Operational risks

Operational risks primarily comprise establishments in new markets, purchasing in Asia, IT systems, competition, logistics, strikes, key employees, social responsibility, product range and shrinkage.

RISK

DESCRIPTION

RISK MANAGEMENT

EXPANSION

Clas Ohlson is expanding its operations and brand across several countries. The risk is that the brand will not have the expected impact outside the Nordic region and investments will not generate the intended results. Expansion through the franchise concept generates risks that are primarily connected to the Clas Ohlson brand and concept.

Clas Ohlson conducts detailed market assessments in each individual case of establishment and capitalises on the experiences from previous establishments. Franchise partners subscribe to Clas Ohlson’s Code of Conduct and commit themselves to conducting business in a business ethical manner with respect for human rights, working conditions, and taking into account the environment. Clas Ohlson checks compliance with regular audits.

PURCHASING

Clas Ohlson currently purchases about 40 per cent of the company’s products in Asia, mostly from China. The proportion of purchasing from Asia will increase further through the Clas Ohlson’s own purchasing company. This will boost the company’s competitiveness in the ongoing expansion process. There is a risk of bribery and corruption in the procurement process, and suppliers in low-wage countries increase the risk of deficiencies in working conditions and respect for human rights. Increased single-country exposure entails greater risks (political risk, transport risk, currency risk and so forth).

Clas Ohlson’s Code of Conduct and Ethical guidelines applies to all our suppliers and contracts. Through its own audit team in China, we follow up to the requirements of our Code of Conduct. From 2017 Clas Ohlson participate with SEDEX to further increase transparency on responsible purchasing. Clas Ohlson is continuously working to find new markets for purchases, both in Europe and Asia.

IT-SYSTEMS

Clas Ohlson’s operations are highly dependent on IT support. As a result, it is essential that IT systems provide effective support for the company’s day-to-day operations and maintain a high level of reliability. It is also important to ensure efficiency and provide support in decision-making processes.

Implementation of a new IT system is ongoing. Clas Ohlson has chosen Microsoft Dynamics AX to satisfy future business support software needs. Clas Ohlson has a policy for IT security. There are standardised processes for the implementation of new systems, changing existing systems and daily operations.

COMPETITION

A clear trend in the European retail market is that major nationwide chains are growing, usually at the expense of smaller, individual specialist retailers. The major chains and retailers are establishing operations in several countries through proprietary stores and acquisitions. As a result, market players have become fewer and larger. During recent years, competition intensified due to more stores and shopping centres as well as more players in the e-commerce, particularly in the Nordic region.

Clas Ohlson works continuously to develop its offering, increase accessibility and strengthen the customer experience. Furthermore, the Group works continuously to develop its concept, store format and omni-channel.

LOGISTICS

Clas Ohlson’s distribution centre in Insjön, Sweden, is the hub of the Group’s entire logistics chain. From here, goods are distributed to all stores and to mail order/Internet customers. In recent years, investments have been made in the distribution centre to further optimise the company’s logistics. Collecting the logistics in one location carries certain risks, for example, communication and infrastructure disruptions, fire or strikes.

Clas Ohlson works continuously with maintenance and inspection of systems, fire protection and security systems, etc. The Group also works continuously with inspection of the distribution chain to ensure efficiency.

CO-WORKERS

Clas Ohlson needs motivated and skilled co-workers in order to achieve objectives and strategies. The geographic location of the operation at Insjön could result in difficulties in recruiting employees with the right expertise. Our expansion also places great demands on our recruitment, training and internal mobility

Neco-workers take part in our introductory program to ensure understanding of Clas Ohlson’s values. Salaries and other conditions are adapted to the market. Clas Ohlson also has variable remuneration based on performance. The Group strives for good relationships with co-workers as well as trade unions. The Group applies flexible working conditions and internal career paths to attract and retain key personnel. Employee surveys are conducted every second year and are actively followed up. We actively strive for greater diversity in our recruitment process.

SUSTAINABILITY RISKS

The company’s stakeholders are placing increasingly higher demands on the company’s social responsibility. Clas Ohlson works actively on sustainability issues that are integrated into the operation and have high priority. Should the company fall short in its sustainability work, there is a risk of negative impact on sales and market shares.

Based on our essentiality analysis, Clas Ohlson has integrated 8 priority sustainability areas linked to the company’s strategies, processes and governance. Based on a value chain perspective, we can understand our negative and positive impact and manage them effectively. Clas Ohlson has signed the UN Global Compact’s 10 principles on anti-corruption, working conditions, human rights and environment. The company’s policies reflect these commitments.

PRODUCT RANGE AND COMMUNICATION

The company’s most important task is to offer customers a broad and attractive product range at great value. If Clas Ohlson were to misjudge new trends in both products and communication, this could entail lower growth and profitability

The Group’s product range committee has overall responsibility for the design of the product range. In addition, Clas Ohlson works on detailed market and competitor assessments in order to have an attractive product range. Clas Ohlson continuously work to ensure a strong and inspiring store and onlineconcept, right pricing and excellent service. The Group has a commercial committee that handles Clas Ohlson’s marketing strategies.

SHRINKAGE

Clas Ohlson is exposed to shrinkage on a daily basis, including for example shoplifting.

The Group implements long-term preventive measures to reduce shrinkage, through such activities as training programs and technical equipment. In addition, continuous follow-ups, evaluation and adaptation of the security efforts are performed.

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