How we manage risk (continued)
Declaration
Risk factors
Strategic risks
Ahold Annual Report 2012 54
Ahold at a glance
Our strategy
Our performance
Governance
Financials
Investors
Monitoring
We use a comprehensive business planning and performance review
process to monitor the Company's performance. This process covers
the adoption of strategy, budgeting and the reporting of current and
projected results. We assess business performance according to both
financial and non-financial targets. In order to meet business needs
and the requirements of the Dutch Corporate Governance Code, we
have a Group-wide management certification process in place, which
requires that the executive management team members at each of
our reporting entities send letters of representation to the Corporate
Executive Board on a quarterly basis. These letters confirm whether
they are in compliance with Ahold's global Code of Conduct, policies
on fraud prevention and detection, accounting and internal control
standards, and disclosure requirements. Compliance with Ahold's
responsible retailing standards is confirmed through bi-annual letters of
representation. Both our Internal Control and Internal Audit functions
help to ensure that we maintain and improve the integrity and
effectiveness of our system of risk management and internal control.
Internal Audit undertakes regular risk-based, objective and critical
audits. The function also monitors the effectiveness of corrective actions
undertaken by management, including significant audit findings.
Governance Risk and Compliance Committee
The Governance, Risk and Compliance (GRC) Committee oversees
governance, risk and compliance activities within the Ahold group
and reviews relevant reports that are submitted to the Corporate
Executive Board, the Supervisory Board and the Audit Committee.
During 2012, the GRC Committee met quarterly. Ahold's Chief
Corporate Governance Counsel (chair) and Chief Financial Officer
sit on the GRC Committee, as do other members of management
responsible for key governance, risk and compliance functions.
Annual declaration on risk management and control
systems regarding financial reporting risks
Ahold supports the Dutch Corporate Governance Code and makes
the following declaration in accordance with best practice provision
11.1.5:
The Corporate Executive Board is responsible for establishing and
maintaining adequate internal risk management and control systems.
Such systems are designed to manage rather than eliminate the risk of
failure to achieve important business objectives, and can only provide
reasonable and not absolute assurance against material misstatement
or loss.
With respect to financial reporting, management has assessed
whether the risk management and control systems provide reasonable
assurance that the 2012 financial statements do not contain any
material misstatements. This assessment was based on the criteria set
out in COSO: Internal Control - Integrated Framework. It included
tests of the design and operating effectiveness of entity level controls,
transactional controls at significant locations, and relevant general
computer controls. Any control weaknesses not fully remediated at
year end were evaluated. Based on this assessment, management
determined that the Company's financial reporting systems are
adequately designed and operated effectively in 2012.
The principal risk factors that may impede the achievement of
Ahold's objectives with respect to strategy, operations, financial
and compliance matters are described in the following section.
The enterprise risk management system, the governance and control
standards incorporated into our ABC Framework, and the monitoring
systems described above are the principal means by which we
manage these risks. Management is not aware of any important
failings in these systems as of year end 2012.
The following discussion of risks relating to Ahold should be read
carefully when evaluating the Company's business, its prospects and
the forward-looking statements contained in this Annual Report. Any of
the following risks could have a material adverse effect on Ahold's
financial position, results of operations and liquidity or could cause
actual results to differ materially from the results contemplated in the
forward-looking statements contained in this Annual Report.
We recognize different strategic, operational, financial, and
compliance and regulatory risk categories. The risks described below
are not the only risks the Company faces. There may be additional
risks that we are currently unaware of or risks that management
believes are immaterial or otherwise common to most companies,
but which may in the future have a material adverse effect on Ahold's
financial position, results of operations, liquidity and the actual
outcome of matters referred to in the forward-looking statements
contained in this Annual Report. For additional information regarding
forward-looking statements, see the Cautionary notice.
We are continuing with our strategy to reshape the way we do business
and drive growth. Our six priority areas focus on increasing customer
loyalty, broadening our offering, expanding our geographic reach,
driving simplicity, being a responsible retailer, and engaging and
attracting the best talent. Our promises focus on what we will do to be
a better place to shop, a better place to work and a better neighbor
everywhere we operate. You can read more about our strategy and
ambitions in the Our strategy section of this Annual Report.
Ahold is subject to a variety of risks related to our pillar strategies, our
promises and the achievement of our ambitions, including execution,
macro-economic and competitive risks. If we are unable to execute
our plans or meet our ambitions or the expectations of our customers,
communities, employees or shareholders, our sales and earnings
growth could be adversely affected.
