Our principal risks and mitigations (continued) 56 John Lewis Partnership plc Annual Report and Accounts 2016


These are our top seven risks, which cause us most concern. We are actively managing and monitoring these risks as a priority to protect and develop the Partnership.


Principle 1 Type of risks in our risk universe


Strategic risks i.e. risk of us ‘doing the wrong thing’


Operational risks i.e. risk of us ‘doing the


right thing, in the wrong way’


Financial risks i.e. risk of us ‘doing it in


a way that loses money or incurs unnecessary liabilities’


Compliance risks i.e. risk of us ‘not complying


with applicable laws and regulations’


advantage of Partners


Increase


Realise market potential


Efficiently Grow


Risk 1 Competition Description


Competitor actions put pressure on market value, our margin and threaten our volumes in the retail grocery sector. The growth of online business models in the general merchandise sector, mean customers focus more on value for money and less on loyalty.


Potential consequence


We may lose customers impairing our ability to grow long-term profitability.


Partnership Aims affected Realise market potential Grow efficiently


Consequences and Partnership Aims affected


How have we managed and will mitigate the risk? Increased risk profile o


Controls in place a Continuing to secure value for all of our customers through our price matching commitments


a Regular strategic risk review and strategy implementation monitoring by Executive Management


a Weekly review of sales margin and operating KPIs


Progress in the year a Our Divisional strategies have been refreshed, communicated and embedded to respond to the competitive threats


Further actions a Continue to focus on differentiating our customer service, product quality and product innovation


a Introduce new products and services in anticipation of changing customer requirements


a Regular monitoring and reporting to enable us to adapt to changing and emerging competition risk


2 Pension obligations Description


Changes in the real discount rate causes: 1) Significant volatility in our pension fund liabilities and could cause a breach in our banking covenants.


2) Increased pension operating costs. Potential consequence


Defined benefit pension obligations place a significant financial burden on the Partnership and can divert resources away from other investment opportunities.


Partnership Aims affected Increase advantage of Partners Realise market potential


Change in description


Controls in place a Regular review of valuation assumptions through internal and external monitoring


Progress in the year a The Pension Benefit Review has reduced the future volatility


Further actions a The Trustee is implementing the new Defined Contribution scheme and an ongoing programme to increase hedging of inflation and interest rates


3 Information security Description


A breach of Partner or customer data due to the external threat to cause disruption or access sensitive data; and a need to respond to the pace of technological development.


Potential consequence


A significant data breach and loss of either Partner or customer data could cause financial, regulatory, legal and/or reputational damage.


Partnership Aims affected Increase advantage of Partners Realise market potential Grow efficiently


Increased risk profile o


Controls in place a Robust network security and regular testing to provide early identification of network or system vulnerabilities


a Continuous security monitoring a Partner training


Progress in the year a Enhancements to the systems and controls that hold Partner and customer data have considerably improved resilience


a More regular and sophisticated security testing a Improved Partner security awareness


Further actions a Continue to implement Data and IT Security Improvement Programmes across the Partnership


a Ongoing rollout of improved information security training to Partners


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