Ahold faces risks related to food safety.
Ahold depends on a limited number of centralized facilities
and relies on technology systems to support its logistics.
The supply chain of growing, packing and transporting food
from producers to retailers requires sourcing from different
suppliers worldwide. Although Ahold's food safety policy
covers the complete supply chain, from farm and production
level to the Company's own operations, it may still face food
safety problems, including disruptions to the supply chain
caused by food-borne illnesses, or injuries caused by food
tampering or poor sanitary conditions. I nstances of food
safety problems, real or perceived, whether at Ahold's food
retail stores or its foodservice facilities or at those of its
competitors or those of the Company's customer operators,
could adversely affect the price and availability of the
affected food product and cause customers to shift their
preferences and may also result in product liability claims
and negative publicity about Ahold or the food industry in
general, which could have a material adverse effect on the
Company's sales and results of operations.
Ahold's business is subject to environmental liability
risks and regulations.
Ahold's businesses are governed by environmental laws
and regulations in all countries where it does business.
These laws and regulations also govern the discharge,
storage, handling and disposal of hazardous or toxic
substances. If stricter laws are passed or applicable
environmental laws are more strictly enforced, Ahold may
incur additional expenditures. The Company's failure
to comply with any environmental, health or safety
requirements, or any increase in the cost of such
compliance, could have a material adverse effect on
its financial position, results of operations and liquidity.
Ahold's efforts to reduce inventory shrink might
not be successful.
Ahold may not be able to control costs related to inventory
shrink, which generally results from the limited shelf life of
its perishable inventory and from inventory losses resulting
from theft or fraud. Although the Company has taken
a number of steps to reduce inventory shrink, including
enhancing its inventory control systems and improving its
ordering procedures, Ahold might not be able to achieve
its goal of reducing inventory shrink. Any failure to reduce
shrink could have a material adverse effect on the
Company's financial position, results of operations
and liquidity.
Ahold's logistics infrastructure is concentrated in a limited
number of centralized locations for which Ahold has limited
or no comparable back-up. In addition, Ahold relies on
advanced technology systems to increase the efficiency of
its logistics and reduce its distribution costs. An interruption
of operations at one or more of Ahold's logistics facilities,
or a disruption to the technology systems used to support
its logistics operations, could disrupt Ahold's supply chain,
decrease the volume of its business and result in increased
costs. Although Ahold continues to invest in disaster
recovery plans and security initiatives with respect to its
logistics and technology systems, these measures cannot
fully prevent interruptions that could have a material
adverse effect on its financial position, results of operation
and liquidity.
Risks relating to ownership of Ahold's common
shares and ADSs
Ahold may not be able to ensure adequate internal
controls over financial reporting.
Management conducted an evaluation of the effectiveness
of the Company's internal control over financial reporting as
of December 31, 2006 using the criteria set forth in the
COSO Framework. Based on this evaluation, management
determined that the Company's internal control over
financial reporting was effective as of December 31, 2006.
However, the Company will have to devote significant
resources to continuing compliance with the applicable
internal control requirements. Any failure to ensure
adequate internal controls over financial reporting could
result in accounting errors or misstatements in Ahold's
financial statements and could harm the reliability of its
financial statements, which could in turn adversely affect
investor confidence and the prices of Ahold's common
shares and ADSs. For a further discussion regarding
Ahold's internal controls, see "Internal control" in this
Annual Report.
Ahold Annual Report 2006 35
