MATERIAL ISSUES, RISKS AND OPPORTUNITIES
MATERIAL ISSUES
MATERIAL ISSUES ARE THE FACTORS THAT ARE LIKELY TO HAVE THE MOST MATERIAL IMPACT ON THE GROUP’S REVENUE, PROFITABILITY AND SUSTAINABILITY, AND THEREFORE INFLUENCE OUR ABILITY TO CREATE AND SUSTAIN VALUE, OR LIMIT VALUE EROSION, FOR STAKEHOLDERS.
MATERIAL ISSUES FOR 2023
One of the material issues for the 2022 financial year was the turnaround of the Office business. Following the stronger performance of Office in the current reporting period and the improved prospects for the business, the directors believe that a specific material issue for the Office turnaround is no longer appropriate. The operational plans for the sustained improvement in Office’s performance have been incorporated into the remaining material issues.
The material issues for 2023 are as follows:
Aspirational fashion |
Account management |
Aspirational fashion |
Retail presence (stores and online) |
HOW MATERIAL ISSUES ARE MANAGED
The material issues are reviewed annually during the course of the Group’s strategic planning process:
IDENTIFY
factors that could have a material impact on the Group
- Macroeconomic and trading environment and operating context
- Needs, expectations and concerns of primary stakeholders
- Key Group risks
- Financial, manufactured, intellectual, human, social and relationship, and natural capital resources
- Legislative and regulatory framework
DETERMINE
material
issues
- Based on the outcome of the assessment, determine the issues that are likely to have the most material impact on performance in the year ahead, as well as in the long term
- These issues are reviewed by the CEO, the Deputy Managing Director and CFO, and presented to and endorsed by the board
- The material issues are aligned with the Group’s Business Philosophy, strategic objectives, plans and projects
- Measurable deliverables from the strategic plans and projects are incorporated in the performance targets for executives
INTEGRATE
material
issues
- Short- and medium-term operational plans are developed annually for managing each material issue
- Key performance indicators are determined to monitor the progress in managing the material issues
- Risks and mitigation plans are outlined for each material issue
- Medium-term opportunities are identified which highlight the potential to create value over a two to four-year time horizon
REPORT
on material
issues
- Report to the board and board committees on material issues at quarterly meetings
- Report to shareholders and other stakeholders on the material issues in the integrated annual report and at bi-annual results presentations
- Outline progress in delivering on the operational plans, performance against targets and challenges impacting the material issues
MAJOR GROUP RISKS
The risk heat map is based on residual risk and focuses on ‘moderate’ to ‘high’ risks impacting the Group’s operations. Accordingly, identified risks with a residual risk rating of ‘low’ are not included in the heat map below.
| RESIDUAL RISK | REPORT REFERENCE | |||
| Electricity load shedding in South Africa impacting on ability to trade |
1 |
Truworths Material issue: Retail presence | ||
| Supply chain disruption |
2 |
Truworths Material issue: Supply chain; Office Material issue: Supply chain |
||
| Contending with the volatile exchange rate in managing retail selling prices of imported merchandise |
3 |
Truworths Material issue: Aspirational fashion | ||
| After COVID-19, retail footfall in London has recovered. However, there is uncertainty on its sustainability in the current high-inflationary macro environment | 4 |
Review of 2022, Outlook for 2023 | ||
| Online sales substituting store sales in a fast-changing UK retail landscape | 5 |
Office Material issue: Retail presence | ||
| Shortage of skilled IT human resources for support and projects | 6 |
Truworths Human capital; Office Human capital |
||
| Impact of changing product mix within sports and made-to-order ranges on Office’s gross margin | 7 |
Office Material issue: Aspirational fashion | ||
| Suitability and sustainability of Office’s ageing merchandise management system, having become acutely dependent on highly skilled scarce internal and external resources | 8 |
Office Material issue: Aspirational fashion; Chief Financial Officer’s report |
||
| A major cybersecurity incident could lead to the loss of sensitive information and resultant reputational damage | 9 |
Chief Financial Officer’s report | ||
| Major business disruption due to a disaster that leads to the loss of or inability to access one or more of the main business sites for an extended period | 10 |
Truworths Material issue: Supply chain | ||
| Proposed amendment of schedules to the Financial Intelligence Centre Act (FICA) | 11 |
Truworths Material issue: Account management | ||
| Ineffective management of account risk in Truworths | 12 |
Truworths Material issue: Account management | ||
| Debt relief legislation will enable the SA National Credit Regulator to extinguish debts owed by qualifying indebted customers to credit providers such as Truworths | 13 |
Truworths Material issue: Account management | ||
| Outbreaks of civil unrest impacting ability to trade and posing a threat to employees, customers and assets | 14 |
Truworths Material issue: Supply chain | ||
| Office’s reliance on third-party brands | 15 |
Office Material issue: Aspirational fashion; Office Material issue: Supply chain |
||
| Suppliers not operating to contracted standards of ethical behaviour could result in reputational damage and interruption of supply | 16 |
Truworths Material issue: Supply chain; Office Material issue: Supply chain |
||
| Failure by Truworths to comply with the amendments to the Employment Equity Act and ministerial determinations could result in penalties | 17 |
Truworths Human capital | ||
| Loss of key executives and senior employees | 18 |
Truworths Human capital; Office Human capital; Chairman’s report |