Marks and Spencer 2012 Annual Report Download - page 48

Governance Marks and Spencer Group plc Annual report and financial statements 2012 46
Accountability continued
Description Mitigating activities
Finance We continue to focus on maintaining a strong financial position that supports improvements to our business.
Economic outlook
Worsening economic conditions impact consumer
confidence and our ability to achieve the plan
As consumers’ disposable incomes come under pressure
from price inflation and government austerity measures, trading
conditions continue to remain a challenge for our business.
– We regularly review and monitor the effectiveness of our pricing and promotional
strategies across our General Merchandise (GM) and Food businesses, tailoring
our consumer offering where appropriate.
– The business continues to actively manage and minimise costs where appropriate
and regularly reviews customer feedback and our positioning in the market place
to ensure we meet customer expectations.
Financial position
Deterioration in our financial position limits our
flexibility and ability to fund and grow the business
In the event that the Group’s financial performance does not
meet market expectations, our ability to borrow from lenders on
our existing terms may be impacted, resulting in increases to the
cost of borrowing and insufficient funding to meet our capital
requirements and growth plans.
– Group Treasury regularly carries out forecasting of our debt capacity,
financial covenants and other rating metrics within current rating bands.
– The funding level of our pension scheme is monitored in collaboration with
the Trustees on a regular basis, with clear parameters in place that would trigger
an intra-valuation debate between the Trustees and the Company.
– We have regular communication with rating agencies and brokers.
– Group Treasury proactively monitor the potential for a Eurozone break up and where
possible assess the impact this could have on the Group’s financing and derivatives.
Brand and reputation Our founding principles of Quality, Value, Service, Innovation and Trust continue to influence ‘how we do business’ and our
reputation for being one of the UK’s most trusted brands.
Corporate reputation
External expectations relating to our financial performance,
Plan A commitments or corporate governance are not
adequately managed
Our brand continues to be trusted in the marketplace, with Plan A
and robust governance being integral components. A strong
brand brings high expectations and the need to consistently
deliver quality, value and trust to our wide stakeholder base. The
business must also manage significant external expectation
regarding our plan.
– The business follows a clear plan to effectively communicate key information
to internal and external stakeholders (and other external parties).
– Group KPIs and benefits tracking for all strategic initiatives enable regular
monitoring of business and key programme performance.
– Our commitment to Plan A and becoming the world’s most sustainable retailer
by 2015 remains a priority for the Group with one of our key objectives being for
all M&S products to have at least one Plan A quality by 2020.
– Policies and procedures are in place to meet the requirements of the Bribery Act,
supported by a training programme.
Our customers
Loss of engagement with our core 55+ customer
As we seek to enhance the M&S brand and make our sub brands
more distinctive, it is important that we continue to address our
core customers’ specific needs in an increasingly competitive and
economically uncertain market.
– GM and Marketing have prioritised focus on our core customer and will continue
to respond to sales and customer reaction to product/in-store experience through
focus groups, online reviews and our in-house Customer Insight Unit.
– We are in the process of delivering improvements to our stores to strengthen and
clarify our brand in response to customer research.
Food safety
A food safety incident occurs or is not effectively managed
As a leading retailer of fine quality fresh food in the UK, it is
paramount that the food products we sell to our customers are
safe, especially as we introduce more operational complexity
such as delis and bakeries as part of our new store format.
– We have a dedicated team in place to ensure that all M&S food products are safe
for consumption through rigorous controls and processes, with a continuous focus
on quality. We apply this approach to all new initiatives and locations.
– We maintain robust governance of the supply base through our supplier audit
programme and reporting process. Depot auditing is now also well established.
People and change Our people are fundamental to the long-term success and growth of this business.
Our people
Reduced engagement and retention of key employees impacts
our ability to deliver business plans
As we go through a period of economic uncertainty as well as a
number of internal change initiatives, it is ever more important to
ensure that M&S remains a great place to work.
– A monthly briefing is cascaded to our top managers, a quarterly results broadcast is
held for all employees and Directors regularly hold employee engagement sessions
to communicate the growth ambitions and underlying plans for the business.
– Development of future talent remains a key priority. Managers attend our ‘Lead to
Succeed’ programme, helping them to realise their full potential, whilst succession
planning is a key area of focus for the Board.
– We plan to roll out an improved performance and talent management process to
ensure robust career development discussions take place across the business.
Programme and workstream management
Benefits from our major business programmes
and workstreams are not realised
We continue to undertake a number of major strategic
programmes to underpin the achievement of our plan; the delivery
of forecasted benefits is critical to this.
– Our Strategic Programme Office centrally governs the strategic initiatives across
the Group, performs regular reviews and updates the Executive Board on their
status, tracking of costs and realisation of benefits.
– All major programmes possess their own governance structures, supported by
robust project management discipline.
Distribution centre restructure NEW
We fail to effectively deliver our new national e-commerce
distribution centre
We are opening a new national distribution centre which will also
service all customer orders placed through Shop Your Way. The
implementation of this distribution centre relies on a number of
new facilities, business processes and systems.
– We are taking a phased approach to implementation for our new distribution centre,
and robust governance structures exist to engage all areas of the business.
– Simulation models are being used to test the robustness of the facility in different
scenarios and a programme is in place to ensure open dialogue with key partners.
– We will continue to implement measures to test and manage facility performance.