Marks and Spencer 2016 Annual Report Download - page 31

29
ANNUAL REPORT AND FINANCIAL STATEMENTS 2016
GOVERNANCEFINANCIAL STATEMENTS OUR BUSINESSOUR PERFORMANCE
RISK DESCRIPTION CHANGE IN 2015/16 MITIGATING ACTIVITIES
6FOOD
COMPETITION
Loss of market
share, due to
market price
defl ation or
changes in the
competitive
landscape
The food market continues to
evolve in response to changing
customer behaviours and the
increasing infl uence of the
continental discounters.
The ongoing polarisation
between value and premium
means it is important that we
continue to provide a point of
di erence through newness,
product quality and innovation,
as well as convenience.
The food market has remained
challenging in 2015/16. In
response to this we continue
to monitor our price positioning
and to leverage our strengths.
> Signifi cant focus on product newness and innovation
to retain point of di erence and drive customer loyalty.
> Continued focus on product availability for
our customers.
> Regular review of price positioning.
> Simply Food expansion to provide convenience
for our customers.
> Review of key lines to improve comparability
with competitors.
7FOOD SAFETY
AND INTEGRITY
A food safety or
integrity related
incident occurs
or is not e ectively
managed
As a leading retailer of quality
fresh food, it is of paramount
importance that we e ectively
manage safety and integrity,
especially as we grow our global
food business and given the
risk of fraudulent behaviour in
the supply chain.
The external pressures facing
the food industry continued
to evolve in 2015/16. Fraudulent
behaviour in the supply chain
remains a signifi cant risk,
whilst regulatory requirements
are becoming increasingly
stringent. However, in response,
our strong control environment
has kept pace.
> Dedicated team responsible for ensuring that
all products are safe for consumption through
rigorous controls and processes.
> Continuous focus on product quality.
> Proactive horizon scanning, including focus
on fraud and adulteration.
> Robust store, supplier and depot auditing
programme in place.
> Crisis management plan in place.
8
Nr
CLOTHING &
HOME ETHICAL
SOURCING
Our ethical
standards continue
to be of high
importance as
we make changes
to our sourcing
strategy
The promotional nature of
the retail environment,
coupled with inherent cost base
pressures, make achievement
of margin targets a key objective
for the business. Against this
background, it is critically
important that we maintain our
high ethical standards and the
strong control environment
under which we operate.
The Clothing & Home margin
risk included in last year’s
report has been replaced by
this Clothing & Home ethical
sourcing risk. This recognises
the importance of our strong
ethical behaviours and the
role they play in achieving
our business objectives as
we continue to improve our
margin performance.
> Clearly defi ned sourcing policies and procedures.
> Mature supplier ethical auditing programme in place,
involving independent third party auditors.
> Regional compliance teams providing ongoing
in-country support.
> Factory listening groups in place.
> Member of the Ethical Trading Initiative.
9CYBER/
INFORMATION
SECURITY
We experience
a major breach
in cyber, system
or information
security
The business is subject
to external threats from
hackers or viruses, or
sensitive data is accessed
without authorisation.
2015/16 saw a number of major
organisations subjected to
cyber-attacks. The external
threat profi le is ever changing,
and the regulatory environment
supporting data protection is
also becoming more stringent.
> Security controls in place including policies,
procedures and security technologies.
> Ongoing monitoring of developments in cyber
security threats, engaging with third party
specialists where appropriate.
> Control of sensitive data through limited and
monitored access and the roll-out of systems
possessing enhanced security.
> Established team dedicated to managing security
requirements for M&S.com.
10 INTERNATIONAL
The performance
of our International
business and
fulfi lment of our
strategy is a ected
by a lack of brand
momentum or
substandard
infrastructure
To drive profi table growth,
we need to ensure that our
infrastructure and underlying
processes and systems are
su ciently robust, and that
our brand resonates across
international markets.
International performance
has remained challenging in
2015/16. We are working to
improve all aspects of our
International business
including our business model,
supply chain, systems and the
skillset of our people.
> Geographic spread mitigates against localised
geo-political or economic risks.
> Local market knowledge provided by franchise
and joint venture partnerships.
> Performance monitoring by region, country and
store, including focus on like-for-like performance
and action planning for poor performing stores.
> International representation in key Group initiatives.
11 M&S.COM
BUSINESS
RESILIENCE
A major failure
of our M&S.com
platform or at our
Castle Donington
distribution centre
impacts our ability
to trade online
As our online tra c grows and
our network infrastructure and
operating model evolve, it is
increasingly important to ensure
that the M&S.com business and
key dependencies are resilient.
Whilst this risk continues to
be important especially as
online tra c grows, the
resilience and performance
of our M&S.com platform and
Castle Donington distribution
centre have improved
signifi cantly in 2015/16.
> Dual site M&S.com command centre operates 24/7
to monitor website availability and performance.
> Social media monitored to observe and respond to
trends in customer experience.
> Business continuity plans, incident reporting and
management procedures are well established
and tested, with regular monitoring including
quarterly Business Continuity Committee meetings.
> Proven resilience plans in place for the
M&S.com platform.
Notes: The Group Risk Profi le will evolve as mitigating activities reduce net risk over time, or as new risks emerge. Three new risks have been added to the Group Risk Profi le since the
prior year (IT integration, Changing consumer behaviours and Business transformation); the remaining risks have essentially remained the same, with the exception of one risk where
the emphasis has changed from Clothing & Home margin to Clothing & Home ethical sourcing. Four risks have been removed from the Group Risk Profi le since the prior year (Our people,
sta retention, IT change and Programme and workstream management).
The risks listed do not comprise all those associated with Marks & Spencer and the numerical referencing does not denote an order of priority. Additional risks and uncertainties
not presently known to management, or currently deemed to be less material, may also have an adverse e ect on the business. These less material risks are kept in view in case their
likelihood or impact should show signs of increasing. Further information on the fi nancial risks we face and how they are managed is provided on pages 113-116.
FIND OUT MORE
See our Audit Committee Report on p42-46 Read Risk in action on p47-48