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How we manage risk - continued
Operational risks
Governance
Risk related to collective bargaining
A significant portion of Ahold's employees are represented by unions and are covered
by collective bargaining agreements. As the collective bargaining agreements with those
unions expire, the Company might not be able to negotiate extensions or replacements on
terms acceptable to the Company. Although Ahold considers its relations with the relevant
trade unions to be stable and has organized its human resource functions to support the
Company's union relations and collective bargaining negotiations, any failure of our
operating companies to effectively renegotiate these agreements could result in work
stoppages or other organized labor actions. Ahold may not be able to resolve any issues
in a timely manner and its contingency plans may not be sufficient to avoid an impact on
the business. A work stoppage due to failure of one or more of its operating companies to
renegotiate a collective bargaining agreement, or otherwise, could have a material adverse
effect on Ahold's financial position, results of operations and liquidity.
Risks related to information security
Ahold's business operations generate and maintain confidential commercial and personal
information concerning customers, employees, suppliers, and the Company. Our
information security policy mandates that we implement and maintain controls, processes
and tools which ensure confidentiality, privacy, integrity and availability of confidential and
sensitive information. We also manage and monitor compliance with our policy and with
the various legal and regulatory requirements. However, disclosure of confidential
information to unintended third parties may negatively impact Ahold's competitive position
and corporate reputation or result in litigation or regulatory action. This could have a
material adverse effect on Ahold's financial position, results of operations and liquidity.
Risks related to business and IT continuity
A number of Ahold's critical business processes and functions are concentrated in
a limited number of centralized facilities and/or are dependent on IT systems and
infrastructure, key personnel, an IT outsourcing provider and other key suppliers for which
Ahold has limited or no comparable back-up available. If any of these critical business
processes or functions suffer a severe disruption which renders such facilities, critical
IT systems or infrastructure, key suppliers or key personnel unavailable, Ahold could
experience disruption to its supply chain, store and administrative operations. Ahold
continues to invest in recovery plans and security initiatives with respect to its facilities
and its technology systems which support its critical business processes and takes steps
to mitigate the dependency risks associated with our key strategic suppliers. However,
these measures cannot fully prevent business interruptions that could have a material
adverse effect on our financial position, results of operations and liquidity.
Risks related to food and product safety
The growing internationalization of our supply chain, the increased penetration of Ahold's
own brand products in its assortment and increasing levels of regulation continue to render
food and product safety one of Ahold's most significant business risks. Ahold's food and
product safety policies and practices cover the complete supply chain, from farm and
production level to the Company's own operations. However, we may face food and
product safety problems, including disruptions to the supply chain caused by food-borne
illnesses and negative consumer reaction to publicity surrounding any incidents, which
may have a material adverse effect on our reputation, sales, financial position, results of
operations and liquidity.
