How we manage risk continued
In addition to the principal risks
and uncertainties linked to our
strategy above, the Company
has risks in the following areas:
Overview
Business review
Governance
Financials
Investors
Ahold Delhaize Annual Report 2016
Sustainable 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 Delhaize’s brands and reputation
may suffer if it does not adequately address
relevant sustainability issues affecting the
food retail industry. We have integrated
sustainable retailing into our Better Together
strategy to ensure that it is part of our daily
business, and that we continue to improve our
performance, with a focus on three strategic
areas: promoting healthier eating, reducing
food waste and creating healthy and inclusive
workplaces. Through the implementation
of our strategy, we aim to strengthen the
communities where we operate. We also have
the responsibility to our shareholders to control
our tax costs as described in our Tax Policy.
In addition to addressing risks to our brand and
reputation, our Better Together and Sustainable
Retailing strategies will position us well against
the following other risks: an inability to meet
our customers’ changing needs for healthy
and sustainable products; increasing costs
due to waste or negative externalities in our
supply chain; negative impact to our associate
engagement if we don’t support associates’
changing expectations of employers; lack
of suppliers able to meet improved safety
and sustainability standards; and regulations
related to climate impact.
For more information see Our Better Together
Strategy.
Insurance programs (F)
Ahold Delhaize manages its insurable risks
through a combination of self-insurance and
commercial insurance coverage. A large part
of our operations is self-insured for workers’
compensation, general liability, property,
vehicle accident and certain healthcare-
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.
Unforeseen tax liabilities (C)
Because Ahold Delhaize 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 sustainable manner,
taking into account the applicable regulations
of the jurisdictions in which we operate. As a
result of Ahold Delhaize’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 authorities in the jurisdictions
where Ahold Delhaize operates may review 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 Delhaize’s financial position, results of
operations and liquidity. In addition, any review
by the authorities could cause Ahold Delhaize
to incur significant legal expenses and divert
management’s attention from the operation of
our businesses.
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.
