Robust risk management

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 could impact the Group’s ability to achieve its Project 50 strategy.

Mitigation

The Remuneration Committee reviews key personnel rewards so that they are competitive and commensurate with performance. LTIPs will be implemented for the executive management and senior leadership teams during H1 FY20. Personal development plans and performance development reviews are in place for all employees to ensure training needs and career aspirations are met. Our objective is to further enhance employees skills base and develop succession plans where appropriate.

Consumer And Customer Trends

Potential Impact

Consumer preferences and buying habits could lead to our products not meeting consumer needs or not readily available for purchase.

Mitigation

Close contact is maintained with both consumers and customers to better understand their desires and create products that fulfil their needs. Investing in new product development as well as online offering and availability are key strategic pillars for the Group.

Product Quality And Compliance

Potential Impact

Consumer preferences and buying habits could lead to our products not meeting consumer needs or not readily available for purchase.

Mitigation

Close contact is maintained with both consumers and customers to better understand their desires and create products that fulfil their needs. Investing in new product development as well as online offering and availability are key strategic pillars for the Group.

Brexit And Supply Chain Disruption

Potential Impact

Disruption to the supply chain from Brexit or other factors could limit availability of products and thereby reduce sales.

Mitigation

The Group maintains a high level of expertise in its purchasing and supply chain team and reviews its supply base continuity plans. The team seeks to cultivate strong relationships with major suppliers with regular reviews to ensure continuity of supply at competitive prices. The potential import and export implications are also assessed and tracked accordingly in line with government updates.

Covid-19

Potential Impact

The Group is exposed to the risk of increasingly sophisticated cyber-attacks aimed at causing business disruption, capture of data for financial gain, general embarrassment and reputational damage.

Mitigation

Investment internally and externally continues to be applied to maintain a high level of protection software and real-time back-up. The Group continues to monitor and strengthen its data privacy measures and IT general controls.

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

There is an agreed deficit recovery plan fixed until April 2027 or until a new schedule is agreed based on the next triennial valuation which is expected later this year based on assumptions at 5 April 2020. This 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 data for financial gain, general embarrassment and reputational damage.

Mitigation

Investment internally and externally continues to be applied to maintain a high level of protection software and real-time back-up. The Group continues to monitor and strengthen its data privacy measures and IT general controls.