Tesco 2006 Annual Report Download - page 24

Risk management and internal control
Accountabilities Accepting that risk is an inherent part of
doing business, our risk management system is designed to
both encourage entrepreneurial spirit whilst also providing
assurance that risk is understood and managed. In terms of
broad accountabilities, the Board has overall responsibility for
risk management and internal control within the context of
achieving the Group’s objectives. Executive management is
responsible for defining and maintaining the necessary control
systems. The role of Internal Audit is to monitor the overall
system and report on its effectiveness.
Background The Group has a five-year rolling business plan
to support the delivery of the Company’s strategy of long-term
growth in returns for shareholders.
Every business unit and support function derives its objectives
from the five-year plan and these are cascaded to managers
and staff by way of personal objectives. Key to delivering
effective risk management is ensuring our people have a
good understanding of the Group’s strategy and our policies,
procedures, values and expected performance. We have a
structured internal communications programme that provides
employees with a clear definition of the Group’s purpose, goals
and accountabilities, and the scope of permitted activities for
each unit, line managers and individuals. This ensures that all
our people understand what is expected of them and that
decision-making takes place at the appropriate level.
We recognise that our people may face ethical dilemmas in the
normal course of business so we provide clear guidance based
on the Tesco Values. The Values set out the standards that we
wish to uphold in how we treat people. These are supported
by the Code of Ethics which offers guidance on relationships
between the Group and its employees, suppliers and
contractors. The Company is a signatory to the DTI Code of
Conductand met its obligations for implementing the Code.
We operate a balanced scorecard approach that is known
within the Group as our Steering Wheel. This unites the
Group’s resources around our customers, people, operations,
communities and finance. This enables the business to be
operated and monitored on a balanced basis with due regard
for all stakeholders.
Risk management The Board maintains a Key Risk Register
which we review formally twice a year. The register is populated
with risks identified through discussions principally between
the Head of Internal Audit and the Board of Directors although
the views of senior management are also invited. Collectively
the Board conduct an assessment of risk severity, considering
impact and likelihood and the adequacy of mitigating
measures taken by the business. A balanced approach allows
the degree of controllability to be taken into account when we
consider the effectiveness of mitigation, recognising that some
necessary activities carry inherent risk. Our risk management
process recognises that there are opportunities to improve
the business to be built into our future plans.
Our key risks are set out on pages 13 to 16 of the Operating
and financial review.
22 Tesco plc
Corporate governance continued
Board Nominations Remuneration Audit
Members attendance during the year ended 25 February 2006 meetings Committee Committee Committee
Number of meetings held 8154
Non-executive Directors
Mr D E Reid (Chairman) 8 1 N/A N/A
Mr C L Allen 715N/A
Mr R F Chase (Senior Independent) 8 1 5 4
Mrs K R Cook1812–
Mr E M Davies 8153
Dr H Einsmann 814N/A
Mr K J Hydon 81N/A 4
Ms C McCall271N/A1
Executive Directors
Sir Terry Leahy 8 1 N/A N/A
Mr R Brasher 8N/AN/AN/A
Mr P A Clarke 8 N/A N/A N/A
Mr A T Higginson 8 N/A N/A N/A
Mr T J R Mason 8 N/A N/A N/A
Mr D T Potts 8 N/A N/A N/A
Notes:
‘N/A’ indicates the Director is not a member of the Committee. Directors leave the meeting where matters relating to them are being discussed. It is expected that all Directors
attend Board and Committee meetings unless they are prevented from doing so by prior commitments and all Directors attend the AGM.
1MrsK R Cook resigned from the Audit Committee in September 2005 and was appointed to the Remuneration Committee in October 2005.
2Ms C McCall joined the Audit Committee in September 2005.