Kesko's Annual Report 2009
Kesko's Annual Report 2009
Kesko's Annual Report 2009
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with regard to business operations, and the continuity management<br />
projects underway are aimed at securing undisturbed critical<br />
operations and a sufficiently fast recovery after a serious disturbance.<br />
The plans are tested regularly to ensure their efficiency<br />
and updatedness and to maintain readiness for crisis situations.<br />
Suppliers and distribution channels<br />
In divisions that are strongly dependent on individual principals<br />
and suppliers, such as the car and machinery trade, changes in<br />
ownership, or in a principal's or supplier's strategy concerning<br />
the product selection, pricing and distribution channel solutions<br />
can mean a reduction in competitiveness or sales, or a loss of<br />
business. Good market shares, growing sales and development of<br />
operations create a basis for long-term cooperation.<br />
Suppliers may have increasing difficulties in deliveries, as a<br />
result of the recession. There is also a growing risk of bankruptcies.<br />
The financial situation and delivery accuracy of the major<br />
suppliers are monitored and substitute suppliers are examined.<br />
Store sites<br />
Store sites are a significant competitive factor. Considerable<br />
amounts of capital or lease liabilities are tied up in store properties<br />
for years. As a result of the recession or changes in the competitive<br />
situation, there is a risk that store sites may become<br />
unprofitable and that operations will end while the long-term<br />
liabilities remain. The acquisition of good store sites can be<br />
slowed by scarcity of plots, zoning and permit procedures and<br />
trends in plot prices. Each operating country has its special characteristics<br />
arising from, for example, legislation and the authorities.<br />
Foreign real estate owners' readiness to make repair or<br />
extension investments has weakened in some cases as a result of<br />
the recession.<br />
These risks are managed by long-term store network planning,<br />
careful preparation of each store site investment decision<br />
and the sale-leaseback system. In cases where Kesko manages<br />
the construction, the aim is to design a store site that can be<br />
modified for different uses as necessary. In the case of leased<br />
premises, the flexibility and continuity requirement is taken into<br />
account by extension options included in the leases.<br />
Responsibility<br />
Different aspects of responsibility are increasingly important for<br />
customers, and possible responsibility failures would weaken<br />
<strong>Kesko's</strong> reputation. <strong>Kesko's</strong> challenges in responsibility work<br />
include communicating its responsibility policies to customers,<br />
retailers and suppliers, and ensuring the ethicality of production.<br />
In monitoring the social compliance of its suppliers, Kesko primarily<br />
concentrates on suppliers operating in the so- called ‘high<br />
risk’ countries. China is <strong>Kesko's</strong> most important non-EU import<br />
country, and our own local monitoring team has been established<br />
in Shanghai. Their duty is to guide, train and supervise the<br />
suppliers of <strong>Kesko's</strong> division parent companies, focusing on the<br />
terms of employment and working conditions, as well as on<br />
matters relating to compliance with environmental and chemical<br />
legislation.<br />
Malpractice and wastage<br />
Recession entails a growing risk of financial malpractice. Preventive<br />
measures have included more effective communications,<br />
Kesko financial statements <strong>2009</strong><br />
131<br />
training and guidelines as well as tightened controls. Information<br />
technology is increasingly used to trace incidental transactions,<br />
and prevent and reveal malpractices.<br />
Retail stores incur significant financial losses arising from<br />
wastage. Wastage can result, for example, from spoilage or<br />
breakage of goods, theft or other malpractice, and unsuccessful<br />
purchasing. The Group continuously develops methods and tools<br />
for more efficient wastage management and reduction. Wastage<br />
prevention training is arranged for retailers, supervisors and sales<br />
staff in different contexts, and it is a key area in training new<br />
store personnel. Wastage teams have been established in stores<br />
to find out the reasons for the store's wastage and to establish<br />
efficient wastage management measures. Best practices are<br />
adopted for wider use.<br />
Safety of payment and online transactions<br />
The requirements of stakeholders and the law for safe information<br />
handling to prevent damages and malpractice have<br />
increased, especially with respect to credit card payment and<br />
personal information. Kesko is carrying out a project to introduce<br />
chip card payment terminals. Audits and up-to-date information<br />
security solutions are used to ensure the confidentiality of customer<br />
and personal information. Appropriate guidelines are central<br />
in ensuring the confidentiality of business secrets. Critical<br />
transactions, such as payments, are protected with job descriptions,<br />
acceptance limits, access rights and system controls.<br />
Employee competence and working capacity<br />
The implementation of strategies and the achievement of goals<br />
require competent and motivated people. There is a risk that the<br />
trading sector will not attract the most competent people. The<br />
increased need for specialised expertise increases dependence on<br />
the competences of individuals and the risk of losing key people.<br />
In connection with strategy work, the competencies required for<br />
strategy implementation are identified, and personnel plans are<br />
drawn up. Personnel surveys play a central role in the development<br />
of HR management and the promotion of working capacity.<br />
<strong>Kesko's</strong> employer image is developed by systematic stakeholder<br />
cooperation and internal and external communications.<br />
Product safety and supply chain quality<br />
<strong>Kesko's</strong> objective is to provide safe products for its customers. A<br />
failure in the quality assurance of the supply chain, or in product<br />
control may result in financial losses, the loss of customer confidence<br />
or, in the worst case, a health hazard. In order to manage<br />
this risk, the Product Research Unit controls the quality of products<br />
sold by Kesko Food, Citymarket Oy and Anttila, and supervises<br />
companies manufacturing products for Kesko Food. The<br />
trading sector’s self-control practices ensure that the regulations<br />
and rules concerning foodstuffs are observed. The practice of<br />
recalling products ensures that defective products are withdrawn<br />
from sale quickly.<br />
Pandemics<br />
A pandemic, or an epidemic of widely spread disease, would<br />
have extensive effects on business operations. At least temporarily,<br />
it could impact demand and the availability and quality of<br />
goods and services. <strong>Kesko's</strong> continuity management principles<br />
concerning the safeguarding of critical functions require that the