Tesco 2007 Annual Report Download - page 26

Risk management and internal controls
Accountabilities Accepting that risk is an inherent part of
doing business, our risk management systems are designed
both to encourage entrepreneurial spirit and also provide
assurance that risk is fully understood and managed. 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 implementing and
maintaining the necessary control systems. The role of Internal
Audit is to monitor the overall systems and report on their
effectiveness to Executive management, as well as to the Audit
Committee, in order to facilitate its review of the systems.
Background The Group has a five-year rolling business plan
to support the delivery of its strategy of long-term growth and
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 and
goals, accountabilities and the scope of permitted activities for
each business unit, as well as individual line managers and
other employees. 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 Group 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 Conduct and met its obligations for implementing the Code
for the financial year ended 24 February 2007.
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. The scorecard operates at every level
within the Group, from ground level business units, through
to country level operations, up to the Group Steering Wheel.
It enables the business to be operated and monitored on
a balanced basis with due regard for all stakeholders.
Risk Management The Group maintains a Key Risk Register.
The Register contains the key risks faced by the Group,
including their impact and likelihood as well as the controls
and procedures implemented to mitigate these risks. The
content of the Register is determined through regular
discussions with Executive management and review by the full
Board. 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 riskwhich may be outside the Group’s control. Our
risk management process recognises there are opportunities
to improve the business to be built into our future plans.
Our key risks are summarised on pages 16 to 19 of the
Operating and Financial Review.
The risk management process is cascaded through the Group
with every international CEO and local Boards maintaining
their own risk registers and assessing their control systems.
The same process also applies functionally in those parts of
the Group requiring greater overview. For example, the Audit
Committee’s Terms of Reference require it to oversee the
Finance Risk Register. A further example is that of the
Corporate governance continued
Board Nominations Remuneration Audit
Members attendance during the year ended 24 February 2007 meetings Committee Committee Committee
Number of meetings held 8174
Non-executive Directors
Mr D E Reid (Chairman) 81N/AN/A
Mr C L Allen 816N/A
Mr R F Chase (Senior Independent) 8174
Mrs K R Cook 716N/A
Mr E M Davies 7152
Dr H Einsmann 717N/A
Mr K J Hydon 81N/A 4
Ms C McCall 81N/A3
Executive Directors
Sir Terry Leahy 81N/AN/A
Mr R Brasher 8 N/A N/A N/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
Miss L Neville-Rolfe11 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.
1Miss L Neville-Rolfe was appointed on 14 December 2006 and has attended the one meeting that took place since that date.
24 Tesco PLC Annual report and financial statements 2007 Find out more at www.tesco.com/corporate