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Annual Report and Accounts 2015


John Lewis Partnership plc


107


Risk management and internal audit activities


The Partnership Board has ultimate responsibility for the Partnership’s system of internal control and risk management and reviewing its effectiveness.


The Partnership Board delegates the monitoring of internal control and risk management processes to the Committee. The Committee seeks assurance from the work of the Group Risk Management, and Internal Audit and Operational Risk Management departments, which provide objective assurance on the effectiveness of those arrangements through the delivery of a risk-based work plan and risk management activities.


The Head of Group Risk and the Head of Internal Audit and Operational Risk Management report functionally to the Chair of the Committee and operationally to the Acting Group Finance Director.


The Partnership’s systems of risk management and internal control


Risk management


Assessing and managing risk is fundamental to safeguarding our Partners’ interests, protecting our reputation, complying with regulatory standards and achieving our business objectives.


Executive management is responsible for identifying and evaluating the principal business risks and for implementing and maintaining systems for managing those risks in an efficient and effective manner.


To enable this, the Partnership has developed a risk management framework, including a process for how we identify, evaluate, manage and monitor the principal risks faced by the Partnership, supported by tools, dedicated Partners and a risk governance structure.


Further details on this can be found on pages 42 to 43, along with details of our principal risks and how we mitigate them, on pages 45 to 47.


Strategic, operational, financial and compliance risk areas are all included within the scope of these activities.


Compliance risks e.g. risk of us “not doing what Regulators require”


The Committee reports regularly to the Partnership Board, which seeks assurance that the systems of internal control for risk management are operating effectively. Reporting is through management representations, the work of internal audit and other means of assurance.


During the year, the Committee focussed on IT controls including meeting with Divisional IT Directors to understand plans to strengthen our IT controls framework. Additionally the Committee oversaw the updating of the Partnership’s Internal Controls Framework.


At the end of the year, the Committee conducted an annual review of the effectiveness of the risk management framework, supported by a self certification exercise by management.


Internal control


The systems of internal control we have established are designed to manage, rather than eliminate, the risk that is inherent in pursuit of our business objectives. As a consequence, our internal controls can only provide reasonable, and not absolute, assurance against material misstatement or loss.


The Committee monitors the development of our policies and systems for identifying, evaluating and managing the principal risks throughout the Partnership. On a quarterly basis, the Committee receives an updated Risk Report on progress on the principal Partnership risks identified as part of the business planning process.


Strategic risks e.g. risk of us “taking the wrong investment decision”


Operational risks e.g. risk of us “doing the right thing, in the wrong way”


Financial risks e.g. risk of us “doing things in a way that loses money


or incurs unnecessary liabilities”


In the following year, we plan to formalise the identification and monitoring of measures for our principal risks and their mitigations, to give us better warning of changes to our risks and the resilience of our internal controls.


During the year and for 2015/16


Strengthening and embedding our risk management framework


During the year, the Committee has overseen further strengthening and embedding of the risk management framework within the Partnership as part of a continuous improvement programme. This included initiating a review by external consultants of our framework.


Outcome of our actions


In response, new tools have been developed, new practices implemented and our risk governance structure has been refined. These are now in use and provide a consistent basis across the Partnership for more efficient identification, evaluation and communication of emerging risk and control issues.


Focus areas for 2015/16


Introduction


Partnership difference


Principles


Strategy


Performance


Governance


Financial statements


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