TIDMBRBY
RNS Number : 2475B
Burberry Group PLC
05 June 2019
5 June 2019
Burberry Group plc - Annual Financial Report
The following documents have today been made available to
shareholders of Burberry Group plc
(the "Company"):
1. Annual Report and Accounts for the financial year ended 30 March 2019;
2. Notice of the 2019 Annual General Meeting; and
3. Form of Proxy for the 2019 Annual General Meeting.
Pursuant to Listing Rule 9.6.1, each of these documents has been
submitted to the National Storage Mechanism and they will shortly
be available for inspection at www.morningstar.co.uk/uk/NSM.
In accordance with Disclosure Guidance and Transparency Rule
("DTR") 6.3.5(3), the Annual Report and Notice of 2019 Annual
General Meeting are also available on the Company website at
www.burberryplc.com.
The 2019 Annual General Meeting (the "AGM") will take place on
Wednesday, 17 July 2019 at Conrad London St. James, 22-28 Broadway,
London, SW1H 0BH. The total of the votes cast by shareholders for
or against or withheld on each resolution to be put to the meeting
will be published on www.burberryplc.com as soon as possible after
the meeting.
In compliance with DTR 6.3.5, the information in the Appendix
below is extracted from the Company's Annual Report and Accounts
for the financial year ended 30 March 2019 (the "2018/19 Annual
Report and Accounts") and should be read in conjunction with the
Company's preliminary announcement issued on 16 May 2019 (the
"Preliminary Announcement"), both of which can be viewed at
www.burberryplc.com. Together these constitute the material
required by DTR 6.3.5 to be communicated to the media in unedited
full text through a Regulatory Information Service. This material
is not a substitute for reading the 2018/19 Annual Report and
Accounts in full. Page numbers and cross-references in the
extracted information below refer to page numbers and
cross-references in the 2018/19 Annual Report and Accounts.
The information contained in this announcement and in the
Preliminary Announcement does not constitute the Company's
statutory accounts, but is derived from those statutory accounts.
The statutory accounts for the financial year ended 30 March 2019
have been approved by the Board and will be delivered to the
Registrar of Companies following the AGM.
Enquiries
Investors and analysts
Annabel Brownrigg-Gleeson
Director, Investor Relations
annabel.brownrigg-gleeson@burberry.com
020 3367 4458
Media
Andrew Roberts
VP, Corporate Relations
andrew.roberts@burberry.com
020 3367 3764
APPIX: ADDITIONAL INFORMATION REQUIRED BY DTR 6.3.5
AUDIT REPORTS
The Preliminary Announcement includes a condensed set of
financial statements. Audited financial statements for the
financial year ended 30 March 2019 are contained in the 2018/19
Annual Report and Accounts. The Independent Auditors' Report on the
Company financial statements and the parent company financial
statements (the "Audit Report") is set out in full on pages 153 to
159 of the 2018/19 Annual Report and Accounts. The Audit Report is
unqualified and does not contain any statements under section
498(2) (regarding adequacy of accounting records and returns) or
under section 498(3) (regarding provision of necessary information
and explanations) of the Companies Act 2006.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The following information is extracted from page 152 of the
2018/19 Annual Report and Accounts.
The directors consider that the Annual Report, taken as a whole,
is fair, balance and understandable and provides the information
necessary for shareholders to assess the Group and the Company's
position and performance, business model and strategy.
Each of the directors, whose names and functions are listed on
pages 94 to 97 confirm that, to the best of their knowledge:
- the Company financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101
'Reduced Disclosure Framework', and applicable law), give a true
and fair view of the assets, liabilities, financial position and
profit of the Company;
- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group; and
- the Strategic Report includes a fair review of the development
and performance of the business and the position of the Group and
the Company, together with a description of the principal risks and
uncertainties that it faces.
PRINCIPAL RISKS
The following information is extracted from pages 74 to 86 of
the 2018/19 Annual Report and Accounts.
OUR APPROACH TO RISK
The Group's strategy takes into account risks, as well as
opportunities, which need to be actively managed. Effective risk
management is essential to executing our strategy, achieving
sustainable shareholder value, protecting the brand and ensuring
good governance.
The Board is ultimately responsible for determining the nature
and extent of the principal risks it is willing to take to achieve
our strategic objectives (the Board's risk appetite), and
challenging management's implementation of effective systems of
risk identification, assessment and mitigation.
The Audit Committee has been delegated the responsibility for
reviewing the effectiveness of the Group's internal controls and
risk management arrangements.
Ongoing review of these controls is provided through internal
governance processes and the work of the Group functions is
overseen by the Executive Committee, particularly the work of Group
Risk and Internal Audit and the Risk and Ethics Committees.
An integral part of our business, our risk management process is
co-ordinated by our Group Risk team, reporting to our Chief
Operating and Financial Officer. Risk management activities include
identifying risks, undertaking risk assessments and determining
mitigating actions. These activities are reviewed by our Internal
Audit and other control functions, which provide assurance to our
Risk Committee, and ultimately to our Board and Board Committees,
as shown in the diagram on page 102.
RISK APPETITE
The Board reviews and validates the Group's risk appetite on an
annual basis. This is integrated into our wider risk management
framework to support better decision-making and prioritisation.
We will pursue growth and are prepared to accept a certain level
of risk to firmly establish our position in luxury fashion and
inspire our customers with our unique British twist. We operate in
a competitive, dynamic sector with long-term growth potential.
Within categories of risk, our tolerance for risk may vary.
Complying with applicable laws and doing the right thing is part
of our culture and underpins our strategic ambition. In exploring
risks and opportunities, we prioritise the interests and safety of
our customers and employees, we seek to protect the long-term value
and reputation of the brand, maximising commercial benefits to
support responsible and sustained growth, and in doing so minimise
risk.
OUR PRINCIPAL RISKS
Our risk management process has identified a broad range of
risks and uncertainties, which we believe could adversely impact
the profitability or prospects of the Group. Our principal risks
are defined as those that we regard as the most relevant to our
business. These are the risks that we see as most material to our
performance and could threaten our business model or the future
long-term performance, solvency or liquidity of Burberry.
Our risk framework is structured around the following categories
of risk: Strategic and Financial, Operational and Compliance. Each
principal risk is linked to one of these categories and may impact
one or more of our strategic priorities.
We have reviewed and updated the descriptions and mitigating
actions of our principal risks to reflect new emerging external
risks and any new strategic priorities that have been announced. We
reviewed whether the level of risk associated with each of the
principal risks is increasing or decreasing compared to the
previous financial year and noted new risks, which do not have a
basis for comparison.
RISK MANAGEMENT PROCESS
BOARD AND BOARD COMMITTEES
Responsible Monitors risks through Board processes Audit Committee
for regular including regular reviews of strategy, reviews effectiveness
oversight of management reports and deep dives of risk management
risk management, into selected risk areas. process with
annual strategic support from
risk review, Internal Audit.
and setting
the Group's
risk appetite.
----------------------------------------------------- -----------------------
MANAGEMENT RISK COMMITTEE (CHAIRED BY CHIEF OPERATING AND
FINANCIAL OFFICER)
Reviews external Meets at least three times per Identifies
and internal year and reports key findings to changes to
environment the Audit Committee. significant
for emerging risks and the
risks. Performs Cross-functional attendees, encompassing effectiveness
deep-dive reviews senior management from IT, Finance, and adequacy
of principal Legal, HR, Supply Chain and Retail. of
risks. mitigating
actions to
Reviews risk achieve agreed
register updates risk tolerance
from risk owners. levels.
----------------------------------------------------- -----------------------
GROUP RISK AND ETHICS COMMITTEE FUNCTIONS AND BUSINESS INTERNAL AUDIT
ASSURANCE TEAM RISK OWNERS AND COMPLIANCE
FUNCTIONS
--------------------- --------------------------- ------------------------ -----------------------
-- Establishes -- Reviews and -- Carry out day-to-day -- Review risk
risk monitors ethical risk management management
management risks, as well activities. process
framework. as behavioural -- Identify and periodically.
-- Facilitates and responsibility assess -- Compliance
updates practices across risk and implement functions provide
to risk registers. the Group. Approves action to mitigate independent
-- Provides policies relating risk assurance to
resources to such ethical within their area. management
and training matters, including -- Assign owners and the Board
to the Group's codes to risks on risk status
support risk of conduct. to update risk (Health and
management process. -- Performs deep-dive registers. Safety, Legal,
-- Prepares reviews and assesses Brand Protection,
Board and Risk results of investigations Quality, Asset
Committee and corrective and Profit
updates. actions. Protection,
-- Supports the Responsibility).
Group in managing
ethical and associated
reputational
risks, including
overseeing awareness
and training across
the Group to reinforce
business ethics
and good practice.
--------------------------- ------------------------ -----------------------
STRATEGIC AND FINANCIAL RISKS
EXECUTION OF STRATEGIC PLAN
Focused execution of the strategy through our six strategic
pillars (Product, Communication, Distribution, Digital, Operational
Excellence and Inspired People) is key to sustainable shareholder
value. Success depends on the value and relevance of our brand
to luxury consumers around the world and our ability to innovate.
Failure to execute the projects that underpin these strategies
successfully could result in under delivery on the expected
growth, productivity and efficiency targets. This could have
a significant impact on the value of the business and market
confidence in our ability to deliver the strategy.
We operate in the global luxury market, where competition
is intensifying. Today's luxury customers demand creativity,
curation, excitement, innovation and personalisation. Our
ability to make the right strategic investment decisions in
response to these changes is vital to our success.
No Change
----------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
----------------------------------------- ---------------------------------------
All strategic pillars. -- Throughout FY 2018/19 we
focused on building the capabilities
to develop and deliver our strategy.
Key executive-level appointments
were made to drive the Communication
and Distribution strategies.
-- The Executive Committee is
accountable for the conduct
of these programmes and delivery
of outcomes in accordance with
our Board-approved plan.
-- A Transformation Management
Office co-ordinates delivery
of the programme, monitors the
risks associated with each of
the major programmes, and tracks
progress and benefits.
-- We have increased our focus
on measuring and demonstrating
progress in our transformation.
We have designed a set of lead
indicators to assess progress
in product, communications,
store performance and service.
-- FY 2018/19 was an important
year in advancing our Product
and Communication strategies
with significant interest generated
ahead of commercialising Riccardo
Tisci's first collections. The
product assortment and cadence
of release has been altered
with a
stronger focus on leather goods
and collaborations, and some
ranges being sold exclusively
through digital channels.
-- We continued to increase
our focus on digital and ensure
that our social channels and
their content are relevant for
the different
markets in which we operate.
-- Our Inspired People initiatives
include leading the Group-wide
engagement survey. This has
shown a marked increase in the
understanding of our strategic
goals and transformation plan
within the Group.
-- Our Operational Excellence
programme continues apace and
has now delivered cost savings
of GBP105 million since its
inception in
FY 2016/17.
-- Our IT strategy, prepared
by the Chief Information Officer
and the IT Leadership Team,
comprises a portfolio of IT
projects linked to the Group's
strategic objectives. IT projects
are managed by the IT Portfolio
Forum.
----------------------------------------- ---------------------------------------
RISK TOLERANCE
----------------------------------------- ---------------------------------------
We will pursue growth and accept
a certain level of risk to ignite
brand heat and firmly establish
our position in luxury fashion.
We approve capital investment
in strategic projects and accept
moderate to high earnings volatility
in pursuit of innovation and
profitable growth, balancing
a reasonable return on capital
for a reasonable level of commercial
risk within the approved capital
allocation framework.
-----------------------------------------
EXAMPLES OF RISKS
-----------------------------------------
-- Firmly positioning the brand
in luxury is
dependent on creating new and
innovative luxury products that
excite our global customers.
If we are unable to innovate
effectively and get these new
products into the market with
speed, our sales or margins
could be adversely affected.
-- Our development and deployment
of content
through communication channels
does not create sufficient brand
heat globally.
-- We do not achieve the required
organisational alignment and
enhance our capabilities and
culture to compete and grow
effectively and at the pace
required to deliver the targets.
-- Failure to sufficiently transform
operational
processes could undermine our
ability to
deliver the required cost savings
and
margin improvements.
-- Failure to deliver the technology
innovation
required to empower changes
in the Group's
business model and to deliver
the anticipated
benefits from key investment
strategies in
Digital, Retail and Group Operations.
----------------------------------------- ---------------------------------------
IMAGE AND REPUTATION
The Group carefully safeguards its image and reputational
assets. Unfavourable incidents, unethical behaviour or erroneous
media coverage relating to the Group's senior executives,
products, practices or supply chain operations could damage
the Group's reputation.
As our customers continue to engage with the brand through
social media, a misleading perception of the Group's values
and performance could potentially lead to a slowdown in sales.
Burberry's increasing reliance on influencers in its marketing
and on collaborations in product design exposes the Group
to increased reputational risk.
New
-------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
---------------------------------------- -------------------------------------
All strategic pillars. -- Training and monitoring of
adherence by personnel to the
requirements in the Group's
Responsible Business Principles.
-- Codified incident management
policy, monitoring of social
networks and response procedures.
-- Oversight of mitigation of
reputational issues by the Ethics
and Risk Committees.
-- The Group has established
Corporate Responsibility (CR)
standards, which aim to ensure
compliance with labour, human
rights, health and safety and
environmental standards across
our operations and extended
supply chain.
-- Supplier audits and supplier
training programmes are examples
of the actions and programmes
that have been put in place
in day-to-day operations.
-- Strengthening our approval
processes and editorial controls
to ensure all product and content
is reviewed and signed off prior
to external release.
-- Introducing additional training
to strengthen our understanding
of and sensitivity to a range
of perspectives to help us live
our values and fully embrace
diversity and inclusion.
-- Establishing employee councils
focused on diversity and inclusion.
-- Assembling an advisory board
of external experts to provide
insight and help raise Burberry's
consciousness and understanding
of social issues.
-- Increasing awareness of and
training with respect to Burberry's
Model Well--being Policy to
all people who engage with model
on Burberry's behalf, including
employees, freelancers, casting
agents, contractors and
external third parties to ensure
they adhere to the policy.
---------------------------------------- -------------------------------------
RISK TOLERANCE
---------------------------------------- -------------------------------------
Protecting the brand and its
reputation globally is at the
heart of everything we do. We
take a risk-averse approach,
adopting a strategy to avoid
or mitigate any reputational/brand
risk.
----------------------------------------
EXAMPLES OF RISKS
----------------------------------------
-- An unfavourable incident
relating to a senior executive,
erroneous media coverage or
negative discussions on social
networks could damage Burberry's
reputation.
-- A celebrity, influencer,
collaborator or model associated
with Burberry becoming involved
in a reputational incident could
potentially lead to pressure
on Burberry to distance the
brand from them and could reflect
poorly on Burberry, negatively
impacting Burberry's reputation.
-- Unfavourable or erroneous
media coverage or negative discussions
on social networks about the
Group's products, content or
practices could impact brand
reputation.
-- Unethical behaviour on the
part of individuals or entities
connected with the Group could
attract negative attention to
the brand.
-- If suppliers or partners
do not respect the Group's Responsible
Business Principles this could
reflect negatively on Burberry.
-- Failure of employees or those
acting on Burberry's behalf
to adhere to Burberry's Model
Well--being Policy could result
in reputational or legal risk.
-- Failure to understand social
issues and respect cultural
sensitivities could negatively
impact Burberry's reputation.
---------------------------------------- -------------------------------------
GLOBAL CHINESE CONSUMER SPING
Global Chinese consumer spending patterns significantly change
having an immediate adverse impact on Group sales.
Any significant change to Chinese consumer spending habits
or the economic, regulatory, social and/or political environment
in China could adversely impact the domestic consumer group's
disposable income or confidence. Such changes could also lead
to Chinese consumers scaling back on international travel,
which could impact the Group's revenue and profits outside
China.
New
--------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
------------------------------------ ------------------------------------------
All strategic pillars. -- The Group has strengthened
the leadership team across Asia
and has made continued investment
in new stores, including new
openings in China, and the refurbishment
of stores such as Kerry Centre
in China.
-- Development and execution
of China strategy, including
targeted marketing around lunar
new year.
-- Investment in inventory and
technology to support China
digital across our own platforms
and those of our third-party
partner platforms.
-- Supporting investment and
growth strategies in other global
markets to reduce Burberry's
exposure to an individual country
or group of customers.
------------------------------------ ------------------------------------------
RISK TOLERANCE
------------------------------------ ------------------------------------------
We will pursue growth and accept
a certain level of risk to ignite
brand heat with Chinese consumers
and firmly establish our position
in luxury fashion.
------------------------------------
EXAMPLES OF RISKS
------------------------------------
-- Burberry's growth from Asia
does not reach expectations
either in magnitude or timing,
especially in China (where growth
rates are highest).
-- Significant short-term slowdown
in luxury goods consumption
by Chinese consumers.
------------------------------------ ------------------------------------------
FOREIGN EXCHANGE
Volatility in foreign exchange rates could have a significant
impact on the Group's reported results. Burberry is exposed
to uncertainty through foreign exchange movements. The outcome
of the UK's withdrawal from the EU may have a major impact
on foreign exchange rates, which in turn could cause significant
change in our Group reported results.
Increased
----------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
--------------------------------------- -----------------------------------------
Volatility in foreign exchange -- Burberry seeks to hedge anticipated
rates could impact our overall foreign currency transactional
financial performance. cash flows using financial instruments.
These are mainly in Burberry's
centralised supply chain
and wholesale business. Burberry
does not hedge intra-group foreign
currency transactions at present.
-- Burberry monitors the desirability
of hedging the net assets of
non-pound sterling subsidiaries
when translated into pound sterling
for reporting purposes. We have
only entered into modest transactions
for this
purpose in the current and previous
year.
-- Burberry monitors the overall
impact of unhedged exchange
movements and provides guidance
to shareholders if exchange
rates move on a quarterly basis.
--------------------------------------- -----------------------------------------
RISK TOLERANCE
--------------------------------------- -----------------------------------------
Burberry does not seek to manage
structural foreign exchange
risk relating to its overseas
retail operations.
---------------------------------------
EXAMPLES OF RISKS
---------------------------------------
-- Burberry operates on a global
basis and earns revenues, incurs
costs and makes investments
in a number of currencies. Burberry's
financial results are reported
in pound sterling. Most reported
revenues are earned in non-pound
sterling currencies, with a
significant proportion of costs
in pound sterling. Therefore,
changes in exchange rates, which
are driven by several factors,
such as global economic trends,
the form of the UK's withdrawal
from the EU or
other developments, could impact
Burberry's revenues, margins,
profits and cash flows.
--------------------------------------- -----------------------------------------
OPERATIONAL RISKS
LOSS OF DATA OR CYBERATTACK
A cyberattack results in a system outage, impacting core operations
and/or results in a major data loss leading to reputational
damage and financial loss.
The Group's technology environment is critical to success.
A robust control environment helps decrease the risks to core
business operations and/or major data loss.
No Change
------------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
------------------------------------------ ----------------------------------------
Having a resilient technology -- Governance provided through
landscape is integral to delivering the cross-functional Cyber Security
our Operational Excellence and Steering Group with Executive
Digital strategic pillars. membership and sponsorship.
-- Continued investment in the
cybersecurity programme and
completion of independent risk
assessments to validate the
strategy
and identify capabilities required
to achieve the appropriate levels
of security.
-- Expanded cybersecurity scorecard
monitoring to Executive and
IT management through monthly
reporting.
-- Security monitoring, which
provides monitoring of the network
and computers 24/7, 365 days
a year, supported by robust
security incident response processes.
-- Creation of an Information
Security Advisory function to
embed security in new projects
and initiatives.
-- Security Training and Awareness
rolled out to employees globally
with completion monitoring.
This included completion of
multiple phishing awareness
campaigns.
-- Implementation of solutions
to detect personal and sensitive
data loss with improved control
over user access management.
-- Established process for third-party
security assessments.
-- Data Privacy Steering Committee,
a cross-functional group to
review data controls around
existing systems as well as
assess the
potential data risks (from both
a legal and reputational perspective)
associated with new IT, Marketing,
Retail and Digital initiatives
across Burberry.
-- Ongoing collaboration between
the Data Protection office,
Legal, IT and Information Security
to ensure policies are adhered
to in
respect to the appropriate collection,
security, storage, retention
and deletion of personal data.
------------------------------------------ ----------------------------------------
RISK TOLERANCE
------------------------------------------ ----------------------------------------
Protecting the brand and its
reputation globally is at the
heart of everything we do. We
take a
risk-averse approach, adopting
a strategy to
avoid or mitigate any reputational/brand
risk.
------------------------------------------
EXAMPLES OF RISKS
------------------------------------------
-- Malware results in a loss
of system control
causing business disruption
and/or major
data loss.
-- Credential compromise of
customer or
employee accounts leading to
business
disruption and/or major data
loss.
-- Accidental personal data
loss or disclosure
leading to regulatory fines.
-- Attack on www.burberry.com
causing business disruption
and/or major data loss.
-- Compromise or misconfiguration
of externally
facing assets causing business
disruption and/
or major data loss.
-- Fines due to failure to comply
with EU General Data Protection
Regulation (GDPR) and/or equivalent
applicable data protection
legislation globally.
------------------------------------------ ----------------------------------------
PEOPLE
Inability to attract, motivate, develop and retain our people
to perform to the best of their ability in order to meet our
strategic objectives.
No Change
-------------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
----------------------------------------- ------------------------------------------
Delivery of our strategy relies Leadership and Culture
on our ability to ensure our -- A new Leadership Development
people continue to be driven Programme, built around Burberry
and inspired to deliver outstanding Behaviours, is being rolled
results for the Group. This out to engage and equip leaders.
is done through fostering a The programme is run over nine
dynamic and inclusive culture months and comprises 360 feedback,
where all employees feel engaged, coaching and a
empowering and equipping our three-day event. To date, the
leaders, strengthening capabilities Executive Committee, senior
and expanding our talent plans, leadership team and 62 leaders
simplifying how we work, and have attended the three-day
driving positive change and event, with all other leaders
a more sustainable future across to be enrolled by the end of
every part of our footprint. FY 2019/20.
-- A second global employee
engagement survey was carried
out in July 2018, with results
published in September, with
87% of employees confirming
that they were proud to work
at Burberry. Leaders are held
accountable for delivering against
agreed action plans. A third
global engagement survey will
take place in July 2019.
-- Leaders were equipped with
regular strategy updates, including
talking points and exercises,
to engage their teams on the
strategic direction and build
a sense of belonging to the
inclusive culture at Burberry.
The engagement survey illustrated
a significant shift in employees'
understanding of the Group's
direction (from 68% in 2017
to 74% in 2018).
Talent and Careers
-- A new careers site has been
created and launched, including
experience maps, to engage the
workforce on the Burberry careers
proposition, in line with feedback
received through the employee
engagement survey.
-- An approach for identifying
high potentials across the organisation
has been rolled out.
-- All line managers have been
invited to attend "Career Conversations"
training, rolled out for all
employees in career development.
We have also held Global and
Regional Careers Awareness weeks.
Performance, Reward and Recognition
-- Simplified, more effective
performance management process
across the business rolled out
with a four-point performance
rating scale.
-- Continuation of embedding
Burberry Behaviours into performance
management.
-- Our Executive Committee ensures
there is a competitive total
reward offering, both financial
and non-financial, to retain
our people and to attract new
hires.
Diversity, Inclusion and Employee
Relations
-- We have developed a plan
focused on increasing understanding,
diversifying
the pipeline of talent and championing
those who help others to ensure
we create and promote a more
diverse and inclusive workforce.
-- We are in the process of
hiring a Director of Diversity
and Inclusion and a VP, Employee
Relations.
Well-being
-- 51 UK employees have now
been trained as qualified mental
health first aiders, with further
courses scheduled.
-- Further plans to define Burberry's
Well-being strategy in place.
----------------------------------------- ------------------------------------------
RISK TOLERANCE
----------------------------------------- ------------------------------------------
We recognise the value and importance
of
successfully delivering our
Inspired People strategy and
therefore have a low tolerance
for risk in this area.
-----------------------------------------
EXAMPLES OF RISKS
-----------------------------------------
-- Failure to engage or equip
our teams to
deliver our strategy, or address
key capability gaps.
-- Failure to build the right
capabilities and
behaviours in our leadership
population.
-- Loss of critical talent/knowledge/
unmanageable levels of attrition
due to ongoing transition period/change
fatigue.
-- The long-term impact of the
UK's withdrawal from the EU
on the Group's EU workforce.
----------------------------------------- ------------------------------------------
IT OPERATIONS
IT operations fail to support critical processes across the
Group including Retail, Digital and Group functions such as
Supply Chain and Finance.
No Change
-----------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
------------------------------------ ---------------------------------------
All strategic pillars. -- IT function has been further
strengthened with clear alignment
between the IT teams, the strategic
pillars, business functions
and operations.
-- Controls to maintain the
continuity of the Group's IT
systems are in place, including
business continuity and IT recovery
plans, which would be implemented
in the
event of a major failure.
-- A tested Group incident management
framework is in place to report,
escalate and close high-impact
events.
-- Programmes that will improve
IT's ability to support operations
are in place with a clear portfolio
of IT projects linked to the
Group's strategic objectives.
Delivery of these projects is
overseen by our IT Portfolio
Forum, which regularly monitors
progress.
------------------------------------ ---------------------------------------
RISK TOLERANCE
------------------------------------ ---------------------------------------
In operating our business and
managing the possible disruption
to our IT operations, we have
a low tolerance for risk.
------------------------------------
EXAMPLES OF RISKS
------------------------------------
-- Failure to provide technology
platforms that meet customer
demands and support innovation
could result in failure to deliver
the strategy and loss of revenue.
-- Failure to provide stable
and resilient technology platforms
that meet business demands could
result in failure to deliver
the strategy and negatively
impact operations due to poor
system performance and/or system
outages.
------------------------------------ ---------------------------------------
SUSTAINABILITY AND CLIMATE CHANGE
The success of our business over the long term will depend
on the social and environmental sustainability of our operations,
the resilience of our supply chain and our ability to manage
the impact of any potential climate change on our business
model and performance.
To address long-term sustainability challenges and understand
potential impacts of climate change on our business, in both
operational and financial terms, we have been working with
Forum for the Future to explore global environmental, social
and technological trends and how they could affect our business
model. This exercise has involved senior leadership from across
the business and results are now informing the development
of cross-functional action plans to help us mitigate long-term
risks and future-proof our business.
Increased
------------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
----------------------------------------- -----------------------------------------
Our commitment to being an industry -- Our Chief Supply Chain Officer
leader in responsible and sustainable is responsible for ethical trading,
luxury underpins our vision environmental sustainability
to establish ourselves firmly and community investment matters
in luxury fashion and deliver and reports on these topics
sustainable, long-term value. to the Ethics Committee, Risk
Committee and the Board.
-- Long-standing responsibility
programmes, coupled with our
2022 Responsibility goals, are
driving continuous improvements
while supporting our supply
chain partners in moving beyond
social and environmental compliance.
See more on pages 42 to 55.
-- We continuously explore more
sustainable materials and manufacturing
processes. Recent examples are
included on page 47.
-- During FY 2018/19, we completed
three scenario analysis workshops
to assess long-term environmental,
social and technological trends
that could significantly impact
our business model and operations
over the next 20 years. We explored
the uncertainties, risks and
opportunities that lie ahead,
in light of forecasted climate
change impacts to 2040, which
will inform our strategic response
to climate change.
-- We have set science based
targets to address our GHG emissions
along our entire value chain.
Our targets have been approved
by the Science Based Target
Initiative (SBTi) and are in
line with the Paris Agreement
to limit global warming to 1.5
degrees from pre-industrial
levels.
-- We are signatories of the
UNFCCC Fashion Industry Charter
for Climate Action, which aims
to reduce aggregate GHG emissions
across the fashion industry
by 30% by 2030. Representatives
of our Responsibility team
participate in the working groups
and chair one of them.
-- In September 2018, we were
the first luxury company to
announce that we were stopping
the practice of destroying any
unsaleable finished products.
We are implementing a zero-waste
mindset across our global operations,
with a focus on improving inventory
management, extending the life
cycle of our products and maximising
donation, repurposing and recycling
routes, while developing new
partnerships and solutions for
revaluing waste.
-- We are core partners of the
Ellen MacArthur Foundation's
'Make Fashion Circular' initiative,
which aims to create a new,
circular textiles economy, and
signatories of the New Plastics
Economy Global Commitment, which
aims to eradicate plastic waste
and pollution by 2025.
-- We continue to support programmes
led by The Burberry Foundation
that tackle educational inequality
in Yorkshire, foster community
cohesion in Italy, and enhance
social and economic empowerment
in Afghanistan.
-- We use the WWF water risk
assessment tool and the Aqueduct
Water Risk Atlas to understand
potential future strains on
water resources and long-term
risks in our supply chain. This
informs the roll-out of our
energy
and water reduction programme
to key supply chain partners.
-- We are a founding partner
of the Sustainable Fibre Alliance
(SFA), a UK-based NGO working
with key stakeholders in Mongolia
to improve the impacts of cashmere
production by restoring grasslands,
promoting animal
welfare and supporting a decent
living for cashmere goat herders.
----------------------------------------- -----------------------------------------
RISK TOLERANCE
----------------------------------------- -----------------------------------------
We have a low tolerance for
risk, when it comes to protecting
the human and environmental
resources we all depend on.
However, given the long-term
nature of some sustainability
risks and the level of uncertainty
associated with their occurrence
and impact, we accept that some
risks are inevitable. We therefore
focus on helping to minimise
global risks
while building resilience in
our operations
and supply chain.
-----------------------------------------
EXAMPLES OF RISKS
-----------------------------------------
-- Resource scarcity, coupled
with increasing demand, could
affect the production, availability,
quality and cost of raw materials.
-- Increased frequency of extreme
weather
events, from floods to droughts,
could cause disruption in our
supply chain and impact our
business model by changing the
sourcing of raw materials, as
well as the production and distribution
of finished goods.
-- Increased regulation and
more stringent
environmental standards could
impact our business by affecting
production costs and flexibility
of operations.
-- Our industry is sustained
by many agricultural and manufacturing
communities around the world.
Failure to support them in preserving
key skills and building more
sustainable livelihoods could
cause social, economic and
operational challenges, from
community
tensions and disruption to production
to
a reduced talent pool.
----------------------------------------- -----------------------------------------
BUSINESS INTERRUPTION
A major incident at one of the Group's main locations, at
its suppliers or affecting key products, which significantly
interrupts the business.
This could be caused by a wide range of events, including
natural catastrophe, fire, terrorism or quality-control failures.
No Change
------------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
----------------------------------------- -----------------------------------------
Our Product and Distribution -- We have policies and procedures
strategic pillars enable us designed to ensure the health
to operate effectively and efficiently, and safety of our employees
delivering Operational Excellence and to deal with major incidents,
through continuity of supply including business continuity
of compliant products and services and disaster recovery.
of the highest quality to our -- The Group continues to evolve
customers. its supply chain organisational
Ensuring our ability to continually design to develop its manufacturing
execute and operate key sites base, reducing dependence on
and factories to develop, manufacture, key sites and vendors.
distribute and sell our products -- A Group incident management
is a key strategic priority. framework is in place to ensure
that incidents are reported
and managed effectively. Across
the Group, our Incident Management
Teams managed 21 incidents in
the year. Twelve of these related
to severe weather warnings,
wild fires and natural disasters.
Two related to terrorist incidents
in cities where we have stores
or employees and we moved quickly
to ensure our customers, employees
and assets remained safe and
secure. The remainder were localised
issues linked to office, store
or system interruptions.
-- Our Group Incident Management
Team took part in training and
incident management exercises
involving large parts of the
Group, our customers and media
relations function. Our plans
as tested during the year were
found to
be effective.
-- Our product suppliers and
vendors are subject to a quality
control programme,
which includes regular site
inspections and independent
product testing.
-- Robust security arrangements
are in place across our store
network to protect people and
products in case of security
incidents.
-- Business continuity plans
are in place for our 10 main
sites including the three major
distribution centres and our
two UK factories. Business continuity
plans are being developed for
our third factory Burberry Manifattura
in Italy.
-- The Group's key IT systems
are protected to prevent and
minimise any potential interruption.
This includes resilient design
and the provision of disaster
recovery services to continue
operating within pre-agreed
times in
case of a major incident. Our
plans as tested during the year
were found to be effective.
-- Management regularly reviews
and manages business continuity
and disaster recovery risks,
recognising that these plans
cannot always ensure the uninterrupted
operation of the business, particularly
in the short term.
-- A comprehensive insurance
programme is in place to offset
the financial consequences of
insured events, including fires,
flood, natural catastrophes
and product liabilities.
----------------------------------------- -----------------------------------------
RISK TOLERANCE
----------------------------------------- -----------------------------------------
We have a low tolerance for
risk in this area, particularly
in respect of product safety
and quality.
-----------------------------------------
EXAMPLES OF RISKS
-----------------------------------------
-- Burberry operates three owned
factories and a global network
of storage and distribution
hubs. These face typical property
risks, such as
fires, floods and terrorism.
-- Burberry works with several
suppliers of luxury goods, which
would be difficult to replace
quickly. Their loss could interrupt
the delivery of core products
or a seasonal range.
-- A serious product quality
issue could
result in a product recall.
----------------------------------------- -----------------------------------------
COMPLIANCE RISKS
REGULATORY RISK AND ETHICAL/ENVIRONMENTAL STANDARDS
The Group's operations are subject to a broad spectrum of
national and regional laws and regulations in the various
jurisdictions in which we operate.
These include product safety, trademarks, competition, data,
corporate governance, employment, tax and employee and customer
health and safety. Changes to laws and regulations, or a major
compliance breach, could have a material impact on the business.
No Change
---------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
---------------------------------------- ---------------------------------------
Compliance with applicable laws -- The Group monitors and seeks
and regulations and behaving to continuously improve processes
in accordance with our values to gain assurance that its licensees,
as a business underlie all our suppliers, franchisees, distributors
strategic pillars. and agents comply with the Group's
contractual terms and conditions,
its ethical and business policies,
and relevant legislation.
-- Specialist teams at corporate
and regional level, supported
by third--party specialists
where required, are responsible
for ensuring the Group's compliance
with applicable laws and regulations
and that employees are aware
of the laws and regulations
relevant to their roles.
-- Assurance processes are in
place to monitor compliance
in a number of key risk areas,
with results being reported
to our Risk Committee and Audit
Committee.
-- We have an established framework
of policies that aim to drive
best practice across our direct
and indirect operations, including
our Responsible Business Principles
and Global Environmental Policy.
Policies available at
www.burberryplc.com, are owned
by senior leadership and are
issued to all supply chain partners.
Their implementation is monitored
on a regular basis.
-- We have established a Data
Privacy Steering Committee to
oversee compliance with applicable
data legislation.
-- International tax reform
is a key focus of attention
with significant developments
reported to the Audit Committee.
-- Roll out of annual mandatory
training to all employees and
to targeted functions to ensure
awareness and compliance with
our policies governing anti-bribery
and anti-corruption (ABAC),
Market Abuse Regulations, annual
conflict declarations, criminal
finances, anti-money laundering
and privacy.
-- Our culture and policies
encourage employees to speak
up and report any issues
without fear of retribution.
A global confidential employee
helpline is in place in
almost all countries where we
have retail and corporate locations,
and where it is legally permitted.
All calls and emails are logged
and independently reviewed and
followed up. During the year
136 cases were received and
the results and themes are reviewed
by the Ethics Committee. No
significant issues were identified
from these cases during the
year.
-- In accordance with our ABAC
policy, annual training is required
to be performed. This year the
annual e-learning module was
rolled out to all corporate
staff and manufacturing and
retail employees of manager
level and above, a total of
3,345 employees. The training
reached a 96% completion rate.
Any incidents or
potential areas of concern are
investigated by highly experienced
investigators in our Asset Profit
and Protection team and ABAC
risks are covered as part of
the scope of Internal Audit
reviews. During the year there
were no ABAC-related issues.
---------------------------------------- ---------------------------------------
RISK TOLERANCE
---------------------------------------- ---------------------------------------
In complying with laws and regulations,
including customer and employee
safety, and bribery and corruption,
we have a low tolerance for
risk.
----------------------------------------
EXAMPLES OF RISKS
----------------------------------------
-- Regulatory non-compliance.
-- Failure by the Group or associated
third parties to act in an ethical
manner consistent with our code
of conduct and our Responsibility
Agenda, for example with regard
to model well-being.
-- Non-compliance with labour,
human rights and environmental
standards across our own
operations and extended supply
chain would go against our Responsible
Business Principles
and could result in financial
penalties, disruption in production
and reputational damage to our
business.
-- Failure to comply with GDPR
and/or equivalent applicable
data protection legislation
globally.
-- Tax is a complex area where
laws and their interpretations
are changing regularly. Non-compliance
by Burberry and its associated
third parties in this area could
result in unexpected tax and
financial loss.
---------------------------------------- ---------------------------------------
INTELLECTUAL PROPERTY AND BRAND PROTECTION
Sustained breaches of Burberry's intellectual property (IP)
rights or allegations of infringement by Burberry.
Counterfeiting, copyright, trademark and design infringement
in the marketplace could reduce the demand for genuine Burberry
merchandise.
Failure to implement appropriate brand protection controls
in connection with our commitment to stop destroying unsaleable
finished products could negatively impact the integrity and
the luxury positioning of the brand.
No Change
---------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
---------------------------------------- ---------------------------------------
Protecting the integrity of -- The Group's global Brand
the brand, safeguarding and Protection team is responsible
elevating its luxury position, for brand protection efforts
complying with applicable laws globally, including in the digital
and regulations and doing the environment. Where infringements
right thing underlie all our are identified these are addressed
strategic pillars. through a mixture of criminal
and
civil legal action and negotiated
settlements.
-- IP rights are driven largely
by national laws, which afford
varying degrees of protection
and enforcement priorities depending
on the country.
-- Trademark, copyright and
design registrations globally
across all appropriate categories.
-- The Brand Protection team
partners closely with the design
and merchandising teams to ensure
that our products do not infringe
the rights of third parties
and to ensure that we have adequate
protections in place prior to
market entry.
-- Exploring new and emerging
threats and ways to combat threats.
-- Inspiring Burberry associates
and partners to engage with
us in protecting our brand.
-- Partnering with enforcement
agencies and our digital partners
to minimise the visibility of
counterfeit and parallel trade
products both online and offline.
-- Disrupting the flow of counterfeit
products by enforcing at source
level.
-- Implementation of brand protection
controls to safeguard the brand
in connection with our commitment
to stop destroying unsaleable
finished products.
---------------------------------------- ---------------------------------------
RISK TOLERANCE
---------------------------------------- ---------------------------------------
We have a low tolerance for
risk in protecting the integrity
of the brand, asserting our
IP rights while ensuring due
respect is given to the IP rights
of others.
----------------------------------------
EXAMPLES OF RISKS
----------------------------------------
-- Counterfeiting, parallel
trade, copyright, trademark
and design infringement in the
marketplace can reduce the demand
for genuine Burberry merchandise
and impact revenues.
-- Unauthorised use of trademarks
and other IP, as well as the
unauthorised sale of Burberry
products and distribution of
counterfeit products, damages
Burberry's brand image
and profits.
-- Increased newness and shorter
lead times make it more challenging
to prevent infringements and
counterfeiting of
our brand.
-- Allegations from third parties
of IP infringement by Burberry
could negatively impact Burberry's
reputation, result in claims
and financial loss through withdrawing
infringing products.
-- Distribution outside of our
authorised network could negatively
impact the demand for Burberry
products and negatively impact
our luxury reputation.
---------------------------------------- ---------------------------------------
EXTERNAL RISKS
MACRO-ECONOMIC AND POLITICAL INSTABILITY
The Group operates in a wide range of markets and is exposed
to changing economic, regulatory, social and political developments
that may impact consumer demand, disrupt operations and impact
profitability. Adverse macro-economic conditions or country-specific
changes to the operating or regulatory environment or civil
unrest may impact the spending habits of key consumer groups
and cause increased operational costs.
No Change
-----------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
---------------------------------------------- -----------------------------------
Volatility in the external environment -- Our global reach helps to
could impact our overall financial mitigate reliance on particular
performance and operations. consumer groups. In addition,
our brand has wide appeal across
multiple consumer segments,
including a broad set of ages
and preferences.
---------------------------------------------- -----------------------------------
RISK TOLERANCE
---------------------------------------------- -----------------------------------
We have a low tolerance for
risk in this area but recognise
external factors are more difficult
to mitigate as they are often
outside of our control.
----------------------------------------------
EXAMPLES OF RISKS
----------------------------------------------
-- The strategy does not address
how the changes created by macro-economic
trends and uncertainty in the
outlook for the luxury sector
globally or within significant
consumer groups could impact
our performance.
---------------------------------------------- -----------------------------------
UK'S WITHDRAWAL FROM THE EU
Various scenarios could impact the Group's financial position,
supply chain and people.
Increased
-----------------------------------------------------------------------------------
LINK TO STRATEGY ACTIONS TAKEN BY MANAGEMENT
--------------------------------------- ------------------------------------------
Volatility caused by the UK's -- Our steering committee continually
withdrawal from the EU may impact monitors the evolving impact
our overall financial performance of the UK's withdrawal from
and our ambitions under supply the EU and oversees our response.
chain operational excellence. -- We have prepared for a no-deal
scenario across all business
activities including supply
chain, trade compliance, intellectual
property and people.
-- Any transitional arrangement
potentially offers some temporary
relief for longer-term mitigation
planning and implementation.
-- We engage with UK government
departments and other external
stakeholders to ensure they
are fully informed of our circumstances.
--------------------------------------- ------------------------------------------
RISK TOLERANCE
--------------------------------------- ------------------------------------------
We have a low tolerance for
risk caused by the UK's withdrawal
from the EU, however, there
remains uncertainty about the
long-term impact.
---------------------------------------
EXAMPLES OF RISKS
---------------------------------------
-- Additional customs duty from
exiting the EU single market
and the cessation of the UK's
access to the EU's free trade
agreements.
-- Disruption to business operations.
-- Impact on some current business
road maps.
-- Extended supply chain lead
times could increase inventory
levels.
-- Uncertainty over the rights
of EU nationals has increased
the risk of being unable to
recruit and retain talent.
-- Exchange rate volatility
impacts Group revenues, margins,
profits and cash flow.
--------------------------------------- ------------------------------------------
Gemma Parsons
Company Secretary
Burberry Group plc
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
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