The ‘Making Sainsbury’s Great Again’ (“MSGA”) plan continued to progress from recovery to focus on growth during the year. To support the growth plans and to fully consider both opportunities and risks, a new business strategy team has been established, and the risk management process has been enhanced. Risk is an inherent part of doing business. The system of risk management used to identify the principal risks the Group faces, and to develop and closely monitor key controls, is described on this page. The management of the risks is based on a balance of risk and reward determined through careful consideration of both the potential likelihood and impact. The principal risks identified by the Board and the corresponding mitigating controls are set out below in no order of priority.
Business continuity and acts of terrorism
A major incident or act of terrorism could impact on the Group’s ability to trade.
In the event of a potentially disruptive incident, detailed plans are in place to maintain business continuity. These plans are regularly updated and tested.
Business strategy
If the Board adopts the wrong business strategy or does not implement its strategies effectively, the business may be negatively impacted. Strategic risk needs to be properly understood and managed to deliver long-term growth for the benefit of all stakeholders.
A clear strategy is in place with five key areas of focus: great product at fair prices, accelerating the growth of complementary non-food ranges, reaching more customers through additional channels, growing supermarket space and active property management. Progress against these areas of focus and any risks to delivery are regularly reviewed by the Board and the overall strategy is reviewed at the annual two-day strategy conference. The Operating Board also holds regular sessions to discuss strategy. This activity is supported by a dedicated strategy team. To ensure that the strategy is communicated and understood, the Group engages with a wide range of stakeholders including shareholders, colleagues, customers and suppliers.
Colleague engagement, retention and capability
The Group employs around 150,000 colleagues who are critical to the success of our business. Maintaining good relations with colleagues and investing in their training and development is essential to the efficiency and sustainability of the Group’s operations.
The Group’s employment policies and remuneration and benefits packages are regularly reviewed and designed to be competitive with other companies, as well as providing colleagues with fulfilling career opportunities. Colleague surveys, performance reviews, communications with trade unions and regular communication of business activities are some of the methods the Group uses to understand and respond to colleagues’ needs. Processes are also in place to identify talent and actively manage succession planning throughout the business.
Economic and market risks
The unprecedented economic slowdown and reducing job security is resulting in an increasing demand for value from customers. Challenges to household disposable income, competitor pricing positions and product costs can affect the performance of the Group in terms of both sales and costs.
Focus continues on delivering quality products with universal appeal, at a range of price points ensuring value for all our customers. This is achieved through the continuous review of our key customer metrics, active management of price positions, development of sales propositions and increased promotion and marketing activity. While external cost pressures including oil-related costs and business rates affect our business, the Group continues to work hard to mitigate the impact of these cost pressures on customers and on our overall profitability through the delivery of cost savings.
Environment and sustainability
The key risk facing the Group in this area relates to reducing the environmental impact of the business with a focus on reducing packaging and new ways of reducing waste and energy usage across stores, depots and offices.
A number of initiatives are in place, which are being led by the Environmental Action team and the Corporate Responsibility Steering Group to reduce our environmental impact and to meet our customers’ requirements in this area. Further details are included on this page.