The Board recognises the need for a robust system of internal controls and risk management.
The Group operates in an environment that is constantly changing and as a result the risks it is facing change over time. The Group’s management have developed processes to assess risks and to develop strategies for dealing with these risks on an ongoing basis. A formal review of these risks is carried out by the Group once a year.
The review process involves the classification of risks, assessment to determine the relative likelihood of them impacting the business and the potential severity of the impact, and determination of whether changes to management processes are needed to manage them effectively.
The directors have identified the following as principal risks and uncertainties:
Talent Retention
Potential Impact
Loss of key personnel, employee churn and failure to attract high quality people could impact the Group’s ability to achieve its ambitions.
Mitigation
The Remuneration Committee reviews key personnel rewards annually to ensure they are competitive, commensurate with performance and reflect the increased cost of living due to inflation. The Group operates Personal Development Plans and Performance Development Reviews. Training programmes were introduced to ensure both business and personal needs are met. The business also operates a hybrid way of working and office culture, to support employees with greater flexibility.
Consumer & Customer Trends
Potential Impact
Particularly in the current economic environment, consumer preferences and buying habits could change, meaning our products may not meet consumer needs and our customer acquisition strategies may need to evolve.
Mitigation
Regular reviews of EPOS and market dashboards, as well as maintaining close contact with customers facilitates our understanding and alignment with their strategies. The creation of our DTC marketplace will provide a significant change in the frequency and quality of our interaction with consumers helping to create products that fulfil their needs. Our investment in new product development will closely follow their feedback and wider market trends including sustainability.
Product Quality, Regulations & Compliance
Potential Impact
Inconsistent quality or non-compliance with regulations would have a severe impact on service levels, customer relationships and have financial repercussions.
Mitigation
The Company has a well-defined new product development process that incorporates product quality and compliance verification. We only partner with long-term, established key suppliers with excellent product quality controls and adherence to compliance standards. We also employ compliance consultants for product labelling verification and registration.
Cost Inflation
Potential Impact
Disruption to the supply chain could limit availability of products and thereby reduce sales and business performance. Product cost inflation from adverse economic factors could affect consumer demand and Group profitability.
Mitigation
The Group maintains a detailed forecast and demand planning process to maximise product availability while optimising its inventory levels. The team has strong, long-term relationships with major suppliers, supported by regular reviews to ensure continuity of supply at competitive prices and early visibility of any issues. Where possible, the sales team negotiates higher rates with retail customers to offset increased costs.
Acquisition Integration
Potential Impact
Failure to achieve the intended operating cost synergies following the acquisition of InnovaDerma Plc.
Mitigation
The gran a board approved functional integration project to maximise efficiency of the post-acquisition integration. The plans were reviewed and updated during functional, Exec and Board meetings and progress was communicated to employees at monthly Townhall meetings.
Pension Fund Deficit
Potential Impact
The revaluation of the defined benefit pension plan on a technical provision basis at each reporting date can cause large fluctuations in valuations based on factors outside the Group’s control and drive increases in cash payments into the fund.
Mitigation
A fund deficit recovery plan for the period to November 2037 is discussed and agreed every three years. The outcome of the latest triennial review based on the position at 5April 2023 is expected in the late autumn and will inform the negotiation of any change to the schedule. The deficit recovery plan provides a degree of certainty over cash flows between triennial reviews. The Group maintains a close relationship and regular communication with the Trustees.
Cyber Security
Potential Impact
The Group is exposed to the risk of increasingly sophisticated cyber-attacks aimed at causing business disruption, capture of confidential data for financial gain, and reputational damage.
Mitigation
The business has assessed its control environment compared to the framework set out by Centre for Internet Security (CIS). There is an improvement plan, updated annually, which incorporates investment in software, policies, procedures, and training. Our supplier review includes a cyber security review to ensure the supply chain is robust. In addition, the Group maintains a cyber insurance.