Material risks and opportunities

Over the last two years, we have fundamentally improved the rigour with which the universe of relevant risks is being assessed. As a result, the risk register is a comprehensive and well-considered view of the risks the group is likely to face. We thoroughly interrogate the various mitigating strategies to ensure a proactive response to the material risks, and we have enhanced the monitoring of response plans to ensure their effectiveness.

The Tiger Brands’ board has ultimate responsibility for overseeing the group’s risk management processes. The board is assisted by the risk and sustainability committee who are responsible for ensuring that the risk management process complies with relevant standards and governance requirements. Senior management in each division and business unit is responsible for managing risks in their respective areas. Oversight of risk management at divisional level rests with the relevant executive committees. Divisional and business unit risk registers are updated quarterly; the risk and sustainability committee meets three times a year.

Risk appetite and tolerance

Risk appetite refers to the level of risk that Tiger Brands’ management is prepared to absorb before mitigating actions are implemented; risk tolerance refers to the company’s strategic capacity to accept or absorb the risk.

The risk and sustainability committee determines the risk appetite, tolerance and velocity (the time taken to feel the impact of a risk after it materialises) to the board. The board reviews and approves this annually, ensuring that the company effectively identifies, manages and reports on risk across all operations and all territories. The underlying reporting structure starts at site level and rolls up into the relevant business unit and division, culminating in risk reporting at a group level.

Each risk is evaluated in terms of its likelihood and impact, both on an inherent (actual impact) and residual (after mitigating action) basis. The group risk profile is reviewed quarterly and is continually revised after considering changes to the local and regional macro-economic environment, recent political and legislative developments, socio-economic challenges and technological advancements. Through our combined assurance model, the risk and sustainability committee evaluates and approves the level of assurance provided for all group risks.

Our top 10 risks

The following heat maps reflect the top 10 inherent and residual risks for Tiger Brands in the 2020 financial year; these are the risks identified as having the most material implications for Tiger Brands and its employees.

Inherent risk map   Residual risk map
 
Albany route-to-market   Occupational health and safety
Negative impact of Covid-19   Information and cyber security
Business continuity vulnerabilities   Data and information risk
Operating environment   Attract and retain critical skills
Food safety and product quality   Intensifying competition

The following table briefly reviews the implications, mitigation measures and the year-on-year trend in the risk rating, for each of the top 10 risks.

Material risks     Implications for value     Mitigating actions  
  1.

Albany route-to-market

Risk trend  
2019 ranking (2)
   

Increasing levels of violent crime against drivers in the bakery route-to-market can result in:

  • employee and service provider loss of life
  • distribution disruptions
  • reputational and brand damage
  • potential loss of market share.
   
  • All delivery routes are continually risk assessed, and tailored response measures developed
  • Security assessment reports have been compiled for all facilities to address security-related improvement opportunities
  • A limited number of security service providers have been appointed to service the bakeries. This will promote compliance to the relevant legislation, monitoring and management of key performance indicators per bakery while ensuring overall cost efficiency
  • Exploring technological solutions for more effective security provision at a reduced cost
  • Exploring and piloting digital payment systems.
 
  2.

Negative impact of Covid-19

Risk trend  
2019 ranking (n/a)
   

The high rate of Covid-19 infections and the response measures implemented by government and business, increased market uncertainty and challenged risk management through the following:

  • economic shutdown and reduced growth
  • production setbacks and declining stock levels
  • increased operational costs and revenue loss
  • employee unease, absenteeism, job loss and loss of life
  • declines in customer experience and brand reputation.
   
  • An executive committee Covid-19 task team was set-up to manage our response across customers, communities, employees and operations
  • Measures have been implemented to align with government, limit travel, accommodate sick leave, distribute and digitise work arrangements, prioritise manufacturing of critical products, bolster factory and staff hygiene, and support delivery of food to community beneficiaries
  • In ensuring the ongoing availability of essential food items throughout the lockdown alert levels, our approach included daily meetings, running scenarios and collaborating across the value chain to ensure minimal disruptions, meet demand and continue to support national food security.
 
  3.

Business continuity vulnerabilities

Risk trend  
2019 ranking (6)
   

Disruption at our facilities – for example, following a significant technical breakdown, floods or fire, political or labour unrest, and/or interruption of IT services, energy or water supply – can lead to:

  • interruptions in production, resulting in lost sales, and reduced market share and reputation
  • damage to plant and equipment
  • increased production costs.
   
  • A business continuity steering committee has been established and consists of a multi-disciplinary team including IT, Supply Chain, HR, Finance, Corporate Affairs, Internal Audit and Group Risk. The steering committee is in the process of finalising a roadmap which encompasses specific business continuity training as well as consideration of best practice standards such as the ISO 22301 as well as the evolving practices and standards released as a result of the Covid-19 pandemic. Business continuity plans are in place for all high-priority packaging and raw materials across the business; a formal management process for the group’s manufacturing facilities is in place. This includes IT business continuity and annual technical testing of the IT disaster recovery plans
  • A network upgrade project is currently underway to implement secondary network links at all Tiger Brands’ sites. This will ensure that there is no disruption to site connectivity when the primary network connection is lost
  • Annual external risk, control and environmental audits inform improved business-continuity planning and disaster-recovery processes
  • Appropriate insurance cover is reviewed annually, and disaster-recovery plans are in place.
 
  4.

Operating environment

Risk trend  
2019 ranking (1)
   
  • Weakened consumer demand off the back of lower economic growth negatively impacts volumes, and has heightened the consumer focus on shopping on promotion, negatively impacting profitability
  • The rising cost of utilities, labour, general input costs and regulatory requirements, is increasing the cost base at a higher rate than inflation, weighing on margins.
   
  • Driving growth through customer strategies focused on winning at the point of purchase and building on the strength of our existing brands
  • Creation of a health and nutrition strategy
  • Being efficient by unlocking costs and cash through incremental supply chain savings and driving continuous improvement efficiencies
  • A people strategy focused on talent, leadership and creating a great place to work
  • A sustainability strategy is aimed at health and nutrition, enhanced livelihoods and environmental stewardship.
 
  5.

Food safety and product quality

Risk trend  
2019 ranking (3)
   

Challenges with food safety and product quality can have significant implications in terms of:

  • loss of life
  • reputational and brand damage
  • loss of market share
  • disruptions to production
  • expensive product recall
  • potential litigation.
   
  • Enhanced good manufacturing practice (GMP) standards and food safety system certification standard (FSSC 22000) implemented across the group, supported by standardised quality self-assessments for all our manufacturing sites, training of quality teams, and a robust supplier quality management process
  • Manufacturing, group legal and regulatory compliance functions collaborate to ensure products comply with regulatory standards and meet consumer preferences
  • Entrenched partnership with Stellenbosch University to remain at the forefront of scientific trends, through the Centre for Food Safety
  • Adoption of European Hygienic Engineering and Design Guidelines (EHEDG) in terms of manufacturing hygiene standards.
 
  6.

Occupational health and safety

Risk trend  
2019 ranking (4)
   

Occupational health and safety incidents can result in:

  • loss of life of employees and service providers
  • reputational and brand damage
  • regulatory non-compliance costs
  • loss of market share.
   
  • Robust safety programme implemented across the group, supported by self-audits, annual independent audits, and behavioural safety and awareness initiatives, reinforced with disciplinary action
  • Safety improvement targets signed off annually for each division and manufacturing site
  • Standardised occupational health and hygiene programme and fitness to work standards have been operationalised at all manufacturing sites.
 
  7.

Information and cyber security

Risk trend  
2019 ranking (5)
   

Increasing interconnectivity, globalisation and commercialisation of cybercrime are driving greater frequency and severity of cyber incidents, including data breaches.

  • This can compromise the confidentiality, integrity and availability of information and technology resources, leading to disclosure of commercially sensitive information, intellectual property and/or disruption to operations
  • In addition to non-compliance risks, the release of any personal information also has negative reputational and brand implications.
   
  • Various external security specialist providers are utilised to ensure that we enhance our security posture
  • Penetration testing is part of the standard project lifecycle approach
  • The new Cyber Security Bill has been drafted and is out for public comment. The conditions and impact of the Bill need to be assessed against our current processes and controls
  • IT policies have been established to support the group’s approach to managing information security
  • The cybersecurity landscape is monitored with a view to implementing the latest security practices and revising existing controls to safeguard the group against cybercrime and maintaining cyber resilience
  • Operational Technology (OT) Security Assessment will be performed on our top five manufacturing facilities in FY21
  • Finalisation of cyber insurance, inclusive of our OT environment
  • Coverage of our vulnerability management programme (i.e. security threat management programme) has been extended to the entire Tiger domain, inclusive of the site environments across the country
  • Appropriate measures are in place to safeguard against threats to information and cyber security that are a consequence of remote working arrangements. These include firewall monitoring that includes the virtual private network, endpoint and full disk encryption, email exchange management by service provider Mimecast and network vulnerability scans.
 
  8.

Data and information risk

Risk trend  
2019 ranking (7)
   
  • Suboptimal information management could lead to inconsistent data quality, compromising decisions and contributing to privacy/identity management and information security risks
  • Increased regulation is placing additional demand on system capabilities and IT teams and presents implications in terms of compliance and potential non-compliance costs.
   

The formation of a Tiger-wide Data Governance Council (DGC) has been approved.

  • As part of the PoPIA compliance programme, a privacy compliance governance is being implemented through the Tiger Information Office to adequately manage and safeguard the processing of personal information across Tiger
  • The DGC will coordinate and streamline data risk management and governance across Tiger and will report to the risk and sustainability committee of the board.
 
  9.

Attract and retain critical skills

Risk trend  
2019 ranking (8)
   
  • A loss of critical skills can negatively impact our ability to deliver our strategy and maintain business viability and profitability
  • An inability to ensure sufficient level of diversity in the executive team and across the employee base also undermines our effectiveness and has reputational implications.
   

Comprehensive people strategy is in place to attract, develop, reward and retain talent, with provision for:

  • Performance management and incentive structures aligning performance to group objectives
  • Proactive talent mapping and engagement plans by role and function to drive talent acquisition
  • Skills development and leadership initiatives
  • Robust induction and onboarding programme
  • Initiatives have been developed to improve employee engagement and experience across Tiger Brands
  • Implementation of the engagement/employee experience survey will enable the organisation to track, report and close gaps on culture transformation and employee engagement.
 
  10.

Intensifying competition

Risk trend  
2019 ranking (16)
   

Intensifying competition poses an increasing challenge to our market performance, threatening:

  • Loss of consumers and market share
  • Retailer dominance and customers becoming competitors
  • Inability to compete in high value categories
  • Erosion of brand equity and profit margins.
   
  • Review of business, with a fit-for-future restructure and updated strategic growth drivers
  • Key account forums and joint business plans established with key customers
  • Enhanced research and analytics, with monitoring of customer and brand strategies and performance
  • Increased investment in, and enhanced execution of R&D, innovation and marketing
  • Development of private label and value-brand strategies
  • Drive for talent and high-performance culture.