john-lewis-partnership-plc-annual-report-2015

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44 John Lewis Partnership plc Annual Report and Accounts 2015 Managing our Partnership risks (continued) Our formal risk assessment process for stress-testing key business plan decisions reinforces our intuitive use of risk management in every day decision-making. How we govern risk management The Partnership Board has overall accountability for ensuring that risk is effectively managed across the Partnership and determining the nature and extent of the significant risks it is willing to take. The Partnership Board has delegated responsibility for the day-to-day management of the principal Partnership risks to the Chairman’s Committee, within the Board’s set risk tolerances. The Audit and Risk Committee review the effectiveness of the risk management process. Each Division is responsible for identifying, evaluating, managing, measuring and monitoring the risks in their respective area. Divisional Risk Committees oversee the effective use of the risk assessment process, with assistance from the Group Head of Risk and Divisional Risk Managers. Internal Audit reviews internal controls using a risk-based audit plan, and management self-certify that they have followed the risk management process at the year end. Our governance structure encourages the effective flow of risk insights throughout the Partnership. For more detail, go to the Audit and Risk Committee report on page 104. Providing confidence to our stakeholders A formalised approach to risk management is also a Corporate Governance requirement, providing confidence to our stakeholders. Risk Management Governance structure Direction and oversight Risk policy, tolerances and framework Partnership Council In this we apply voluntarily the principles of the UK Corporate Governance Code (‘the Code’). The Financial Reporting Council, the UK’s Corporate Governance regulator, updated the Code in September 2014. As detailed on page 85, the revised Code will be reported against for our next financial year. Partnership Board Chairman’s Committee Divisional Management Boards Audit and Risk Committee Waitrose John Lewis Partnership Services Group We have chosen to adopt the UK Corporate Governance Code on a voluntary basis. For more information about how we comply go to our governance section starting on page 82. Risk activity and approval Risk identification, evaluation, management, monitoring and reporting Waitrose Divisional Risk Committees John Lewis Risk Owners + Partnership Services Group Risk Management Function
Annual Report and Accounts 2015 John Lewis Partnership plc 45 Our principal risks and mitigations Using our risk universe, risk management process and governance structure, the Chairman’s Committee has identified 23 principal risks, prioritised between ‘red’ and ‘amber’ risks: We have defined a Risk Universe for the Partnership, defining a comprehensive list of potential risks we could be exposed to. It helps us identify and analyse our risks. Top red risks (10) Top amber risks (13) Of those identified: Principal risks, analysed per our Risk Universe categories Strategic risks i.e. risk of us “doing the wrong thing” 1 Competition 5 Economic environment 6 Operating model strain 7 IT infrastructure capability 8 Change delivery aa Political environment aa Media communications aa Ten risks are in the ‘red zone’. They have been assessed as beyond our tolerance for acceptable risk taking and so require further responses. Plans have been developed with action owners and timelines. Progress is reviewed by the Chairman’s Committee. Our principal risks evolve over time. As we progress our strategy and business plan, new risks emerge and we adjust our mitigation activities. Following this year’s evaluation, the Chairman’s Committee has identified that: Operational risks i.e. risk of us “doing the right thing, in the wrong way” 4 Efficiency 10 Talent aa Omnichannel proposition aa Responsible sourcing aa Loss of key suppliers, 3rd parties aa Loss of key B2B customers aa IT failure aa Business interruption 1 Competition 4 Efficiency Financial risks i.e. risk of us “doing it in a way that loses money or incurs unnecessary liabilities” 2 Pension obligations 3 Property valuation aa For details of how we evaluated the top ten risks, see page 43 and for how we manage them, see pages 46 to 47. aa 13 risks are in the ‘amber zone’. They have been assessed as being managed satisfactorily and so no additional actions are required. They are formally monitored by Divisional Risk Committees to ensure they do not deteriorate. Increased risk profile 3principal risks have increased significantly and are now in the red zone. aa Funding & liquidity aa Financial control, reporting and governance What s changed since last year 3 Property valuation What are we doing about these risks? Additional plans have been developed to improve our management of threats from competitors, secure delivery of our efficiency initiatives and protect against changes in the value of our property. Progress is monitored by Divisional Risk Committees and the Chairman’s Committee. Business interruption Compliance risks i.e. risk of us “not doing what Regulators require” 9 Data protection breach aa Our risk universe helps us to identify emerging and changing risks. These risks do not comprise all those associated with the Partnership, as there are some risks currently deemed to be less material, i.e. in the ‘green zone’, and others we are not yet aware of. Decreased risk profile 2 aa Product quality and food safety aa Health & Safety breach aa Other regulatory compliance principal risks from last year’s evaluation are no longer in the red zone, as they are now deemed to be being managed satisfactorily and have a reduced threat. Regulatory compliance Why have these reduced? Work performed throughout the year has improved the resilience of our key IT systems and a Regulatory Compliance project is underway to improve our policies and procedures. Introduction Partnership difference Principles Strategy Performance Governance Financial statements
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In a nutshell... Annual Report and
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