MATERIAL BUSINESS RISKS
As required by S.299A(1) of the Corporations Act 2001 (Cth), and in accordance with ASIC Regulatory Guide 247 Effective Disclosure in an Operating and Financial Review (RG 247) issued in March 2013, material business risks that could adversely affect financial performance include:
Market
- Inability to defend against increased competition from existing competitors and/or new entrants
- Weakening of general economic activity and the retail sector in Australia and New Zealand
- Failure to hedge appropriately or effectively against adverse fluctuations in interest rates and exchange rates or default by a hedge counterparty
- Damage or dilution to the Woolworths’ retail brands
Environmental
- Woolworths’ operations, in particular its petrol, meat processing plants and winemaking businesses, expose it to potential environmental liability for contamination, which could have an adverse effect on Woolworths’ results
- Woolworths is subject to risks from natural disasters and adverse weather conditions
Strategic
- Customer strategy implementation fails to rebuild trust in Woolworths’ brands and loyalty, to deliver evolving customer needs for product range, value and services
- Divestment or acquisition activities result in unforeseen liabilities
- Unforeseen increase in cost structure
Regulatory
- Failure to understand and comply with existing and new legal and regulatory obligations set by the Australian Competition and Consumer Commission or other regulators
- Regulatory changes to Workplace health and safety regulations could result in significant costs
- Litigation or legal proceedings could expose Woolworths to significant liabilities
Operational
- Business transformation and change programs fail to deliver expected benefits with inability to fully deliver and absorb change
- Failure to deliver optimal store network, maintain and manage property portfolio
- Reliance on independent third party suppliers
- Inability to effectively manage inventory in retail businesses may impair competitive position
- System availability and performance may be adversely affected by ageing infrastructure and technology obsolescence
- Interruptions at Woolworths’ workplaces arising from industrial disputes, work stoppages and accidents
- Failure to meet food, liquor and general merchandise own and exclusive brands product safety and quality standards resulting in litigation and public liability claims
- Operation of certain Woolworths’ businesses through significant joint ventures and strategic alliances creates additional risks and uncertainties in its business
- Inability to attract or retain talent
- Failure to establish effective security measures to protect customer data from cyber attacks and leakages
- Current and future leasing arrangement constraining capital availability