![Lewis Group Ltd [logo]](../i/logo_lewis.gif "Lewis Group Ltd"){kind=logo}
sustainability and governance: risk management
Risk is integral to any business. Risks need to be managed to ensure that the business continues to meet its goals, but in many instances risk also provides opportunities to grow the business.
Risk management is a process of identifying, evaluating, and responding to business-specific, industry and general risks. Due to their involvement in the business operations, executive management is able to identify risks and to assess whether the risk has to be transferred, avoided or managed. This process has been formalised by the Risk Working Group who reports on a biannual basis to the Audit and Risk Committee.
The primary risks to the group have remained unchanged from the previous year and there has been no shift in their significance. These can be broadly categorised as follows:
Credit management
The extension of credit to our customers and subsequent collectability of these debts is influenced by:
- Social and economic trends
Relevant factors include personal debt levels, unemployment levels, food and transport inflation rates and interest rates.
The group has industry-leading credit-granting systems which assess the creditworthiness of customers and ensures manageable levels of bad debt. Any shift in the payment pattern of our customer base would be rapidly identified and the appropriate action taken. - The National Credit Act (“NCA”)
Our credit-granting process, which has been in place for many years, was similar to the requirements of the National Credit Act and, therefore, the transition to the NCA was very smooth. The store-based collection process ensures that Lewis will continue to interface closely with its customers and is a major advantage when dealing with certain aspects of the NCA.
Human capital
Labour related
Our employees are unionised and as with all collective bargaining, there is a risk of disputes and work stoppages. In the past, Lewis and the unions have reached mutually acceptable settlement.
Key executives
These persons generally have substantial experience and expertise in the furniture retail business and have made significant contributions to the success and growth of the group.
The retention of key executives is the responsibility of the board through its Remuneration and Nomination Committee.
Procurement
The group imports directly 26.6% of total purchases from foreign suppliers. The foreign exchange risk of imports is mitigated through the use of forward currency contracts.
Our supplier base is diversified and we source from both local and foreign suppliers.
The supply chain is continually being assessed to ensure its cost-effectiveness and efficiency in delivering merchandise at the right time and to the right destination.
HIV/AIDS
South Africa has one of the highest HIV/AIDS infection rates in the world. HIV/AIDS management programme is in operation for the group’s permanent staff and their immediate families. The cost of the cover is borne by the group. With respect to customers, the impact is indeterminable, but there has been no significant deterioration in the death claims experience of Monarch Insurance Company (“Monarch”).
Information technology
The business is dependent on its information technology platforms. Software development and services are outsourced to a third-party provider. The quality of the service is monitored through a service level agreement.
Disaster recovery planning is in place and tested regularly during the year. In addition, a comprehensive business recovery plan exists for the group.
Investments
Monarch holds investments to support the solvency margins and technical reserves required by the Short-term Insurance Act. The fair value of these investments are affected by the economic and investment climate. The board of Monarch regularly assesses investment strategy in conjunction with our investment advisor, Sanlam Asset Management.