Tesco 2014 Annual Report Download - page 24

Principal risks Key controls and mitigating factors
Competition and consolidation
Failure to compete on areas including price, product
range, quality and multichannel service in increasingly
competitive UK and overseas retail markets could
impact our market share and adversely affect the
Group’s financial results
New entrants to the market and the consolidation
of competitors through mergers or trade agreements
in key markets or geographical areas could adversely
impact our market share
• Our strategy to have broad appeal on price, range and format and to
take the lead as a multichannel business, allows us to compete in
different markets
• A more diversified portfolio, such as our new food experience investments
in Giraffe, Harris and Hoole and Euphorium, allows us to take advantage
of new retailing opportunities
• Our Executive and Multichannel Committees and Trading Groups
regularly review markets, trading opportunities and competitor activities,
including discounter growth, convenience and online activities
• We continue to innovate and invest in online and multichannel activities,
including our grocery, clothing and general merchandise offerings in the UK
and internationally
• Increased global marketing efforts aim to maximise the impact of our brand
and intellectual property
• Performance is tracked against relevant KPIs and measures that customers
tell us are critical to their shopping experience
• Customer perceptions of Tesco and competitors are constantly monitored to
allow us to respond quickly and appropriately
Reputational risk
Failure to protect the Group’s reputation and brand
in the face of ethical, legal, moral or operational
challenges could lead to a loss of trust and confidence
and a decline in customer base, and also affect our
ability to recruit and retain good people
If we do not make positive contributions to society
and effectively communicate these, this may adversely
impact our ability to win and retain customer trust
and loyalty
•Tesco Values are at the heart of how we do business to help us to
consistently and transparently do the right thing for customers,
colleagues and society as a whole
• Through our newest Value – ‘we use our scale for good’ – we are tackling
some of the most important issues for society: creating opportunities for
young people, improving health, and reducing food waste. These
ambitions build on the essential work we do every day as a responsible
business: trading responsibly, reducing our impact on the environment,
being a great employer and supporting local communities
•We have established an external advisory panel of experts to challenge
and help shape the strategic direction of this important work. See our
Tesco and Society Report 2014 for more details
•Communication and engagement programmes help us to understand
stakeholder views and reflect them in our strategy and policies
• Building strong relationships with our trading partners (suppliers) allows
us to recognise and anticipate changes in our industry so we can continue
to provide quality, affordable products at a great price and which are
sourced responsibly
• Our embedded Group Code of Business Conduct, Bribery Act and UK
Groceries Supply Code of Practice guidelines guide our behaviour in
dealing with customers, employees, suppliers and other stakeholders
•Comprehensive and improved supplier auditing and product surveillance
programmes are in place to minimise the risks associated with product
integrity and labour standards
• Governance committees, including the Executive, Corporate Responsibility,
Group Commercial, Social Responsibility, Compliance, Multichannel and
Technology Committees, guide and monitor policies
Performance
If business units (including the UK) underperform
against plan and against competitors, our business may
fail to meet the stated strategy in full and impairment
of asset values may result
The delivery of long-term goals and sustainable
performance may be impaired if the business
focuses too heavily on short-term targets
• Our Board, Executive Committee and various operational committees,
including the UK Operating Board, meet regularly to review performance risks
•All business units have stretching targets based on a Steering Wheel
balanced scorecard system; performance against budgets and KPIs are
monitored continually and reported regularly to the Board
• Clear budgets, goals and objectives are set for subsidiary CEOs, with a
high proportion of reward based on the achievement of stretching targets
• Our diversification strategy minimises the impact of changes in the
economic climate
• The regional alignment of shared opportunities leverages skill and scale to
maximise performance
• Clear and regular communications ensure that colleagues have confidence
and belief in our long-term strategy and perform at their best without
undue focus on short-term performance targets
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 21