Marks and Spencer 2013 Annual Report Download - page 47

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Governance Marks and Spencer Group plc Annual report and financial statements 2013 45
Overview Strategic review Financial review Governance Financial statements and other information
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
Risk identication
Risk assessment
Risk mitigation
Stable/known
Changing/new
Economic
outlook
GM stock
management
GM product
Food safety
and integrity
International
Our people IT change
Programme
and workstream
management
Distribution
centre
restructure
Multi-channel
Core external risk Emerging areas
Core operations Business change
External
Internal
Changing
competitor
environment
Omni-channel
Accountability
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 Group 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 the Group Board for final approval.
To ensure our risk process drives improvement across the
business, the Executive Board monitors the ongoing status and
progress of action plans against key risks on a quarterly basis.
Risk remains an important consideration in all strategic
decision-making at Board level, including debate on risk
tolerance and appetite.
Our principal risks and uncertainties
As with any business, we face risks 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 discussions on risk, including potential emerging
risks as discussed on page 48.
Overleaf are details of our principal risks and the mitigating
activities in place to address them. 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 greatest importance to the business at this moment in time
and those that have been the subject of debate at recent Board
or Audit Committee meetings.
Key areas of focus
We continue to drive improvements to our risk management
process and the quality of risk information generated, whilst
at the same time maintaining a simple and practical
approach.
During the year we have focused on a number of key areas:
1. Evolving risk descriptions
As time progresses, the nature of some Group risks is
evolving. To ensure we continue to address the most
important risks facing the Group at this point in time we have
updated a number of risk titles and descriptions. New titles
are assigned to GM product (2012: Our customers) and
Food safety and integrity (2012: Food safety). New
descriptions are in place for International and Our people.
2. Action plans for key risks
We continue to assess whether sufficient additional
mitigating activities are underway to reduce the net risk
position of the Group’s key risks. By considering net risk on
both a one year and three year horizon, we are able to
identify when mitigating activities will result in a tangible risk
reduction. We also continue to review the ongoing
appropriateness of actions to ensure they are as relevant,
timely and measurable as possible.
3. Influence of risk tolerance
Risk tolerance and appetite are important considerations
in strategic decision-making at Board level. We also
recognise the value in applying the concept of risk tolerance
in discussions across all levels of the organisation. It is
especially beneficial when determining the nature of
mitigating activities and their role in addressing risk likelihood
or impact.