H
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How we manage risk (continued)
tifilUE3
Ahold at a glance
Our strategy
Our performance
Governance
In addition to the principal risks and uncertainties
as linked to our strategy above, the Company has
additionally risks in the following areas:
K Responsible retailing (S, O)
Increased regulatory demands, stakeholder
awareness and the growing sentiment that
large retailers must address sustainability
issues across the entire supply chain mean that
Ahold's brands and reputation may suffer if it
does not adequately address relevant corporate
responsibility issues affecting the food retail
industry. Ahold has integrated responsible
retailing into its Reshaping Retail strategy to
ensure that responsible retailing is part of the
daily business. For more information see Ahold's
Responsible Retailing Report 2013.
K Insurance programs (F)
Ahold manages its insurable risks through a
combination of self-insurance and commercial
insurance coverage. Our U.S. operations are
self-insured for workers' compensation, general
liability, vehicle accident and certain health
care-related claims. Self-insurance liabilities
are estimated based on actuarial valuations.
While we believe that the actuarial estimates are
reasonable, they are subject to changes caused
by claim reporting patterns, claim settlement
patterns, regulatory economic conditions and
adverse litigation results. It is possible that the
final resolution of some claims may require us
to make significant expenditures in excess of
our existing reserves. In addition, third-party
insurance companies that provide the fronting
insurance that is part of our self-insurance
programs require us to provide certain collateral.
We take measures to assess and monitor the
financial strength and credit-worthiness of the
commercial insurers from which we purchase
insurance. However, we remain exposed to a
degree of counterparty credit risk with respect to
such insurers. If conditions of economic distress
were to cause the liquidity or solvency of our
counterparties to deteriorate, we may not be able
to recover collateral funds or be indemnified from
the insurer in accordance with the terms and
conditions of our policies.
K Other financial risks (F)
Other financial risks include foreign currency
translation risk, credit risk, interest rate risk,
liquidity risk and contingent liabilities to
third parties relating to lease guarantees.
For information relating to these financial risks,
see Note 30 and Note 34 to the consolidated
financial statements.
K Unforeseen tax liabilities (C)
Because Ahold operates in a number of
countries, its income is subject to taxation in
differing jurisdictions and at differing tax rates.
Significant judgment is required in determining
the consolidated income tax position. We seek
to organize our affairs in a tax-efficient and
balanced manner, taking into account the
applicable regulations of the jurisdictions
in which we operate. As a result of Ahold's
multi-jurisdictional operations, it is exposed to a
number of different tax risks including, but not
limited to, changes in tax laws or interpretations
of such tax laws. The tax authorities in the
jurisdictions where Ahold operates may audit the
Company's tax returns and may disagree with
the positions taken in those returns. An adverse
outcome resulting from any settlement or future
examination of the Company's tax returns
may result in additional tax liabilities and may
adversely affect its effective tax rate, which
could have a material adverse effect on Ahold's
financial position, results of operations and
liquidity. In addition, any examination by the tax
authorities could cause Ahold to incur significant
legal expenses and divert management's
attention from the operation of its business.
Financials
Investors
Ahold Annual Report 2013
K Risks related to the legislative and
regulatory environment and litigation (C)
Ahold and its businesses are subject to various
federal, regional, state and local laws and
regulations in each country in which they operate,
relating to, among other areas: zoning; land use;
antitrust restrictions; work place safety; public
health including food and non-food safety;
environmental protection; alcoholic beverage,
tobacco and pharmaceutical sales; and
information security. Ahold and its businesses
are also subject to a variety of laws governing
the relationship with employees, including
but not limited to minimum wage, overtime,
working conditions, health care, disabled access
and work permit requirements. The cost of
compliance with, or changes in, any of these
laws could impact the operations and reduce the
profitability of Ahold or its businesses and thus
could affect Ahold's financial condition or results
of operations. Ahold and its businesses are
also subject to a variety of antitrust and similar
laws and regulations in the jurisdictions in which
they operate, which may impact or limit Ahold's
ability to realize certain acquisitions, divestments,
partnerships or mergers.
From time to time, Ahold and its businesses are
parties to legal and regulatory proceedings in a
number of countries, including the United States.
Based on the prevailing regulatory environment
or economic conditions in the markets in which
Ahold businesses operate, litigation may increase
in frequency and materiality. These legal and
regulatory proceedings may include matters
involving personnel and employment issues,
personal injury, antitrust claims, contract claims and
other matters. We estimate our exposure to these
legal proceedings and establish accruals for the
estimated liabilities where it is reasonably possible to
estimate and where the potential realization of a loss
contingency is more likely than not. The assessment
of exposures and ultimate outcomes of legal and
regulatory proceedings involves uncertainties.
Adverse outcomes of these legal proceedings, or
changes in our assessments of proceedings, could
potentially result in material adverse effects on our
financial results. For further information, see Note
34 to the consolidated financial statements.