TIDMSBRY
RNS Number : 4028O
Sainsbury(J) PLC
29 May 2020
29 May 2020
J Sainsbury plc
(the "Company")
Annual Report and Financial Statements
AND NOTICE OF ANNUAL GENEral meeting 2020
The following documents have today been posted or otherwise made
available to shareholders:
-- Annual Report and Financial Statements 2020 for the year ended 7 March 2020;
-- Notice of Annual General Meeting to be held on 2 July 2020; and
-- Form of Proxy for the 2020 Annual General Meeting.
In accordance with Listing Rule 9.6.1R, a copy of each of these
documents will be uploaded to the National Storage Mechanism and
will be available for viewing shortly at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
The above documents may also be viewed online at www.about.sainsburys.co.uk/ar20 20 and www.about.sainsburys.co.uk/ agm2020 .
A condensed set of the Company's financial statements and
information on important events that have occurred during the
financial year and their impact on the financial statements were
included in the Company's Preliminary Results Announcement on 30
April 2020.
That information together with the information set out below
which is extracted from the Annual Report and Financial Statements
2020 (the "Annual Report 2020") constitute the material required by
Disclosure Guidance and Transparency Rule 6.3.5R, which is required
to be communicated to the media in full unedited text through a
Regulatory Information Service.
This announcement is not a substitute for reading the full
Annual Report 2020. Page and note references in the text below
refer to page numbers in the Annual Report 2020. To view the
preliminary announcement, slides of the results presentation, the
transcript of the presentation and the webcast please visit
www.about.sainsburys.co.uk/investors/results-reports-and-presentations
.
Enquiries
Investor Relations Media
James Collins Rebecca Reilly
+44 (0) 20 7695 0080 +44 (0) 20 7695 7295
Our Principal Risks and Uncertainties
The COVID-19 pandemic has demonstrated that risk and issue
management is an inherent part of doing business and has tested
Sainsbury's risk and resilience processes. The short-term impact of
COVID-19 on our principal risks was assessed by the Board. The
results of this assessment are set out on pages 7 to 9. Below and
on the following pages, we set out an overview of the risk
management framework, the principal risks at year end, ongoing
mitigations and how these align to our strategy. The Board will
continue to monitor the principal risks and flex mitigations, in
particular, to respond to the medium and longer-term impacts of the
pandemic as they become clearer.
Risk management framework
The management of risk is based on the balance between risk and
reward, determined through a careful assessment of both the
potential outcomes and impact as well as risk appetite.
Consideration is given to both reputational and financial impact,
recognising the significant commercial value of the Sainsbury's
brand. The risk management process is aligned to our strategy and
each principal risk and uncertainty is considered in the context of
how it relates to the achievement of the Group's strategic
objectives.
The following table provides an overview of the key risk
management activities undertaken by leadership that allow the Board
to fulfil its obligations under the 2018 Code. Please refer to page
55 for the role and remit of these.
Division/function leadership
Bottom-up risk identification * Divisional risk maps reviewed and challenged
* Monitor risk actions
Governance forums
Risk identification and monitoring * Divisional risks relevant to forums' area of scope
* Governance forum risk maps
-----------------------------------------------------------------
Operating Board
Bi-annual corporate risk updates * Corporate risk map and monitor actions
and deep dives
* Risk deep dives
* Emerging risk map
-----------------------------------------------------------------
Audit Committee
Corporate risk updates, deep * Corporate risk map
dives and approval of the risk
framework
* Risk deep dives
* Risk policy and framework
* Internal audit reporting
-----------------------------------------------------------------
plc Board
Review of risk process, corporate * Annual internal controls certification by management
risks and approval of risk disclosures
* Principal risk and uncertainty disclosures
-----------------------------------------------------------------
Our risk management process is designed to identify key risks
and to provide assurance that they are fully understood and managed
in line with management's risk appetite.
The plc Board has overall responsibility for risk management and
internal controls, and for reviewing their effectiveness at least
annually. Certain responsibilities have been delegated to the Audit
Committee as outlined on page 71.
The risk management process is embedded at the Operating Board
level and is supported by the bottom-up risk process within
divisions and governance forums. The Operating Board maintains an
overall corporate risk map, which is reviewed four times a year by
the Audit Committee and is formally discussed with the Board.
To support risk discussions, the corporate risk map captures the
principal risks to achieving Sainsbury's objectives and identifies
the potential impact and likelihood at both a gross and net level.
The Operating Board reviews the risk map twice a year to discuss
and agree the level of risk that the business is prepared to accept
for each key corporate risk. The target risk position is captured
to reflect management's risk appetite where this differs to the
current net position. This enables the Operating Board to agree and
monitor appropriate actions as required.
Operating Board members certify annually that they are
responsible for managing their business objectives and internal
controls to provide reasonable, but not absolute, assurance that
the risks in their areas of responsibility are appropriately
identified, evaluated and managed. This is reported to the plc
Board.
Internal Audit and Risk provides the Audit Committee with a risk
management update at each meeting, which includes the key risk
activities undertaken within functions, governance forums and at
divisional and corporate levels.
Developments in our risk management process:
Emerging risks and opportunities were reviewed formally in
the year. Whilst emerging risks are regularly discussed and
identified as risks "to watch" through our bottom-up risk
assessment process, this year a supplementary review was facilitated
by Internal Audit and Risk. The review assessed a range of
scenarios to identify emerging risks and opportunities that
may impact our business, considering their potential timeframe
and degree of certainty. The outcomes were reported to the
Operating Board and Audit Committee. Going forward, this assessment
will be completed annually and aligned to corporate planning.
The business has also continued to monitor and respond to
risks and uncertainties relating to the impact on our operations
of Brexit , which we continue to disclose as a specific principal
risk.
Climate change risks were subject to a specific risk review.
Risks identified from the bottom-up and emerging risk assessments
were reviewed to confirm completeness. Their impact on our
overall risk assessment was then considered.
Climate change risks identified are considered in the existing
principal risks we are disclosing and have been taken into
consideration in assessing impact and likelihood, where appropriate.
As signatories of the Task Force on Climate-related Financial
Disclosures (TCFD), we will implement their recommendations
in 2020/21. This will include using scenario modelling to
further assess the impact of current and emerging climate
change on our business model.
The annual risk management process is illustrated in the table
below.
Quarter 1 Quarter 2 Quarter 3 Quarter 3
March to June July to September September December to
to December March
Divisions/ Divisional Divisional Divisional Divisional
functions risk workshops risk check-in risk check-in risk check-ins
(bottom-up (quarterly (risk validation) (quarterly
risk identification) in 2020/21) in 2020/21)
Management
annual certification
risks are
identified,
evaluated
and monitored
---------------------- ---------------------- ------------------- ----------------------
Governance Governance Governance Governance Governance
forums forum risk forum risk forum risk forum risk
workshops check-in check-in check-in
(consolidated (quarterly (consolidated (quarterly
view of in 2020/21) view of in 2020/21)
risks reviewed) risks validated)
---------------------- ---------------------- ------------------- ----------------------
Operating Emerging risk Corporate Emerging risk Corporate
Board assessment risk map workshop risk map
move to align half-year to review year-end review
with 2020/21 review bottom-up
Corporate (review consolidated and scenario
Planning view based emerging
of risks/actions) risks (2019/20)
---------------------- ---------------------- ------------------- ----------------------
Risk deep dives aligned to business priorities
-------------------------------------------------------------------------------------------
Audit Review and Corporate Risk management Corporate
Committee approve risk map update risk map
principal half-year year-end review
risks and review Approve risk
uncertainties (review consolidated framework
view
of risks/actions)
---------------------- ---------------------- ------------------- ----------------------
Risk deep dives as requested by Audit Committee
Chair
-------------------------------------------------------------------------------------------
plc Board plc Board
review of
risk process,
corporate
risks and
principal
risks
and uncertainties
---------------------- ---------------------- ------------------- ----------------------
Internal Facilitate the risk management process and prepare
Audit and reporting to all Boards
Risk
-------------------------------------------------------------------------------------------
Internal Audit Internal Audit Annual review
risk-based risk-based of
half-year half-year risk framework
plan plan
---------------------- ---------------------- ------------------- ----------------------
The specific risk management activities undertaken in the
financial year to 7 March 2020, and proposed changes for next year,
include:
- The Internal Audit and Risk team facilitated risk workshops
with divisional leadership teams to identify the key risks which
may prevent the achievement of objectives. A risk map is maintained
for each division setting out key risks and their gross, net and
target positions. A consolidated view of relevant risks was then
discussed at each key governance forum - safety, data governance
and operational resilience. In 2020, we will move to quarterly
check-ins with all divisions and governance forums.
- Divisional management and governance forums reviewed key risks
and the effectiveness and robustness of the mitigating controls as
part of their normal business activities.
- Emerging risks and opportunities were formally assessed.
Emerging risks and opportunities will continue to be monitored,
with this assessment aligned to corporate planning in 2020.
- The Operating Board reviewed and challenged the output of the
bottom-up risk process including new risks, risk movements and key
themes. The corporate risk map was updated as appropriate.
- The plc Board reviewed the risk management process and
corporate risks at the year end and approved the Company's
principal risks and uncertainties disclosure, including the
disclosure relating to the impact of COVID-19 on principal risks
(as set out on pages 38 to 45 and on pages 7 to 9).
- Internal Audit provided independent assurance to management
and the Audit Committee over specific risk areas as part of their
audit plan.
- As set out over the following pages, risk deep dives were
undertaken with the Operating Board and/or Audit Committee for
seven of our 12 principal risks. Deep dives will continue, with
focus on assessing whether we are within our risk appetite.
The most significant principal risks identified by the Board and
the mitigations are set out below in no order of priority.
The net risk movement from the prior year for each principal
risk and uncertainty has been assessed.
Mitigations in place, supporting the management of the risk to a
net risk position, are also described for each principal risk and
uncertainty.
Where principal risks have been included in the risk modelling,
undertaken as part of the preparation of the viability statement
(see page 46), this has been indicated with the following symbol:
*.
Key risk movements
As noted, the principal and emerging risks are discussed and
monitored throughout the year to identify changes to the risk
landscape. Risks are reviewed in line with the Company's strategic
objectives.
The key risk movement disclosed relates to the net risk impact
for data security increasing to reflect the level of fines being
imposed in the UK market for data breaches.
Brand perception
Risk
We are a multi brand, multi channel business incorporating
Sainsbury's, Argos, Habitat, Tu , Nectar and Sainsbury's Bank.
Our business must continue to evolve to meet customer needs
and maintain customer loyalty. Customer lifestyles, behaviours
and expectations are changing and we need to continue to differentiate
our offer to retain and attract customers. We also need to
protect our brand so that customers, suppliers and stakeholders
continue to trust us.
Direct oversight
Operating Board, Customer Trading Forum and Sainsbury's Bank
Management Board
Link to strategy
* Be competitive on price
* Offer distinctive products and new categories
* Fast, friendly and convenient
Movement
No change to net risk exposure
Mitigations
* We continually focus on evolving our ways of working
to ensure we continue to meet our customers' needs so
that our brands continue to remain relevant
* We have a wide, differentiated product offer, which
gives our customers more reasons to shop with us
* We change and evolve to meet the needs of our
customers through our digital strategy and technology
developments, so that we are there for them whenever
and wherever they want to shop with us, with great
products and services at fair prices. To deliver this,
we will continue to listen to and understand our
customers
* Nectar supports our strategy of knowing our customers
better than anyone else. The acquisition has given us
more control over how we reward and recognise our
customers and we have since launched digital Nectar
to give customers offers which are personalised to
them
* In terms of brand protection, many of the mitigation
activities set out against the risks above also help
prevent or reduce the risk of losing the trust and
loyalty of customers, suppliers and broader
stakeholders
* We launched an all-encompassing target to become a
Net Zero business by 2040, as we know this is a
material concern and motivation for our customers
both now and in the future
Brexit*
RISK DEEP DIVE
Risk
There remains economic and regulatory uncertainty in the UK
following leaving the EU in January 2020 and a lack of clarity
around future trading arrangements following the transition
period. These uncertainties could have an adverse effect on
customers, supply chains and colleagues, potentially impacting
trading performance across the sector.
Direct oversight
Operating Board
Link to strategy
* Be competitive on price
* Personalised and seamless physical and digital
* Be a place where we all love to work
Movement
No change to net risk exposure
Mitigations
* The Brexit Response team has been in place during the
last year to actively prepare for a no deal scenario.
The Brexit Response team co-ordinates activities
across the Trading, Retail, HR, Legal and Finance
teams to help ensure that, in the event of no-deal at
the end of the transition period, appropriate
mitigations are in place to reduce the impact on
customers, supply chains and colleagues
* These activities continued to focus on three key
areas of risk in the event of a no deal:
* Delays at borders, reducing fresh product
availability and choice
* Cost impact associated with tariffs, loss of trade
and currency fluctuations
* Impact of changes in EU migration throughout our
supply chains
* We will continue to engage actively with the
Government, industry and regulatory bodies to assess
the specific impact on our business as and when their
focus returns to this matter
Business continuity, operational resilience and major incident
response
RISK DEEP DIVE
Risk
A major incident or catastrophic event could affect the business
or its individual brands' ability to trade. Sainsbury's exposure
to operational resilience and major incident risks may be
greater following the acquisition of Argos and Nectar given
the increased size and complexity of the business.
Direct oversight
Group Operational Resilience Committee
Link to strategy
* Fast, friendly and convenient
* Personalised and seamless physical and digital
Movement
No change to net risk exposure
Mitigations
* The Group Operational Resilience Committee (GORC)
meets quarterly and is chaired by the Chief Financial
Officer, with support from our Company Secretary and
Corporate Services Director and Chief Information
Officer. The GORC sets the operational resilience
strategy for the Group and monitors progress against
this
* To support this, the Operational Resilience Committee,
which includes representatives from operational
functions across Sainsbury's, including the Bank,
meets regularly to ensure that the operational
resilience policy and strategy is implemented
* Business-wide resilience exercises are undertaken to
imitate real life business continuity scenarios and
test our ability to respond effectively
* Key strategic locations have secondary backup sites
that would be made available within pre-defined
timescales and are regularly tested
* All key business processes are assessed for
operational resilience against a set of minimum
standards and contingency measures are regularly
tested
* In the event of any unplanned or unforeseen events,
the Incident Response team is convened to manage the
response and any associated risk to the business
* The business has plans in place, supported by senior
representatives who have the experience and the
authority levels to make decisions in the event of a
potentially disruptive incident
* Key strategic locations have an automated emergency
call cascade solution implemented which allows for
emergency communications to be made to all colleagues
and for responses to be received back when required
Business strategy and change*
Risk
If the Board adopts the wrong business strategy or does not
communicate or implement its strategies effectively, the business
may be negatively impacted. Risks to delivering the strategy,
change initiatives forming part of the strategy and other
significant supporting change activities need to be properly
understood and managed to deliver long-term growth for the
benefit of all stakeholders alongside management of business
as usual.
Direct oversight
Operating Board
Link to strategy
* Drive efficiency to reinvest
Movement
No change to net risk exposure
Mitigations
Our business strategy, as set out in this Strategic Report,
is focussed on:
-- Be competitive on price
-- Offer distinctive products and new categories
-- Fast, friendly and convenient
-- Personalised and seamless physical and digital
-- Drive efficiency to reinvest
-- Be a place where we all love to work
-- Net Zero by 2040
* The Board regularly reviews progress against
strategic programmes and any risks to delivery, such
as the ability to implement and deliver change and
new business initiatives. The overall strategy is
reviewed at the annual two-day Strategy Conference
and a Capital Markets Day was held in September 2019
to give investors greater insight into business
priorities
* The Operating Board has regular sessions to discuss
strategy; supported by a dedicated strategy team. The
strategy is communicated and the business continually
engages with a wide range of stakeholders, including
shareholders, colleagues, customers and suppliers
* Management performs ongoing reviews of our market, as
explained on pages 12 to 13 and monitors business as
usual performance to determine indicators of
potential negative performance because of change
initiatives
Colleague engagement, retention and capability
Risk
The business employs over 172,000 colleagues who are critical
to the success of our business. Attracting talented colleagues,
investing in training and development, maintaining good relations,
and rewarding colleagues fairly are essential to the efficiency
and sustainability of business operations. An inability to
attract, motivate and retain talent, specific skill sets and
capability impacts our ability to deliver strategic objectives,
including the integration with Argos. In addition, the challenging
trading environment requires a focus on efficient operations,
which may include change initiatives affecting colleagues,
therefore presenting a risk of loss of colleague trust or
engagement.
Direct oversight
Operating Board
Link to strategy
* Be a place where we all love to work
Movement
No change to net risk exposure
Mitigations
* Employment policies and remuneration and benefits
packages are regularly reviewed and are designed to
be competitive, with other companies, fair and
consistent, as well as providing colleagues with
fulfilling career opportunities
* In addition to strong leadership and nurturing of
talent by line managers, formal processes are also in
place to identify talent and actively manage
succession planning throughout the business
* Reviews are performed to help develop the skills
colleagues need to deliver objectives and this is
supported by embracing new ways of attracting talent
* Our business priority 'Be a place where we all love
to work' reinforces our commitment to giving people
the opportunity to be the best they can be
* Colleague surveys, performance reviews, listening
groups, communications with trade unions, regular
communication of business activities and colleague
networking forums such as Yammer, the updated
colleague portal (Our Sainsbury's) and the colleague
learning portal are some of the methods the business
uses to understand and respond to colleagues' needs
* As change initiatives are implemented, the methods
described above will continue to be employed to
understand and maintain colleague trust and
engagement
Data security*
RISK DEEP DIVE
Risk
It is essential that the security of customer, colleague and
company confidential data be maintained. A major breach of
information security could have a significant negative financial
and reputational impact on the business. The risk landscape
is increasingly challenging with deliberate acts of cybercrime
on the rise, targeting all markets and heightening the risk
exposure to broader business disruption as well as to data
breaches. We continue to invest in improving our data governance
and information security defences, however, we recognised
the net risk increased during the year. This was primarily
driven by the value of fines levied in the UK market for data
breaches.
Direct oversight
Data Governance Committee
Link to strategy
* Fast, friendly and convenient
* Personalised and seamless physical and digital
Movement
Increased net risk exposure
Mitigations
* A Group Data Governance Committee is established and
is supported by focused working groups looking at the
management of colleague data, customer data,
information security, commercial data and awareness
and training
* We have combined our Data Governance and Information
Security functions and the Head of Data Governance
and Chief Information Security Officer continues to
develop information security strategies and to build
the necessary capability to deliver against those
strategies alongside focusing on improving how we
handle data across the organisation
* Various information security policies and standards
are in place, which focus on encryption, network
security, access controls, system security, data
protection and information handling
* All colleagues are required to complete mandatory
training on how to keep our information safe. This is
supplemented by regular awareness campaigns, focusing
on specific aspects of data and information security
* Reviews of key third parties who hold sensitive
customer or colleague data continue to take place and
progress is monitored by the Data Governance
Committee
* A risk-based security testing approach across IT
infrastructure and applications is in place to
identify ongoing vulnerabilities
* Reflecting the importance of data security, two
deep-dive reviews of this risk have been performed
with the Operating Board and Audit Committee in the
year. These have covered mitigating controls and
activities to manage this risk. These discussions are
conveyed to the Board as part of our normal
governance processes. We have also conducted a review
of risk appetite in this area which has been reported
to the plc Board
Environment and sustainability
RISK DEEP DIVE
Risk
The environment and sustainability are core to Sainsbury's
values. The key risk facing the business in this area relates
to reducing the environmental impact of the business, which
could result in a financial and/or reputational risk.
Direct oversight
Operating Board, Corporate Responsibility and Sustainability
Committee
Link to strategy
* Net Zero by 2040
Movement
No change to net risk exposure
Mitigations
* The Corporate Responsibility and Sustainability
Committee met twice during the year. The Committee
assesses the impact of Sainsbury's corporate
responsibility and sustainability strategy on how we
help customers live well for less and in terms of
building customer trust
* In January 2020 we committed to investing GBP1
billion over 20 years towards becoming Net Zero
across our own operations by 2040. This is in line
with the highest ambition of the Paris Climate Change
Agreement to limit global temperature rise to 1.5
degrees. We have refreshed our sustainability
governance structure with the creation of the Net
Zero Steering Group, along with specific working
groups, who will be responsible for driving and
executing this strategy
* We will use the GBP1 billion investment to support
seven commitments focused on reducing carbon
emissions, food waste, plastic packaging and water
usage and increasing recycling, biodiversity and
sustainable diets in order to improve our climate
change resilience
* As part of our Net Zero by 2040 strategy, we will
provide clear, frequent disclosures on our progress.
As signatories of Task Force on Climate-related
Financial Disclosures (TCFD), we will use scenario
modelling to further assess the impact of current and
emerging climate change on our business model and
strategy
Financial and treasury*
RISK DEEP DIVE
Risk
The main financial risks are the availability of short and
long-term funding to meet business needs and fluctuations
in interest, commodity and foreign currency rates.
Direct oversight
The Board of J Sainsbury plc
Link to strategy
* Drive efficiency to reinvest
Movement
No change to net risk exposure
Mitigations
* plc Board approved Treasury policies are in place to
address liquidity risk, refinancing risk, financial
markets risk and counterparty credit risk
* The Treasury function is responsible for managing the
liquid resources, funding requirements, commodity,
interest rate and currency exposures as set out in
line with the Treasury policy and is overseen by the
Treasury Committee
* The Treasury function has clear operating procedures,
which are regularly reviewed and audited
* A long-term funding plan is formed as part of the
annual corporate plan process, which includes an
assessment of short and long-term core funding
requirements and contingent funding requirements
* A short-term funding plan is formalised as part of
the annual budget process, which includes an
assessment of the core and contingent funding
requirements for the following year and the market
conditions for each of the debt markets accessible to
the business
* The business funding strategy and Treasury policies
are approved annually by the plc Board
* Annually, the Audit Committee reviews and approves
the viability and going concern statements and
reports into the plc Board
* Finance Commercial review sessions are held each
period, chaired by the Chief Financial Officer to
review the Company balance sheet, P&L, and net debt
in detail with relevant actions and mitigations
agreed
* There is a long-term funding framework in place for
the pension deficit and there is ongoing
communication and engagement with the Pension
Trustees
* Financial and Treasury risk in respect of Sainsbury's
Bank are detailed separately
Health and safety - people and product*
RISK DEEP DIVE
Risk
Prevention of injury or loss of life for both colleagues and
customers is of utmost importance and is paramount to maintaining
the confidence our customers have in our business.
Direct oversight
Group Safety Committee
Link to strategy
* Offer distinctive products and new categories
* Fast, friendly and convenient
* Personalised and seamless physical and digital
Movement
No change to net risk exposure
Mitigations
* Clear policies and procedures are in place detailing
the controls required to manage health and safety,
and product safety risks across the business and to
comply with all applicable regulations
* These cover the end-to-end operations, including the
auditing and vetting of construction contractors, the
health and safety processes in place in our depots,
stores and offices and the controls in place to
ensure people and product safety and integrity
* In addition, established product testing programmes
are in place to support rigorous monitoring of
product traceability and provide assurance over
product safety and integrity
* Supplier terms, conditions and product specifications
set clear standards for product/raw material safety
and quality with which suppliers are expected to
comply
* Process compliance is supported by external
accreditation and internal training programmes, which
align to both health and safety laws and Sainsbury's
internal policies
* Resource is dedicated to manage the risk effectively,
in the form of the Group Safety Committee and
specialist safety teams
* The Board receives quarterly reports on safety,
including a deep dive facilitated by the Head of
Group Safety and the Head of Technical Operations
Political and regulatory environment*
Risk
There is an increasing trend of regulation, together with
enforcement action, across all areas of our business. This
adds additional cost as we respond to the regulations and
drives complexity into our business processes.
Direct oversight
Operating Board
Link to strategy
* Be competitive on price
* Offer distinctive products and new categories
* Fast, friendly and convenient
* Personalised and seamless physical and digital
* Drive efficiency to reinvest
* Be a place where we all love to work
* Net Zero by 2040
Movement
No change to net risk exposure
Mitigations
* We complete a bi-annual regulatory risk assessment
with key areas of the business to identify current
and emerging regulation affecting the business, so
that we can respond appropriately
* Regulatory updates are regularly presented to our
oversight boards and committees, including the
Regulatory Pay Forum, which was established in 2019
to oversee National Living Wage/National Minimum Wage
compliance across the business, with flexibility to
support other areas of reward compliance if necessary
* To influence current and emerging regulatory
requirements, we continue to engage actively with
Government, industry and regulatory bodies
* We publicly communicate matters where we believe
industry change is required, with a view to enabling
fair competition that is beneficial to our customers
* We communicate our views, and those of our customers
and colleagues, regarding geopolitical issues with
the aim of informing the debate and ensuring our
opinions are represented in the policy and
decision-making processes
Sainsbury's Bank*
Risk
Sainsbury's Bank is exposed to a number of risks. These include
operational risk, regulatory risk, credit risk, capital risk,
funding risk, liquidity risk, and market risk.
Direct oversight
The Boards of J Sainsbury plc and Sainsbury's Bank plc
Link to strategy
* Be competitive on price
* Offer distinctive products and new categories
* Fast, friendly and convenient
* Personalised and seamless physical and digital
* Drive efficiency to reinvest
* Be a place where we all love to work
* Net Zero by 2040
Movement
No change to net risk exposure
Mitigations
* The Bank is managed through defined governance
structures that include the Board of Sainsbury's Bank
plc, its Risk Committee and Audit Committee. The
Board of Sainsbury's Bank plc is comprised of
Executive Directors, Non-Executive Directors and a J
Sainsbury plc Operating Board member
* The Bank has a defined risk appetite aligned to
delivery of strategic objectives and has implemented
a risk management framework that is overseen by its
Risk Committee. This Committee monitors the
effectiveness of risk management activities against
strategic, operational, compliance and financial
risks and is updated on and discusses emerging risk
areas. In particular, the Risk Committee reviews the
results of stress testing including the internal
liquidity and capital adequacy assessments
* The actual management of risks is through an
executive governance structure, which manages the
day-to-day operations of the business. This includes
the Sainsbury's Bank Management Board, an Executive
Risk Committee and an Asset and Liability Committee
* Oversight by J Sainsbury plc is provided through:
* Membership of the Board of Sainsbury's Bank plc - one
J Sainsbury plc Operating Board member is on the
Board of Sainsbury's Bank plc and provides updates to
the Board of J Sainsbury plc on Bank matters
* Updates on key matters arising from meetings of the
Risk Committee and Audit Committee are reported to
the J Sainsbury plc Audit Committee
* There are a number of reserved matters where
Sainsbury's Bank plc needs to obtain permission from
J Sainsbury plc
Trading environment and competitive landscape*
RISK DEEP DIVE
Risk
Effective management of the trading account is key to the
achievement of performance targets. The sector outlook has
been and is set to remain very competitive. The trading environment,
driven by ongoing competitive retail pricing combined with
growing inflationary cost pressures, may adversely affect
our performance. There is also an ongoing risk of supplier
failure, with possible operational or financial consequences
for the business.
Direct oversight
Customer Trading Forum, Operating Board
Link to strategy
* Be competitive on price
* Drive efficiency to reinvest
Movement
No change to net risk exposure
Mitigations
* We adopt a differentiated strategy with a continued
focus on delivering quality products and services
with universal appeal, at fair prices, helping our
customers Live Well for Less
* This is achieved through the continuous review of our
product quality, key customer metrics, monitoring of
current market trends and price points across
competitors, active management of price positions,
development of sales propositions and increased
promotional and marketing activity
* We continue with our commitment to offer customers
even better value with lower regular prices
* In delivering our strategic plan, including our price
investment, we will maintain the strength of our
balance sheet and have identified a series of
measures to conserve cash in the business
* Concerning supplier continuity, Sainsbury's maintains
regular, open dialogue with key suppliers concerning
their ability to trade
Examples of risk deep dives in the last year
A programme of risk deep dives has continued, with half of
the principal risks being reviewed by the Operating Board
or Audit Committee in year. We have set out some examples.
We reconfirmed risk appetite for all corporate risks with
the plc and Operating Boards in the year. A programme of deep
dive reviews, focussed on risk appetite, will continue.
Data security
plc Board and Audit Committee
Biannual risk deep dives are presented by the Head of Data
Governance and Chief Information Security Officer to the Operating
Board and Audit Committee. The Operating Board also receives
reports from the Data Governance Committee.
This year, a risk deep dive with the plc Board was held in
March 2020. The plc Board reviewed our risk appetite across
data and information security risks.
Health and safety - people and product
Audit Committee
The plc Board receives quarterly updates on safety and a risk
deep dive is facilitated annually.
In addition, the Director of Retail and Operations presented
a paper to the March 2020 Audit Committee on how relevant
safety and legal risks are managed in the retail estate.
Financial and treasury
plc Board and Audit Committee
An annual funding deep dive covers going concern considerations,
our diversified portfolio of secured and unsecured borrowings
and core elements of the Group's financing arrangement in
place to maintain funding headroom.
In addition, the business funding strategy and Treasury policies
are approved annually by the plc Board.
Business continuity
Operating Board
The Operating Board performed a deep dive review of our approach
to business continuity, operational resilience and major incident
management, presented by the Director of Audit, Risk and Resilience
in March 2020.
The Group Operational Resilience Committee also actively reviews
this risk during the year. Quarterly updates are also provided
to the Audit Committee.
Environment and sustainability
Operating Board
The Net Zero by 2040 strategy was reviewed in detail by the
Operating Board, including an evaluation of risks, and was
approved by the plc Board and CR&S Committee.
The Sainsbury's Net Zero Steering Group and Value Management
Groups actively reviewed this risk during the year and presented
reports to the Corporate Responsibility and Sustainability
Committee.
Related party transactions
a) Key management personnel
The key management personnel of the Group comprise members of
the J Sainsbury plc Board of Directors and the Operating Board. The
key management personnel compensation is as follows:
2020 2019
GBPm GBPm
Short-term employee benefits 12 11
Post-employment employee benefits 1 1
Share-based payments 6 10
------ ------
19 22
Two key management personnel had credit card balances with
Financial Services (2019: five). These arose in the normal course
of business and were immaterial to the Group and the individuals.
One key management personnel held saving deposit accounts with
Financial Services (2019: three). These balances arose in the
normal course of business and were immaterial to the Group and the
individuals.
b) Joint ventures and associates
Transactions with joint ventures and associates
For the 52 weeks to 7 March 2020, the Group entered into various
transactions with joint ventures and associates as set out
below:
2020 2019
GBPm GBPm
Dividends and distributions received 141 18
Repayment of loans from joint venture - (5)
Disposals of joint ventures (21) -
Rental expenses paid (14) (38)
Year-end balances arising from transactions with joint ventures
and associates
2020 2019
GBPm GBPm
Payables
Other payables 18 (5)
c) Retirement benefit obligations
As discussed in note 35, the Group has entered into an
arrangement with the Pension Scheme Trustee as part of the funding
plan for the actuarial deficit in the Scheme. Full details of this
arrangement are set out in note 35 to these financial
statements.
S tatement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year that give a true and fair view
of the state of affairs of the Group and the Company as at the end
of the financial year, and of the profit or loss of the Group for
the financial year. Under that law, the Directors have prepared the
Group financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU) and have elected to prepare the Parent Company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 101 'Reduced Disclosure
Framework' (UK Accounting Standards and applicable law). Under
company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the Company and of the profit
or loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable and prudent;
- state whether IFRSs as adopted by the European Union and
applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the Group and
Company financial statements respectively; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006 and, as
regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
Having taken all the matters considered by the Board and brought
to the attention of the Board during the year into account, we are
satisfied that the Annual Report and Financial Statements, taken as
a whole, is fair, balanced and understandable.
The Board believes that the disclosures set out in this Annual
Report provide the information necessary for shareholders to assess
the Group's performance, business model and strategy.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on
pages 48 to 51, confirms that, to the best of their knowledge:
- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group; and
- the Strategic Report and Directors' Report contained in the
Annual Report and Financial Statements include a fair review of the
development and performance of the business and the position of the
Group, together with a description of the emerging and principal
risks and uncertainties that it faces.
By order of the Board
Tim Fallowfield
Company Secretary and Corporate Services Director
29 April 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACSKKCBQDBKDNPB
(END) Dow Jones Newswires
May 29, 2020 08:02 ET (12:02 GMT)
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