Risks & Uncertainties

The Principal Risks and Uncertainties facing the Group are summarised below.

The disclosure of risks and uncertainties in the table below reflects the ethos of the Company to also look for the opportunities presented when addressing significant risks.

The Principal Risks are formally reviewed in total, twice per year by the Board and monthly by an Executive management committee focused on capacity and effectiveness of the organisation. Updates in terms of emerging risks or significant actions undertaken are addressed as and when required at Board meetings.

Management also reviews strategic, operational, and financial and compliance risks in regular focused forums during the year, for example, a monthly review of capacity and effectiveness across the organisation and enterprise wide risks; quarterly business reviews with each of the businesses; monthly business agenda reviews with the senior business and functional management; six weekly operations forums, covering major programmes and projects; and at other key executive management meetings.

Risks and Uncertainties Mitigating Actions Opportunity
European economy and banking sector continue to deteriorate We have embedded processes which drive working capital management and cash flow at Group and across our businesses. We also have proven agility in driving cost reduction and working capital.Our banking facilities and relationships are kept under constant review and action taken when required.The business regularly reviews its Euro cash deposits and collects unutilised cash on a regular basis. Our focus on delivery of our strategy, along with the insights provided from data from our web channels, means we are able to respond rapidly to economic improvement.
Competitive advantage in the web channel is not maintained  We are continuously driving improvement to our transactional and Community websites, including our industry leading EDE Community and other web innovations such as the Knode. We have recently established a data management group aimed at enhancing the presentation; quality and availability of the information required by our customers.

Our Web Advisory Board includes external subject matter experts, to provide advice and guidance to the Board and eCommerce team on the core areas of our web strategy. 
The continued investment in and development of web functionality provides value to customers, meets their requirements for information and provides Premier Farnell with insights to help decision making processes.
Recruitment, development or retention of talented people Our high potential talent is identified and nurtured through agreed development plans including a comprehensive mentoring programme as well as a focus on succession planning for our key leadership positions.

We actively measure the retention of talent within our organisation which provides us with the ability to track trends and act with the appropriate and necessary actions.

We conduct annual employee engagement surveys to enable progress of our people actions to be monitored and areas of improvement identified and actions put in place.

Our reward schemes are continuously evaluated to drive and reward performance and ensure retention of key talent.

As we drive significant change throughout the organisation our competency development and evaluation processes are focused on encouraging change agility.

Through the strengthening of our diversity and inclusion team, the Group’s focus on employee individuality, diversity and creativity has significantly increased.

Development of talent through transfer across the business through international assignments. 
The creation of a high performing actively engaged team which will consequently lead to improved business performance. By focusing on training and development, customer relationships, leadership, social responsibility, and communications, the number of employees who are actively engaged at Premier Farnell is 77%, in the top quartile relative to the high performing benchmark. 
Data and content quality inhibit effectiveness of our eCommerce strategy A dedicated data function has been established to ensure compliance with internal processes and external regulations.

A data strategy and governance framework has also been developed to support the information requirements of our strategic programmes
Continued investment in data and data management processes to provide our customers with high quality product information and suppliers with rich insights in to customer behaviour.
Insufficient progress with strategic implementation in North America   We have a fully integrated multi-channel sales and marketing plan aimed at addressing the needs of our EDE customers.

Delivery of strategic transformation in North America is led by a high calibre team with regular reviews of the business’s progress by the executive team.
We are leveraging the combination of commerce, community and our element14 brand in the US to win market share and attract EDEs to our online environment. 
Failure to leverage the investment made in Asia Pacific and develop a mature, robust growing business Ongoing focus from CEO, COO and senior leadership team on the development of the Asia Pacific markets in accordance with our strategic intent.

Best practice and personnel leveraged from around the Group to ensure delivery, with an experienced President from the Group appointed to lead the Asia Pacific business in January 2012.

Progress is measured against our business agenda metrics (including customer acquisition and retention; markets sales per day growth and overall margin and profitability targets).

Regional management has been strengthened to support execution against the proposition in the region and in each Asia Pacific market
Continue to invest and effect structural growth in our key Asia Pacific markets.

Develop strong customer loyalty and market share growth in all of our Asia Pacific markets.
Change programs do not deliver targeted benefits We continue to challenge the way we operate and have ongoing plans to improve platforms, systems and processes. All our programs have the appropriate governance, with direct sponsorship of CEO, CFO and COO for all major change programmes and with clear benefit realisation implementation plans and programme assurance processes.   We are continually improving our customer experience through enhanced systems and processes underpinning our multi-channel, high service offering.
Competitive pressures  We continue to focus on product, margin and our high service proposition to drive profitable growth.

We have business intelligence processes to maintain our awareness of market developments and competitor actions, along with our market share for the Group and at a detailed market level.

We continue to build our high service proposition by adding new technologies and a broad range of products. We also lead in innovation for our customers through our web channels, for example with the Knode and by providing end to end solutions for EDEs through Services Beyond Product. 
We have implemented strategic initiatives to build customer loyalty and initiatives targeted at vertical market segments, which provide a differentiated proposition for our customer base.

The fragmentation of the marketplace allows us opportunities given our strengths of global reach and financial position to win business and create further barriers to entry from smaller competitors. 
Significant failure or inefficiencies in our systems and infrastructure  Business continuity plans are kept under review for all our locations. As an example of these contingencies, we have the ability to switch order fulfilment in Europe between our Leeds and Liège distribution centres. Contingency plans are in place for our US warehouse and management systems. We have maintained an ongoing review of our IT infrastructure and conduct regular testing of our systems. We will invest in our back-office systems to support our single front-end web platform over the next three to five years.  We continually improve workflows and operational efficiencies and provide increased capacity and investment in capability. All of these allow the greater support of customers’ future requirements, suppliers’ future needs and the ability to leverage information as an asset.
Legal risks  We have exposure to a number of countries and their respective legal compliance requirements are addressed through a variety of controls. Trade compliance is a specific significant requirement which is controlled through an experienced specialist team, automated screening enablers and ongoing training of our sales teams.

Compliance committee meetings are held with senior management at Group and within the regions. 
The increase in environmental legislation for electronics, such as the introduction of REACH, allows us to provide real value to our customers through our legislative expertise.