John Lewis Partnership Annual Report and Accounts 2015

Annual Report and Accounts 2015

John Lewis Partnership plc

43

HEAT MAP

Partnership risks to the achievement of Principle 1 and The Business Plan

2 9 3

The top ten Partnership risks 1 Competition 2 Pension obligations 3 Property valuation 4 Efficiency 5 Economic environment 6 Operating model strain 7 IT infrastructure capability 8 Change delivery 9 Data protection breach 10 Talent

1. Remote 6 7 10 5 8 4 1

2. Unlikely

3. Possible LIKELIHOOD

Target risk profile, if further actions are successful Net risk profile, after current mitigating controls

Risk management in practice

Our risk management process is used to stress-test key decision-making points in our planning and review procedures. We do this before we commit, so we can make any changes to our plans and deliver them with confidence. A structured risk assessment is a requirement of our strategic and business planning and review process, as well as being an essential part of our management of projects and compliance activities. In this way, risks are assessed by Divisions and Directorates half-yearly, considering the potential impact of the risk and the likelihood of its occurrence – see Heat Map.

Evaluation of impact and likelihood is made after consideration of the effectiveness of current mitigating controls we have in place – to give a ‘net’ profile. If this net profile is deemed to be placing us at too much risk for the return expected and against our risk tolerance (demonstrated by being evaluated in the ‘red zone’), a response will be needed to bring the risk back within an acceptable level of risk taking.

UNDERSTANDING OUR RISKS, AND THEIR IMPACT ON OUR BUSINESS PLANS AND DAY-TO-DAY OPERATIONS, IS VITAL TO CREATING SUSTAINABLE VALUE.

Loraine Woodhouse Acting Group Finance Director

To help visualise this for analysis and decision making, risks are plotted on a Heat Map.

In general, risks evaluated in: ZONE

AMBER ZONE

GREEN ZONE

RED

the ‘red zone’ are ones where we feel we are taking too much risk for the return and against our risk tolerance. Desired ‘target profiles’ are set and further actions identified to bring the risk back within our risk tolerance.

the ‘amber zone’ are ones which we feel we are managing satisfactorily against our tolerance. They will be formally monitored to ensure they do not deteriorate to the red zone, but no further actions are expected.

the ‘green zone’ are ones felt currently to be immaterial and unlikely to affect our Partnership objectives. Risk owners are responsible for monitoring them and raising the alarm if they show significant deterioration.

Details of our risk profiles, current mitigating controls, risk tolerances and further actions are captured in Risk Registers in each Division and at a Partnership level.

The output from the Divisional risk assessments is consolidated, per their net profile, to produce the Partnership Risk Profile. This is reviewed and challenged by the Chairman’s Committee, before being submitted to the Partnership Board for final review and approval. The outcome of this review is fed back to the Divisions for consideration of any changes. The top ten risks are highlighted above.

To ensure that we are managing and taking risk at the right level, the Chairman’s Committee and Divisional Risk Committees monitor the ongoing status and progress of key further action against each risk and its tolerance, on a quarterly basis.

4. Likely

5. Very likely

Introduction

Partnership difference

Principles

Strategy

Performance

Governance

Financial statements

1. Minor

2. Moderate

IMPACT 3. Major

4. Significant

5. Critical

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