Tesco plc Annual Report and Financial Statements 2008

Corporate governance continued
Management of the Group – Executive Committee
The Board delegates responsibility for formulating and implementing the
Group’s strategic plan and for management of the Group to the Executive
Committee, which comprises the seven Executive Directors and is chaired
by the Chief Executive. The Committee, which is not a statutory committee,
has authority for decision-making in all areas except those set out in the
Schedule of Matters Reserved for Board Decision and meets formally
every week. A number of senior executives also attend the Committee
and their valuable operational experience helps broaden the debate. Their
attendance also facilitates the communication of the Committee’s decisions
to the rest of the Group. The Company Secretary also attends in his capacity
as Secretary of the Committee.
The Executive Committee is responsible for implementing Group strategy
and policy and for monitoring the performance and compliance of the
business, drawing on the work of relevant Committees, and reporting on
these matters in full to the Board.
The Committee has set up further non-statutory Committees – including
the Finance, Compliance and Corporate Responsibility Committees (which
are described in more detail below) – and operational groups which have
responsibility for implementing the key elements of the Group’s strategic
plan and managing its UK and international operations, joint ventures,
property acquisitions, finance, funding and people matters. These
Committees and groups have as members an appropriate mixture of
Executive Directors and senior management from relevant functions.
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 internal control 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.
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Tesco PLC Annual Report and
Financial Statements 2008
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 23 February 2008.
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, community and finance. The scorecard
operates at every level within the Group, from ground level business units,
through to country level operations. 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 senior management and review by the Executive Committee
and 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 risk which 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. The key risks and uncertainties we face are summarised on
pages 14 to 17 of the Business 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. We also have a Corporate Responsibility Risk Register which
specifically considers SEE risks. Oversight of these risks is the responsibility
of the Corporate Responsibility Committee. The Board assesses the
significant SEE risks to the Group’s short-term and long-term value, and
incorporates SEE risks on the Key Risk Register where they are considered
material or appropriate.
We recognise the value of the ABI Guidelines on Responsible Investment
Disclosure and confirm that, as part of its regular risk assessment procedures,
the Board takes account of the significance of SEE matters to the business
of the Group. We recognise that a number of investors and other stakeholders
take a keen interest in how companies manage SEE matters and so we
report more detail on our SEE policies and approach to managing material
risks arising from SEE matters and the KPIs we use both on our website
(www.tesco.com/tescoplc) and in our Annual Corporate Responsibility
Review 2008 (www.tesco.com/crreview08). To provide further assurance, the
Group’s Corporate Responsibility KPIs are audited on a regular basis
by Internal Audit.
www.tesco.com/annualreport08