Kesko's Annual Report 2009

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