RISK GOVERNANCE

The board governs risk in a manner that supports Tiger Brands in setting and achieving its strategic objectives. While the board delegates oversight responsibilities to the audit committee and to the risk and sustainability committee, it remains accountable for the governance of risk and for ensuring that Tiger Brands’ combined assurance model enables an effective control environment. This is done in a manner consistent with generally accepted frameworks and good practice, including King IV^TM and ISO 31000:2018.

Implementation responsibility and culture

Whereas the board and its committees execute oversight duties, the executive committee is tasked with the design, implementation, and operation of risk and combined assurance arrangements. This includes the development and maintenance of an appropriate risk awareness culture to establish an enabling environment within which these arrangements can be deployed. It is within this context that Tiger Brands gives life to the philosophy of continuous improvement, tempered by the need to remain fit-for-purpose.

Risk profiling

Tiger Brands adopts a bi-directional comprehensive approach to identifying risks, which includes a top-down as well as bottom-up analysis. The top-down approach starts with a group view of Tiger Brands allowing for the big picture to develop. Consideration is given to the operating environment, the business model, and the associated objectives and strategies defined by the group. Similarly, business units are required to analyse, among others, their operating environments, business models, products, and strategies to identify risks specific to them, which are reported to the group level for oversight. Common business unit risks may then be identified and may potentially be managed at the group level.

Furthermore, Tiger Brands recognises that effective risk management may generate additional benefit beyond the protection that simple risk remediation affords, eg, enhancing a competitive advantage, or perhaps increasing reputational standing with stakeholders. As such, cost-benefit assessments on risk responses and remediation strategies include opportunities as part of the benefit assessment, while costs associated with remediation actions are included in the cost side of the assessment. This allows Tiger Brands to select risk responses and remediation actions that are context appropriate and rooted in a comprehensive and balanced approach to risk management.

The group executive committee oversees the identification of group risks and responses. Business unit management oversees and manages business unit risks and reports the most material risks to the group executive committee through the operational risk management committee. A consolidated Tiger Brands risk profile is then compiled and reported to the board risk and sustainability committee before finally being submitted to the board of directors.

In addition to the analysis and remediation of top risks, we maintain a combined assurance programme that aims to provide stakeholders with comfort that the control measures deployed to shape risks are adequate and effective.

Risk appetite and tolerance

General risk appetite and tolerance ranges are defined by group executive management and annually approved by the board. These ranges are reflected in the heat maps and provide general guidance regarding expected responses to mapped risks. In addition, for each risk group executive management determines a targeted residual risk level. These targets are set against the backdrop of the approved risk appetite and tolerance ranges and more specifically define the nature and extent of each risk’s control improvement plan. This is subject to oversight as per the Tiger Brands’ risk management policy, together with the risk assessment, its analysis, and its current controls.

While the group will accept risk to achieve its ambitions of being a market-leading, international, diversified FMCG company, there is a strong focus and aversion to risk in the areas of food safety, the delivery of quality products and loss of life.

Oversight

The design, implementation and operation of the risk and combined assurance arrangements are subject to quarterly oversight by the operational risk management committee, the risk and sustainability committee, and the board of directors. The first is a sub-committee of the group executive committee and includes group executive management, business unit management and corporate functional leads, while the other is a sub-committee of the board. Notwithstanding this oversight programme, the management teams of the various business units and group operations monitor and manage their risk profiles continuously. This active and continuous process of engagement with risks provides the basis for reporting into the quarterly risk oversight programme.

OUR TOP RISKS

Our material risks are those that exceed our residual tolerance level and are thus identified as having the most material implications for Tiger Brands and its employees.

The heat map represents the inherent risk profile of our material risks. Without adequate remediation the risks are potentially a threat to the group as a going concern and thus merit management attention.

INHERENT RISK MAP		RESIDUAL RISK MAP

Following management’s intervention through various remediation programmes, some of which are still being implemented, the material risk profile shows a marked improvement, albeit still in need of further remediation.

The positioning of Albany route-to-market and cost competitiveness do not appear to improve on the back of implemented control processes,reflecting the company’s cautious stance on these risks. Although we are confident in our response strategies, we are monitoring the effectiveness of control processes for clear evidence of improvement. Once evidence is apparent, the residual risk ratings for these risks will be reassessed. Similarly, market responsiveness shows a marginal improvement from inherent to residual level because of the dynamic and often uncontrollable nature of the market, together with the need to see tangible evidence of control effectiveness before reducing risk levels.

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

			1. ALBANY ROUTE-TO-MARKET Attacks on Albany delivery vehicles carrying stock and cash Risk trend 2021 Ranking (1)			Context and value impact Tiger Brands’ aversion to risks that threaten employee health and safety has resulted in this risk remaining our top risk, with incidents this year – including robbery, assault, and hijackings – remaining unacceptably high.			Mitigating actions Our measures aim to reduce the occurrence of violent crime against drivers and include collaboration with law enforcement agencies and partners. We have also increased response effectiveness by implementing defensive driver and first aid training and using technology solutions to support rapid alert and response action. We have piloted a cashless solution and are assessing the viability of a broader roll-out of this solution.
			2.1 MARKET RESPONSIVENESS Inadequate response to changes in market dynamics (customer and consumer) and competition Risk trend 2021 Ranking (2)			Context and value impact Meeting and exceeding customer and consumer needs and wants is the lifeblood of our business. With consumer spending remaining depressed and competition high, this challenge remains material and threatens our market share, brand equity, profitability and distribution channels.			Mitigating actions Our mitigations revolve around the following key themes: Collaborating with customers and researchers to better understand market needs and wants, while leveraging insights garnered by our own consumer insights division Ensuring that product and customer mix are optimal Maximising service levels to ensure product availability at location.
			2.2 COST COMPETITIVENESS Decline in competitiveness due to higher input costs across the entire value chain, with specific reference to procurement, manufacturing, packaging and logistics, and corporate costs Risk trend New			Context and value impact Our supply chain remains a central component of our ability to remain cost competitive. Its capacity and associated costs were adversely impacted by the resurgence of economic activity as the threat of Covid-19 subsided. Local electricity disruptions have exacerbated the need for alternative energy sources (such as diesel to run generators) that are often more expensive and not in line with Tiger Brands’ environmental aspirations.			Mitigating actions Prioritising the availability of stock to ensure consistent service levels Maximising the efficiency of the logistics value chain Manufacturing optimisation to reduce material usage variances and improve overall plant efficiency Enhanced forecasting, renegotiating creditor terms and conditions and careful oversight
			3.1 FOOD SAFETY Harm to the consumer caused either by foodborne illnesses (food products), or undesired skin/body reactions (personal and home care products) Risk trend 2021 No movement (Joint 3)			Context and value impact Tiger Brands elected to split food safety and product quality risks to better manage the underlying drivers. Food products have inherent capacity to lead to health concerns for consumers and therefore remain at the forefront of management’s attention given the company’s risk averse stance when it comes to public health and safety.			Mitigating actions The nature of food safety demands that we approach it in a scientific and systematic manner to ensure consistent and repeatable results. To this end we have implemented: Quality risk assessment and management protocols (including incident management processes) Rigorous accreditations processes Industry hygiene and quality standards and certifications Positive release protocols Operational monitoring and reporting processes Extensive and ongoing employee training programmes. A key improvement initiative starting in FY23 is the roll-out of quality IT systems that will be phased in over three years.
			3.2 CYBER SECURITY Any risk of financial loss, disruption or damage to Tiger Brands’ reputation due to failures of its information technology systems because of large-scale cyber security attacks Risk trend 2021 No movement (Joint 3)			Context and value impact Increasing interconnectivity, globalisation and “commercialisation” of cyber crime 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, lead 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.			Mitigating actions Our five-year cyber security roadmap is mitigating key risks identified through independent cyber assessments. Various core capabilities have been purchased and are being implemented Strong skill sets added to the team through vendor partnerships to ensure we are ready to respond to any cyber incident We are building capacity to ensure monthly reporting on our cyber security status; this is critical in ensuring continuous improvement and visibility in ensuring that identified gaps are addressed.
			3.3 OCCUPATIONAL HEALTH AND SAFETY (OHS) Failing to provide a safe working environment for our employees, contractors, and visitors Risk trend New			Context and value impact Our direct involvement with the manufacturing of products creates an inherently dangerous environment. This risk was elevated on the back of lagging indicators, such as manufacturing lost-time injuries coming under pressure during the year. We are encouraged, however, by the improvement seen in our leading indicators, which include an increase in the number of safety risks and observations recorded as well as an improvement of the Safety, Security, Health and Environment (SSHE) pillar score at the Manufacturing Competitiveness Enhancement Programme (MCEP) sites. This underlying progress suggests that benefits emanating from our safety initiatives are coming to fruition.			Mitigating actions Tiger Brands’ comprehensive approach to OHS management aims to prevent incidents of injury and provide quality incident response capability. This is done through the operation of a group-wide safety programme, as well as ongoing assurance activities to validate the effectiveness of the control processes. Key measures include: The Tiger Brands’ OHS strategic framework MCEP SSHE pillar assessments and remediation actions Defined reporting and investigation protocols Health centres First responder training Medical emergency and business continuity plans.
			3.4 INDUSTRIAL ACTION Deteriorating labour relations and associated disruption of our value chain Risk trend 2021 Ranking (new) Increase in the movement driven by wage negotiation cycles, as well as below inflation wage increases relative to the cost of living			Context and value impact Within a context of labour-dependent manufacturing that is unionised the threat of industrial action remains prevalent, especially during wage negotiations. Failure to contain industrial action may lead to poor service levels, erosion of profitability and market share.			Mitigating actions Embedding an employee relations strategy that is geared towards creating labour stability and a great place to work Execution of employee engagement and shop floor development programmes Continuous review of our remuneration policies and practices to ensure competitiveness and relevance Business continuity plan
			4 THIRD-PARTY SUPPLIER RISK Failing to adequately manage risks associated with the following outsourced activities: manufacturing, and in-bound supply Risk trend 2021 Ranking (new)			Context and value impact Tiger Brands collaborates with various supply chain partners to deliver on its strategies. These suppliers provide raw materials, ingredients and packaging and in some instances, finished goods, which are subject to quality control processes outside of Tiger Brands’ protocols. Failure to ensure adherence to Tiger Brands’ specifications and standards may erode consumer satisfaction, profitability and brand equity.			Mitigating actions Relationships with these suppliers and manufacturers are carefully contracted to maintain Tiger Brands’ quality requirements and allow for performance management. Beyond contractual compliance, Tiger Brands also implements physical inspections upon delivery and, where appropriate, we obtain Certificates of Analysis. Finally, Supply Quality Assurance (SQA) audit programmes are rolled out to provide necessary assurances.

Retired risks

The impact of Covid-19 was retired from the risk profile this year. The South African government's move to an unrestricted social and commercial environment on the back of a marked decrease in severe cases of Covid-19 follows the broader international trend. On the back of this, the expectation of a return to lockdown conditions experienced during the last two years is lower and as a result this risk has been retired as a standalone risk. This does not imply, however, that it no longer represents a threat to Tiger Brands. The group remains vigilant to its effects and to the possibility that it may again develop into a material risk and has thus included pandemics as root causes for the materialisation of other risks. Our business continuity programme provides the foundation of our response to events of this nature.

Emerging risks

The company has identified several emerging risks, including climate change, the reliable supply of administered services such as water and electricity, and fuel shortages.

The physical and transition risks of climate change are particularly relevant to Tiger Brands’ operations given its strong agricultural association. The risk retains its emerging status due to its size and complexity, making it difficult to describe and manage as a single risk. We continue to monitor climate change from a bottom-up and top-down perspective, identifying specific themes as their relationship with Tiger Brands become more apparent.

Water and electricity are similarly an important dependency in our manufacturing processes. We have largely addressed the unreliable supply of electricity by installing generators and concluding power purchase agreements to introduce solar power at four of our plants, an important step towards a broader rollout. This comes, however, at a significant cost. Access to reliable water supply to support our operations is an important emerging risk, impacted by changing rainfall patterns arising from climate change, as well as challenges relating to municipal water infrastructure in certain areas; this may affect the continuation of operations, production, product quality and food safety.

A related concern is fuel shortages. The increased reliance on generators to mitigate against loadshedding increases the use of fuel. In addition, fuel permeates the supply chain from inbound logistics, to manufacturing to channel distribution. Moreover, general market shortages will impact the cost of inputs as increased fuel prices impact inflation.

We are closely monitoring and managing these risks through normal risk management processes.