Tesco plc Annual Report and Financial Statements 2012

Principal risks and uncertainties
Principal risks
Fraud, compliance
and internal controls
As the business grows in size and
geographical scope, the potential
for fraud and dishonest activity
by our suppliers, customers and
employees increases
IT systems and infrastructure
Any significant failure in the IT
processes of our retail operations
would impact our ability to trade.
Failure to invest appropriately
in IT would constrain the growth
of the business and fail to
safeguard personnel, supplier
or customer data
Group Treasury (excluding
Tesco Bank)
Risks relate to the availability of
funds across the Group to meet
business needs, fluctuations in
interest and foreign exchange rates
and credit risks relating to the risk
of default by counterparties to
financial transactions. The principal
risks associated with operating
Tesco Bank are covered in the
Tesco Bank/Financial Services Risks
section below. Further detail on the
management of financial risks by
the Group can be found in the
‘Financial risks review’ section
following this table and in Note 22
of the financial statements
Property
Continuing acquisition and
development of property sites
carries inherent risk; targets to
deliver new space may not be
achieved; challenges may arise
in relation to finding suitable
sites, obtaining planning or other
consents and compliance with
varying country design and
construction standards
42 Tesco PLC Annual Report and Financial Statements 2012
Change from
2010/11 Key controls and mitigating factors
�� Appropriate procedures and controls, including segregation of duties, are set out and
audited across the business to reduce fraud risks; Internal Audit and Loss Prevention &
Security undertake detailed investigations into all business areas and report their findings
to the Audit Committee
�� Clear behavioural guidance given to employees through Tesco Values and the Group
Code of Business Conduct
�� Compliance Committee formulates and monitors implementation of, and
compliance with, relevant policies and procedures; annual governance returns
completed by each business unit
�� External Audit rotational coverage of areas and assessment of controls
�� Updated policies and procedures for Bribery Act compliance
�� Extensive controls and reviews to maintain integrity and efficiency of IT infrastructure
and data
�� Rigorous governance processes for new and modified systems implementations
�� Processes to deal with significant IT security incidents
�� Sharing of systems across international operations to ensure consistency of delivery
�� Investment in IT systems and innovations to improve business efficiency and
customers’ shopping experience
�� Information Security Committee meets regularly to review the development and
implementation of IT policies
�� Regular review of strategy, risks and financial performance by Board and Executive
Committee, with external advice as required
�� Financial risks relating to underlying business needs are mandated to our Treasury
function which has clear policies and operating parameters and its activities are
routinely reviewed and audited
�� Internal Audit reports on financial control systems
�� Development of cross-functional Eurozone Committee to monitor and manage
the risks associated with instability in the eurozone as a result of the depth of the
financial crisis
UK �� Property Acquisition and related committees closely control all aspects of property
acquisition, planning and construction processes to ensure standards are met and
risks are minimised
�� Group and country Compliance Committees monitor legal and regulatory
compliance in property activities
International �� China Property Company Board closely monitors property matters in China
�� Mall management systems in place to assist tenant management