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Risk Management


Our approach

As with any business we face risks and uncertainties. We believe that effective risk management supports the successful delivery of our strategic objectives. We have an established risk management framework to identify, evaluate, mitigate and monitor the risks we face as a business. Our risk management framework incorporates both a top-down approach to identify our principal risks and a bottom-up approach to identify our operational risks. The Executive Leadership Team (ELT) perform a robust risk assessment on a periodic basis and the output is reviewed with the Audit Committee at least twice a year. This review includes an assessment of the movement in the risks, the strength of the controls relied on and the status of mitigating actions. The principles of risk management have also been embedded into the day-to-day operations of the business units and corporate functions.

The long-term viability statement, set out further below, provides a broader assessment of the longer-term prospects of the Group after consideration of the principal risks and availability of funding.


Principal risks and uncertainties

The Board have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. We are exposed to a variety of other risks but we report those we believe are likely to have the greatest current or near-term impact on our strategic and operational plans and reputation. These risks (gross) and uncertainties are identified in the heatmap below (in no particular order), followed by a more detailed description including key mitigating activities in place to address them. We have also considered the broad potential impacts of Covid-19 which impacts a number of our principal risks. The ‘Changes since 2019/20’ highlight changes in the profile of our principal risks or describe our experience and activity over the last year.

Risk appetite

Our approach is to minimise exposure to reputational, financial and operational risk, while accepting and recognising a risk/reward trade-off in pursuit of our strategic and commercial objectives. As a food manufacturing company, with many well-known brands, the integrity of our business is crucial and cannot be put at risk. Consequently, we have a zero tolerance for risks relating to Occupational Health & Safety and food safety. We operate in a challenging and highly competitive marketplace and as a result we recognise that strategic, commercial and investment risks will be required to seize opportunities and deliver results at pace. We are therefore prepared to make certain financial and operational investments in pursuit of growth objectives, accepting the risk that the anticipated benefits from these investments may not always be fully realised. Our acceptance of risk is subject to ensuring that potential benefits and risks are fully understood and sensible measures to mitigate those risks are established.

Emerging risks

There are two ways in which we have identified our emerging risks in this report. First, for our principal risks, we have noted in the following pages some emerging threats regarding these risks. These uncertainties may relate to future regulatory, economic or political changes. Secondly, we also face a number of uncertainties where an emerging threat may potentially impact us in the longer term. In some cases, there may be insufficient information available to understand the likely scale and impact of the risk. We also might not be able to fully define a mitigation plan until we have a better understanding of the threat. We have created a watchlist of these risks which we will review on a regular basis to monitor any changes to the likely impact on our business.
Some examples of these are:

The pandemic and its wider impact dominate the long-term picture, as the risk of a deep recession, customer failures, permanent changes to retailer landscape with online growth escalating, changes to the way (and where) we work, are all set to pose a risk to our performance and success in the next few years.

Climate-related risks
We recognise that climate change poses a number of physical risks (i.e. caused by the increased frequency and severity of extreme weather events) and other related risks (i.e. economic, technological or regulatory challenges related to moving to a greener economy) for our business. We are currently aligning our internal processes with the recommendations of the Taskforce on Climate-related Financial Disclosures (‘TCFD’) and aim to be fully aligned by 2022.


Click an image below to see a detail explanation.


Impact of Government legislation

Risk and potential impact
The continued focus on health and obesity may result in a decline in demand for cakes and desserts and/or our share of it, along with the risk of additional complexity and cost as a result of any reformulation efforts. There is a high and ever increasing level of media and government scrutiny on health and obesity, as highlighted in the UK by the proposed introduction of regulation over High Fat Sugar & Sodium HFSS) products. It is important that we continue to take a leadership position on health issues. The UK Government has also introduced a new tax on non-recyclable plastic packaging as part of the reformed Packaging Producer Responsibility Regulations. The introduction of an escalating tax on plastic packaging and any further legislation may adversely impact the products that the Group manufactures.

How we manage it
  • We have a wide range of product offerings, including our ‘better-for-you’ range, which means we are well placed to take advantage of the consumer’s increased demand for healthier products.
  • Ongoing evaluation and development of the brand portfolio and innovation pipeline towards healthier options (as described in the Responsibility section).
  • We work closely with non-government organisations and trade associations in our market to fully participate in the debate and help shape solutions.
  • Our Environmental Social Governance (‘ESG’) Committee is headed by our Group CEO. We have a range of cross-functional steering groups which are responsible for the delivery of our ESG strategy, including our Plastics steering group.
  • We continue our efforts to optimise our packaging and to reduce its environmental impact; using materials from certified sustainable sources wherever possible, increasing our use of recycled materials, and increasing the recyclability of our packaging. 94% of our packaging, by weight, is recyclable.
  • We have developed KPIs to drive our progress on ESG forward, including (amongst others) embedding environmentally sustainable packaging across our product portfolio (see the ‘Responsibility’ section of our website for further details).
Changes since 2019/20
  • UK Government Obesity Strategy (announced July 2020) which comes into effect in April 2022; the Group has adapted its strategy in order to address the implications of the strategy.
  • The UK Government introduced primary legislation (November 2020) to bring in an escalating tax on plastic material which will come into force in April 2022.

Macroeconomic and geopolitical instability

Risk and potential impact
Our business has been subject to a period of prolonged uncertainty owing to political and ongoing economic developments related to the UK’s withdrawal from the EU which presents a material risk to our business and may affect our supply chain and expose us to the risk of a further devaluation of sterling against the euro, thereby increasing the Group’s cost base. The outbreak of Covid-19 has also created wide macroeconomic uncertainty that has the potential to impact the Group, although to date it has seen an elevated level of consumer demand. A prolonged period of disruption could expose the Group to operational risks such as securing supplies of key ingredients which could disrupt production or increase costs, see Risk 4. A more detailed assessment of the impact of the UK’s withdrawal from the EU and Covid-19 on our business can be found in the ‘Responsibility’ section of our website.

How we manage it
  • We manage the impact of commodity price inflation and foreign exchange volatility through hedging activity and ongoing supplier risk management.
  • A cross-functional committee headed by the Group CFO and Group Procurement Director is in place to manage the Group’s preparedness for the new trading relationship with the EU.
  • We continue to engage with the Department for Environment, Food & Rural Affairs (DEFRA) and the Food & Drink Federation (FDF) on all matters related to Covid-19 and the UK’s withdrawal from the EU.
  • The Executive Leadership Team closely monitors the Covid-19 threat to ensure appropriate incident and response plans are in place. Above all, we maintain our commitment to the health and safety of our employees and customers by putting people first.
Changes since 2019/20
  • In advance of the end of the EU exit transition period, we developed a comprehensive set of mitigation plans and made preparations to ensure continuity of supply of our products. With a free trade agreement between the UK and EU now in place, we have not seen any material impact from tariff changes. To date, these new arrangements have not resulted in any major disruption to our supply chain.
  • See Risk 4 for additional changes.
  • The UK Government’s vaccine programme rollout continues at pace and reduces the overall risk outlook.
  • As a food manufacturing business our factories remained open and modifications were made to enable social distancing while non-factory employees continue to work from home.

Market and retailer actions

Risk and potential impact As a primarily UK based company, our sales are concentrated with a relatively small number of major customers who operate in a highly competitive market. Maintaining strong relationships with our existing customers and building relationships with new customers and technology-enabled channels is critical for our brands to be readily available and well presented to our consumers. A failure to do this may impact our ability to obtain competitive pricing and trade terms and/or the availability and presentation of our brands. Actions taken by these retailers (for example changes in pricing and promotion strategies), may negatively impact on our financial performance and can also have an impact on the overall market for our products.

How we manage it
  • We have strong relationships with the major retailers built on the strength of our brands, our expertise in our categories and shopper insight.
  • We have a programme of continuous innovation rooted in customer insight and designed to build category growth for our customers and brands.
  • We are growing our International business which reduces dependence on the UK market.
  • We are investing to build our online presence and capabilities.
Changes since 2019/20
  • Covid-19 impacted the timing of our customers’ range reviews. We continued to work with all our customers, including through category partnerships and range reviews, to match our product offering to consumer needs particularly with more meals eaten at home.
  • We recorded significant growth in branded sales as a result of our close customer partnerships and innovation pipeline.
  • Sales through our online channel increased significantly during the year ahead of the broader channel.
  • Our reliable supply performance through the pandemic has, in general, strengthened our relationship with retailers and their confidence in our supply chain resilience.
  • The revised strategy for the International business has resulted in improved performance and is on track to deliver sustainable growth, see Risk 10.

Operational integrity

Risk and potential impact
Delivery of our strategy depends on our ability to minimise operational disruption from issues with facilities, factory infrastructure as well as procurement and logistics functions. Supplier failure, market shortage or an adverse event in our supply chain impacts sourcing of our products and the cost of our products is significantly affected by commodity price movements.

How we manage it
  • We have a crisis management process in place and business continuity plans are reviewed and refreshed on an ongoing basis.
  • Insurance coverage is in place to mitigate against the financial impact of material site issues.
  • We consolidated our warehousing and distribution capability to increase our operational efficiency. There are close relationships at all levels of the business with our outsourced logistics provider.
  • Procurement category plans are in place to mitigate against single supplier risk.
  • We have robust quality management standards applied and rigorously monitored across our supply chain.
Changes since 2019/20
  • The Covid-19 pandemic caused significant disturbance to global supply chains. Our suppliers have risen to the challenge to continue supplying us with raw materials and bought-in finished goods. Our procurement, operational and technical teams have also managed to source alternative suppliers for key ingredients where there were potential interruptions to supply.
  • We have seen sustained high levels of demand from consumers and our customers. Our factories have had to increase production levels whilst putting modifications in place to ensure compliance with WHO and UK Government guidelines to keep employees safe.
  • We improved our business resilience through various initiatives, including maintaining factory site accessibility, and reviewing the effectiveness of our business continuity plans.
  • We maintained high levels of customer service despite the disruptions caused by Covid-19.
  • We have an ongoing 3-year programme (in conjunction with our insurers) to move our sites into a ‘Highly Protected Risk’ status.

Legal compliance

Risk and potential impact
Our business is subject to a number of legal and regulatory requirements and must continuously monitor new and emerging legislation (domestic and international) in areas such as Health & Safety, Listing Rules, competition law, intellectual property, food safety, labelling regulations and environmental standards. We are also expected to comply with the recommendations of the Financial Stability Board Taskforce on Climate-Related Financial Disclosures (‘TCFD’). Considerations for the effects of climate change (e.g. floods and heatwaves) may restrict investment decisions but may also create new opportunities to invest in assets that may be more sustainable; and develop a portfolio of products that use sustainable packaging. A more detailed overview of the impact of climate change on our business can be found in the ‘Responsibility’ section of our website.

How we manage it
  • As previously described in Risk 1, our ESG Committee oversees various initiatives, including compliance with TCFD recommendations.
  • We have leading food industry processes in place to manage Health & Safety and food safety issues (including an ongoing programme of internal and external audits).
  • We have dedicated Legal and Regulatory teams in place to monitor laws and regulations to ensure compliance, protect intellectual property and defend against litigation where necessary.
  • We work closely with our external advisors and the regulators, government bodies and trade associations regarding current and future legislation which would impact the Group.
  • Whistleblowing processes are in place.
Changes since 2019/20
  • The UK Government announced (November 2020) that climate risk reporting will become mandatory for large companies and financial institutions and comes into full effect in April 2022.
  • Our risk management framework is being developed to accommodate and report on climate risks and appropriate disclosures in line with TCFD recommendations.
  • New compliance processes for logging conflicts of interest, gifts and hospitality and customer on-boarding.


Risk and potential impact
A successful cyber-attack or other systems failure could result in us not being able to manufacture or deliver products, plan our supply chain, pay and receive money, or maintain proper financial control. This could have a major customer, financial, reputational and regulatory impact on our business.

How we manage it
  • To reduce the impact of external cyber-attacks impacting our business we have firewalls and threat detection & response systems in place.
  • Disaster recovery plans across the Group are reviewed every year with annual penetration testing also performed.
  • Information and IT policies are in place and are regularly reviewed. Internal phishing campaigns are run and followed up with training and guidance.
  • Incident response plans are in place, recognising that while this risk can be managed it cannot be eliminated.
  • Our cyber-security strategy and actions are regularly monitored by the Audit Committee and the Board.
  • Cyber insurance policy is in place to insure the Group against potential losses arising from a cyber-security breach.
Changes since 2019/20
  • We continue to update our processes and controls as the external environment evolves; this is informed by periodic third party reviews.
  • Our information technology infrastructure remains secure and has been able to cope with the additional network traffic as a result of our employees working from home during the lockdown, with no significant loss of connectivity or productivity.
  • We continue work to enhance the security of our factory operational technology environment.

Product portfolio

Risk and potential impact
Consumer preferences, tastes and behaviours change over time. As part of this, the consumer’s desire for healthier choices and premiumisation are significant trends. Our ability to anticipate these trends, innovate and ensure the relevance of our brands is critical to our competitiveness in the market place and our performance. Furthermore, sales of many of the Company’s products can be adversely affected by warm seasonal weather conditions. We may fail to successfully evolve our portfolio to take advantage of growth categories and/or re-invent our core brands to meet consumer needs.

How we manage it
  • We have a programme of innovation, based on deep rooted consumer insights, to continuously modernise our portfolio of distinctly British brands to ensure they remain relevant to today’s shoppers.
  • We continue to review the impact of weather on sales during our monthly product performance reviews.
Changes since 2019/20
  • The impact of the proposed introduction of HFSS and other regulations is discussed in Risks 1 and 5.
  • The current increased demand of grocery products has placed operational pressure on our major customers, some of whom have consequently delayed their range reviews. This has resulted in a delay to the launch of some of our new product ranges but this is balanced against increased demand for our core product ranges.

HR and employee risk

Risk and potential impact
The inability to attract and / or retain capabilities, or develop the skills, critical for business success may hinder our ability to deliver our strategy, business plan and projects. Whilst Covid-19 has actually resulted in a lower level of colleague turnover and a more buoyant labour market, we need to be mindful of the risk that working in sustained periods of extreme business pressure may bring in terms of wellbeing, productivity and retention.

How we manage it
  • We continue to invest in colleague development and engagement initiatives on a focused basis.
  • We have processes in place to attract talent into the business with the right capabilities and behaviours, and recruit the majority of colleagues through our ‘in house’ team.
  • We have succession plans in place to retain and progress our internal talent pipeline.
  • We have a well-established and successful graduate recruitment and development programme, and invest heavily in apprenticeship training.
  • We benchmark pay to make sure we remain competitive in the market and where appropriate make changes to our offering.
Changes since 2019/20
  • Covid-19 has dramatically changed how we work with even tighter health, safety and well-being measures across all manufacturing sites and remote working being introduced for all colleagues based at main office locations, and the introduction of technology to support this.
  • Significant increase in the amount and variety of internal communications to reflect the need to keep colleagues up to date with the changing Covid-19 landscape, and provide line managers with support and advice, including guidance on managing colleague mental health.
  • Payment of additional ad-hoc bonuses for certain groups of employees recognising their extraordinary contributions in maintaining high levels of business performance.
  • Acceleration of Inclusion and Diversity activity, including the #oktobeme programme.

Strategy delivery

Risk and potential impact
Our balanced strategy seeks to deliver revenue growth, cash generation and cost efficiency. The strategy focuses marketing investment behind key brands. Our strategy may take longer than expected to deliver results which may impact on the speed at which we can deliver shareholder value.

How we manage it
  • Given the seasonal nature of many of our brands, media investment is targeted in the periods of peak consumer demand and through the most cost effective channels.
  • Our new and existing product development programmes are based on deep consumer insight and continue to make our product ranges more relevant to the ever changing lives of our consumers.
  • Our strong strategic relationships with our key customers facilitate the creation and joint ownership of plans for mutual growth.
Changes since 2019/20
  • Our branded growth strategy for delivering new product innovation based on consumer trends, together with high quality advertising behind our major brands, continues to work very well.
  • Our strategy continues to deliver trading profit at the top end of market expectations on the back of consistent growth with Net debt/adjusted EBITDA falling to below 2.0x.
  • We are developing a new strategy building on the branded growth model and reflecting the growth investment opportunities that a lower debt level will potentially unlock.

International expansion

Risk and potential impact
Our ambitious plans to expand our International business are subject to global market forces; fluctuations in national economies and currency movements; societal and political changes; a range of consumer trends and evolving legislation. Failure to recognise and respond to any of these factors could directly impact on our future profitability and rate of growth.

How we manage it
  • We carry out careful due diligence prior to entering a new market.
  • We closely monitor current and forecast performance of our business and where required adapt our marketing approach.
Changes since 2019/20
  • The International business returned to growth during the year.
  • Execution of the revised strategy has continued at pace, as we roll out our proven branded growth model strategy to other markets.
  • We recently signed an agreement with Weston Foods to sell and market Mr Kipling cakes in the US. The first shipments of cake commenced in the first quarter of 2021/22.

Task Force on Climate Related Financial Disclosures

Climate-related disclosures
Climate change is the defining issue of our time and the greatest challenge to sustainable development, affecting every country, business and person on the planet. We recognise that future climate change represents physical risk which includes impacts resulting from acute weather events, or chronic risk stemming from longer-term shifts in climate like higher temperatures, prolonged heat waves, floods and droughts. We also acknowledge that the transition risk (regulatory, technology, market, reputation) to move our business to a net zero one, will become greater as the world economy moves to a more sustainable future. We are committed to working towards incorporating the recommendations laid out by the Task Force on Climate-Related Financial Disclosures (TCFD) in full and are aiming to be fully aligned by April 2022.

Our Executive Leadership Team (ELT) has overall responsibility for climate-related risks and opportunities. Our ESG Governance Committee, which is chaired by the CEO, is accountable for managing the progress of our key sustainability and climate change targets as well as understanding and responding to climate-related risks and opportunities identified through our ongoing climate risk assessment. Updates on our sustainability and climate-related KPIs are provided to the Board on a biannual basis.

Risk management
As a food manufacturer, our business’s direct operations and supply chain is exposed to the physical and transition risks and opportunities stemming from climate change. This year we will begin the initial stages of understanding our climate-related risks more thoroughly to financially quantify all the material impacts of climate change to our business. The results of this assessment will be presented to the ESG Governance Committee and reported on in next year’s annual report.

Metrics and targets
Further information about our environmental performance can be found in the ‘Responsibility’ section of our website. We are in the process of reviewing our carbon reduction targets in line with what the latest climate science says is necessary to meet the goals of the Paris Agreement and limit global warming to well below 2°C.

Viability statement

The Board has determined that the most appropriate period over which to assess the Company’s viability, in accordance with the UK Corporate Governance Code, is three years. This is consistent with the way the Board views the development of the business over the medium term, a period of three years is considered appropriate for business planning and measuring performance. The Board also considered the nature of the Group’s activities and the degree to which the business changes and evolves in the relatively short term. The Board considered the Group’s profitability, cash flows and key financial ratios over this period and the potential impact that the Principal Risks and Uncertainties set out in the Risk Management section above, could have on the solvency or liquidity of the Group.

Sensitivity analysis was applied to these metrics and the projected cash flows were stress tested against a number of severe but plausible scenarios. As of 3 April 2021, £173m of committed borrowing facilities available to the Group were undrawn. The Board considered the level of performance that would cause the Group to breach its debt covenants (see note 2 of the financial statements in the 2020/21 annual report) and a variety of factors that have the potential to reduce Trading profit substantially. These included the rate and success of the Group’s strategy; and macro-economic influences such as climate change, Covid-19 and future regulatory changes in the food industry.

The Board has considered the principal risks or uncertainties and the potential impact of these on the Group’s profitability or available cash resources. In assessing the Group’s viability, the Board also considered all the severe but plausible scenarios simultaneously materialising and for a sustained period, in conjunction with mitigating actions such as reducing discretionary costs. The likelihood of the Group having insufficient resources to meet its financial obligations and remain within its covenants is unlikely under this analysis.

Based on this assessment, the Board confirms that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period to 30 March 2024.