21 Finsbury Food Group Annual Report & Accounts 2019
Risk Report
The Directors recognise the need for a healthy system of internal controls and risk management. We have identified the following as the principal risks and uncertainties the Group faces.
Competitive Environment and Customer Requirements The bakery sector remains competitive. Monitoring key performance indicators at customer level such as service or customer complaints is part of our risk management process. Providing high-quality products, investing in innovation, and competing in value, helps strengthen customer relations and support growth initiatives. We invest heavily in category management, new product development and marketing. This investment has helped create an insight into customer and consumer demands.
Principal Risks and Uncertainties
The Group's management team assesses risks regularly and develops strategies for dealing with them. We carry out an annual formal review of risks. This process involves identifying risks, and determining the likelihood of them affecting the business, the potential severity of their impact, and what we need to do to manage them effectively. This risk management is essential to our ability to achieve our strategic objectives.
The risks we consider material are as follows: Strategic Risks:
Retailer Consolidation There have been a number of high-profile mergers and prospective mergers reported in the press in the past few years such as Tesco and Booker. There is always a risk in these situations that, as the newly merged entities look to offer the consumer lower prices through economies of scale, they rationalise their supplier base. Also, the exceptional buying power of these new entities could pressurise suppliers into lowering prices to preserve trade.
As a supplier to most grocery customers including the ones mentioned above, we are not immune to this risk. We strive to be the highest-quality, most-innovative and lowest-cost supplier and believe this, along with our strong partnership relationships with our customers, will ensure we are strongly placed to continue to supply them.
Consumer Trends The risk of a no deal Brexit and the uncertainty surrounding Brexit more generally along with political uncertainty continue to weigh on consumer sentiment. British consumer confidence has deteriorated in the last year. The risk to the Group is that spending on non-essential goods and treats will fall, affecting the demand for our key products.
We will continue to focus on quality and value and will look for new channels, new products and new formats to gain competitive advantage.
Health continues to be a major focus for the business. Special teams continue to work on reducing sugar and salt as part of the Government obesity strategy and Public Health England recommendations. Our development teams work closely with our customers to ensure we meet or exceed all guidelines for health and nutrition, and work continuously with suppliers to reduce salt, fat and sugar in our products. We are committed to meeting the FSA 2017 salt targets and are already over 90% compliant.
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