Ongoing fragmentation of our customer engagement channels exposes us to a risk of diluting customer experience and ability to differentiate our brand.

No risk movement

We now have a more consistent approach to building impactful customer propositions, offering high-quality and competitive value while improving the customer experience. Propositions are now developed across channels and geographies to ensure consistency in the engagement with customers. Group-wide customer insight management is undertaken to understand and leverage customer behaviour, expectations and experience across the different parts of the business. We monitor the effectiveness of our processes by regularly tracking our business and competitors against measures that customers tell us are important to their shopping experience. We have well-established product development and quality management processes, which keep the needs of our customers central to our decision-making.

Achieving our transformation goals continues to demand effort and investment, especially with regard to technology changes.

No risk movement

We have multiple transformation programmes underway to simplify our business with clear market strategies and business plans in place which evolve as priorities or situations change. We have appropriate executive-level oversight for all the transformation activities to ensure programmes are adequately resourced and milestones achieved.

We have a disciplined and policy-based approach to treasury management. We have reduced our debt levels and have improving debt metrics.

No risk movement

We maintain an infrastructure of systems, policies and reports to ensure discipline and oversight on liquidity matters, including specific treasury and debt-related issues. Our treasury policies are communicated across the Group and are regularly reviewed by the Board, Executive Committee and management. The Group's funding strategy is approved annually by the Board and includes maintaining appropriate levels of working capital, undrawn committed facilities and access to the capital markets. The Audit Committee reviews and annually approves the viability and going concern statements and reports into the Board. There is a long-term funding framework in place for the pension deficit and there is ongoing communication and engagement with the Pension Trustees. Liquidity levels and sources of cash are regularly reviewed and the Group maintains access to committed credit facilities and debt capital markets. While recognising that Tesco Bank is financially separate from Tesco PLC, there is ongoing monitoring of the activities of Tesco Bank that could give rise to risks to Tesco PLC.

We continue to face the ongoing challenge of a changing competitive landscape and price pressure across most of our markets.

No risk movement

Our Board develops and regularly challenges the strategic direction of our business to enhance our ability to remain competitive on price, range and service. This activity includes development of our online channels and multiple formats to allow us to compete in different markets. Our Executive Committee and operational management regularly review markets, trading opportunities, competitor strategy and activity. We engage in market scanning and competitor analysis to refine our customer proposition.

We are leveraging the Tesco Centenary to celebrate 100 Years of great value and reaffirm our position as the customer champion. We continue to implement a number of initiatives and activities thereby helping reappraise the brand, increase trust and reputation while improving our quality and value perception.

Risk decreasing

Maintaining a differentiated brand is one of our strategic priorities. Our Group processes, policies and our Code of Business Conduct sets out how we can make the right decisions for our customers, colleagues, suppliers, communities and investors.

We continue to develop communication and engagement programmes to listen to our customers and stakeholders and reflect their needs in our plans. This includes the Supplier Viewpoint and the integration of local community and local marketing programmes. We continue to maximise the value and impact of our brand with the advice of specialist external agencies and in-house marketing expertise. Our Corporate Responsibility Committee is in place to oversee all corporate responsibility activities and initiatives ensuring alignment with customer priorities and our brand.

Our dependency on technology continues to grow. Ongoing improvements and investment in disaster recovery and business continuity measures help to limit exposure to external threats.

Risk decreasing

A multi-year programme is underway to enhance our technology infrastructure and resilience capabilities. This involves significant investment in our hosting strategy, partnering with cloud providers and re-engineering some of our legacy retail systems, while building redundancy for key business systems.

Our technology security programme continues to build security capabilities to strengthen our infrastructure and Information Technology General Controls.

As a retail organisation we hold a large amount of customer and colleague personal data, and the threat landscape has been ever growing. The introduction of GDPR in May 2018 has meant an increase in individuals' awareness levels, as well as an increase in the financial penalties which can be levied by the data protection authorities.

No risk movement

We put our customers and our colleagues at the heart of all decisions we make in relation to the processing of personal data. Our multi-year technology security programme has been driving the enhancement of our security capabilities to improve data security.

We have an established team to detect, report and respond to security incidents in a timely fashion. We have a third-party supplier assurance programme focusing on data security and privacy risks.

We have made significant investment across the Group to ensure we comply with the requirements of GDPR in Europe, and any other relevant legislation globally. Our privacy compliance programme, which includes assessment and monitoring of risk, continues to drive compliance throughout our global business.

There is regular reporting on progress of the security and privacy programmes to governance and oversight committees.

We continue to monitor and improve our controls to ensure we comply with legal and regulatory requirements across the Group. Long-term changes in the global political environment mean that in some markets there is a push towards greater regulation of foreign investors and a favouring of local companies.

No risk movement

Wherever we operate, we aim to ensure that the impact of political and regulatory changes is incorporated in our strategic planning and policies. We manage regulatory risks through the use of our risk management framework and we have implemented compliance programmes and committees to manage our most important risks (e.g. anti-bribery and competition law). Our compliance programmes ensure that sustainable controls are implemented to mitigate the risk and we conduct assurance activities for each risk area. Our Code of Business Conduct is supported by new starter and annual compliance training and other tools such as our whistleblowing hotline. The engagement of leadership and senior management is critical in the successful management of this risk area and leaders provide clear tone from the top for colleagues.

We continue to focus our efforts on controls which ensure colleague and customer safety.

No risk movement

We have a business-wide, risk-based safety framework which defines how we implement and report on safety controls to ensure that colleagues, contractors and customers have a safe place to work and shop. Each business is required to maintain a Safety Improvement Plan to document and track enhancements. Overall governance is provided by the Group Risk and Compliance Committee, with each business unit operating their own Health and Safety Committee. Our annual colleague survey programme results, alongside other inputs such as safety audits, informs the delivery of safety initiatives and targeted communications.

 Market competitiveness continues to affect our ability to attract and retain key specialist talent. There is continued impact arising from fast-changing and complex legislation.

No risk movement

Talent planning and people development processes are well established across the Group. Talent and succession planning is discussed annually by the Board and three times a year at the Executive Committee and Nominations and Governance Committee. A Group Inclusion strategy is in place. An independent assessment of all promotions and external hires is conducted at leadership level to ensure capability, potential, leadership and values. The Remuneration Committee agrees objectives and remuneration arrangements for senior management. People risk mitigation plans are in place throughout the Group, supported by the Executive Committee.

We continue to monitor and improve our controls to further reduce this risk.

No risk movement

We have product standards, policies and guidance covering both food and non-food, as well as goods and services not for resale, ensuring that products are safe, legal and of the required quality. Measures include policies and guidance to help to ensure that the human rights of workers are respected and environmental impacts are managed responsibly. Refer to pages 24 to 31 for specific actions highlighted under our Little Helps Plan. Supplier audit programmes are in place to monitor product safety, traceability and integrity, human rights and environmental standards, including unannounced specification inspections of suppliers and facilities. We run colleague training programmes on food and product safety, responsible sourcing, hygiene controls, and also provide support for stores. We also provide targeted training for colleagues and suppliers dealing with specific challenges such as modern slavery.

There has been good progress on the expected synergies.

Risk decreasing

A detailed synergy realisation and integration plan was successfully executed during the financial year. Period-end reporting and tracking of targeted benefits and key performance indicators is embedded.

Uncertainty around our departure from the EU has continued to grow as a result of the political deadlock.

Risk increasing

With the UK's future trading relationship with the EU still to be determined, we continue to contribute to important public policy discussion and engage with government, regulatory bodies and industry. During this process, we will continue to assess and monitor the potential risks and impacts on Tesco customers, colleagues and shareholders, while taking appropriate mitigation measures to address challenges including logistics, staff and supply.

This year we put in place a detailed Brexit contingency plan against political and macro-economic changes that could have a material impact on our market and customer proposition.

The Bank continues to actively manage the risks to which it is exposed.

No risk movement

The Bank has a defined risk appetite, which is approved and reviewed regularly by both the Bank's Board and the Tesco PLC Board. The risk appetite defines the type and amount of risk that the Group is prepared to accept to achieve its objectives, and forms a key link between the day-to-day risk management of the business and its strategic priorities, long-term plan, capital planning and liquidity management. Adherence to risk appetite is monitored through a series of ratios and limits.

The Bank operates a risk management framework that is underpinned by governance, policies, processes and controls, reporting, assurance and stress testing.

There is Bank Board risk reporting throughout the year, with updates to the Tesco PLC Audit Committee by the Bank's Chief Financial Officer, Chief Risk Officer and Audit Committee Chairman. A member of the Tesco PLC Board is also a member of the Bank's Board.