‘risk radar’ below maps our principal risks against these
categories. This tool is also used to facilitate wider Executive
and Board-level discussions on risk.
Overleaf are details of our principal risks, the mitigating
activities in place to address them and additional actions
implemented to further reduce net risk to the Group. It is
recognised that the Group is exposed to a number of risks,
wider than those listed. However, a conscious effort has been
made to disclose those of most concern to the business at
this moment in time and those that have been the subject of
debate at recent Board or Audit Committee meetings.