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How we manage risk
Having a structured and consistent
approach to managing risks and
uncertainties is key to being able to
fulfill our stakeholders' expectations.
Risk management
and internal control
Ahold at a glance
Our strategy
Our performance
Governance
In order to meet our Reshaping Retail objectives,
Ahold needs to be agile and entrepreneurial to
respond quickly and effectively to rapid changes in
the retail landscape. Having a well-established and
embedded risk management approach benefits our
decision-making processes to create and preserve
value. Managing risks and unpredictable conditions
in a timely way increases the likelihood that we will
achieve our business objectives, while ensuring
compliance with internal and external requirements.
Ahold strives for a culture of openness and
transparency in which identified risks are disclosed
proactively and unexpected events are reported as
soon as they occur. Risk management is an integral
part of responsible leadership.
Enterprise risk management
Ahold's enterprise risk management program is
designed to provide executive management with
an understanding of the Company's key business
risks and associated risk management practices.
Within each continent, management identifies the
principal risks to the achievement of important
business objectives and the actions needed to
mitigate these risks. Senior executives periodically
review these risks and the related mitigation
practices. The findings are aggregated into an
enterprise risk management report that is presented
to the Executive Committee and the Supervisory
Board. Executive management is required to
review the principal risks and risk management
practices with the Executive Committee as a regular
part of the business planning and performance
cycle. In turn, the Executive Committee provides
complementary insights into existing and emerging
risks that are subsequently included in the program.
Ahold's enterprise risk management program
influences the formation of controls and procedures,
the scope of internal audit activities and the focus of
the business planning and performance process.
Financials
Investors
Ahold Annual Report 2013
Risk appetite
Risk boundaries are set through our strategy, Code
of Conduct, bill of authority and policies. Our risk
appetite differs by objective area:
K Strategic
In pursuing our strategic ambition to grow, Ahold
is prepared to take risks in a responsible way that
takes our stakeholders' interests into account.
K Operational
The core promise of our Company: "better
every day," applies to the day-to-day running of
our businesses and describes our commitment
to be a better place to shop, a better place
to work, and a better neighbor. Risks related
to our promises will be in balance with the
related rewards.
K Financial and reporting
With respect to financial risks, Ahold has a
prudent financing strategy, including a balanced
combination of self-insurance and commercial
insurance coverage1. The Company is committed
to maintaining a strong investment grade credit
rating. In relation to financial reporting, Ahold
uses a classification matrix to evaluate and
report issues.
K Compliance
At Ahold, an essential part of responsible retailing
is behaving according to our values. One of
Ahold's values is "Doing what's right," which
means that the Company and all its employees
are responsible for acting with honesty, integrity,
and respect for others. We strive to comply with
applicable laws and regulations everywhere we
do business.
Control framework
We maintain the Ahold Business Control
Framework (ABC Framework), which incorporates
risk assessment, control activities and monitoring
into our business practices at entity-wide and
functional levels. The aim of the ABC Framework
is to provide reasonable assurance that risks to
achieving important objectives are identified and
mitigated. The ABC Framework is based on the
recommendations of the Committee of Sponsoring
Organizations of the Treadway Commission
(COSO ERM).
We have developed uniform governance and
control standards in areas such as ethical conduct,
agreements, accounting policies and product
integrity. These and other Executive Committee-
approved policies and procedures are incorporated
into the ABC Framework as mandatory
guidelines for all of Ahold's consolidated entities.
Local management is responsible for business
operations, including risk mitigation and compliance
with laws and regulations. Authority limits have
been established to ensure that all expenditures and
decisions are approved by the appropriate levels
of management.
Our key control requirements are documented
in Ahold Control Memoranda (ACMs).
Compliance with the ACMs is mandatory for
all of Ahold's fully-owned entities. The ACMs
cover controls relating to financial reporting and
various other business processes. They include
the requirement for management to assess the
operating effectiveness of all ACM key controls.
1 For further information related to the self-insurance program see Note 24 to the consolidated financial statements