John Lewis Partnership plc annual report and accounts 2012

Business review Risks and uncertainties (continued)

• Energy risk

 The Partnership operates risk management processes for the procurement of energy associated with its activities.

• Insurable risk

 The Partnership’s captive insurance company, JLP Insurance Limited based in Guernsey, provides reinsurance of the Partnership’s employer’s, public and vehicle third party liability insurances and of the Partnership’s healthcare insurance cover. It also reinsures extended warranty cover purchased by customers of John Lewis.

Pensions risk

Our pension obligation represents our longest term risk and is of critical importance. The Pension Fund assets are held in separate funds administered by the Trustees, who delegate day-to-day management of these funds to a number of investment managers. Our pension arrangements and funding position are explained in note 24 to the accounts. We have executed a deficit mitigation strategy over the past six years which means our Pension Fund on an actuarial basis was in surplus at the time of the most recent actuarial valuation in March 2010 and is estimated to be in balance currently. We actively monitor the outlook of asset and liabilities performance against the assumptions set both on an accounting and actuarial basis on a monthly basis and are finalising a formal framework for managing the Financial and Investment Risk of the Pension Fund proactively rather than retrospectively. The liquidity risk is managed by ensuring the annual contribution to the Fund more than covers its outgoings and that income generated from the investment activities is more than adequate to cover any short fall that may occur in exceptional circumstances.

Input cost inflation

Input cost price inflation is a risk to our businesses and as a result we closely monitor the environment to ensure that we are obtaining the best value, at a fair price, for products and raw materials that we source. We also continue to focus on delivering operational efficiencies, which will help offset these increases, through a number of efficiency programmes and initiatives as well as through our financial hedging strategy for future foreign exchange and energy pricing exposure.

Human resources

 The successful delivery of key strategic projects, such as the implementation of new systems, the reengineering of business processes or major infrastructure development, is of paramount importance to the Partnership as they improve the efficiency and resilience of our operations whilst providing a strong platform for future growth. The successful delivery of these projects depends on the resources and skills sets available to the Partnership. Our Personnel strategy aims to ensure that the Partnership possesses the appropriate skills and resources required to deliver these projects. Resources are continually reviewed and aligned with the business critical priorities. Skills gaps are addressed through first-class training and development of Partners. When the required skills are not available due to resources constraints or their highly specialised nature the Partnership will recruit these externally.

Customer offer

Broadening our multi-channel offer and extending our customer base are key to the Partnership’s growth ambitions. We also recognise that the pre-eminent quality of our products and customer service is critical to the Partnership’s success, and a deterioration of these would impact our business. The Partnership has a clear multi-channel strategy to extend its reach whilst leveraging our online position with our established footprint. In addition, we regularly review our customer and service strategies that include ongoing category and range reviews, whilst continuing to invest in our store environments and our multi-channel offer.

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