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Risk Management

Monitoring risk throughout the Group

The Board is accountable for the system of risk management at Ferguson. The Board, Audit Committee and Executive Committee review risks and controls in the context of the Group’s strategic plan and objectives. Throughout the year, information is provided directly from frontline operations, via corporate functions and independent assurance.

Risk analysis during the year

2019/20 risk and control assessments

Throughout the year, Ferguson regularly reviews its principal and emerging risks.

In January 2020, the Board provided its perspective on risks relating to the Group’s strategy for 2020 and beyond. The Board’s assessment on principal and emerging risks was then combined with assessment of risk for business groups and functions in March 2020 to produce an updated overall risk profile and report for the Group.

This risk report, listing principal and emerging risks and how they have changed, was reviewed, amended and finalized with the Executive Committee and the Audit Committee in May 2020. The principal and emerging risks were then reported to and reviewed by the Board in July 2020. Principal risks include those that would materially threaten the Group’s business model, its future performance, solvency or liquidity and reputation.

Throughout the year, members of the Board, Audit Committee and Executive Committee received updates as noted below on the Group’s principal risks. In addition, following the outbreak of COVID-19, these updates included analysis of how COVID-19 amplified or accelerated the onset of certain of these risks and the steps taken to mitigate any potential impacts.

  Risk Updates Provided

A

New competitors

and technology

Formal update provided to the Board in January 2020. Related risks considered by the Board in January and July 2020 and by the Executive team. 

B

Market conditions

Monthly performance reviews with CEO and CFO. CEO update to the Board at each Board meeting.

C

Pressure on margins

D

Information Technology

Reports on the status of the Group’s information technology strategy and operational risks were provided regularly to the Executive Committee, the Board and the Audit Committee throughout the year.

E

Health and safety

Performance updates were provided at every Executive Committee and Board meeting during the year.

F

Regulations

The status of the Group’s compliance program was reported to the Audit Committee in November 2019 and July 2020 and to the Executive Committee in March, April and May 2020.

G

Talent mangement and retention

The Board, supported by the Nominations and Audit Committees, has received detailed updates throughout the year from leadership teams around the Group.

Viability statement

Based on the outcomes of the scenarios and considering the Group’s financial position, strategic plans and principal risks, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment. 

UK withdrawal from the European Union

The UK has left the European Union (“EU”) and is now in a transition period before new rules come into place on January 1, 2021. This could lead to further market uncertainties that could result in a negative impact on the Group’s UK business. However, the large majority of the Group’s profit is derived from North America and the Board’s strategic intent to separate the UK business is unchanged. The timing of the separation remains uncertain in the current economic environment, and consequently the Board is assessing other separation options in parallel with progress towards the demerger to facilitate the exit of the United Kingdom operations*. In addition, disruption in the financial markets could adversely affect the share price of the Group. The Group will continue to monitor developments.

*The UK was sold in January 2021 - for further information click here.