Risk management

Background

Based on the Group’s approach to managing a sustainable business, its strategic objectives, stakeholder engagement and risk management, the Group has identified material risks or issues that could potentially affect the business. The Group Risk Committee is responsible for the overall monitoring, assessing and mitigating of risks within Super Group. In addition, the Group ensures that sufficient insurance is in place.

The risk categories

Super Group classifies the risks that have a material impact on the Group into six strategic categories: Strategic, Human Resources, Financial, Operations, Compliance and IT.

The risk categories can be described as follows:

  Risk categories Overview
Strategic The strategic risk considers the brand and reputation of the Group, the Group’s strategy, initiatives, communication and investor relations.
Human Resources The Human Resources risks are associated with capacity requirements, employment of skills, compensation and benefits as well as the culture of the organisation.
Financial The financial risks pertain to the accounting, reporting structures and

tax of the Group.

Operational Operational risks are associated with sales and marketing, customer service, production and delivery.
Compliance Compliance risks are those that consider the adherence to and compliance with governance, legal and regulatory issues.
IT IT risks contemplate the application development, availability, continuity and the data integrity of the Group’s IT systems.

The risk identification process

Each division is responsible for identifying, assessing and recording risks and monitoring procedures aimed at mitigating them. The Group Audit and Risk Officer facilitates risk sessions with each division and ensures that the risks identified have been correctly assessed. Risks are assessed based on the potential impact on the business, financial position and reputation. A scale of 1 to 5 is used where 1 is “Minor” and 5 “Catastrophic”. Risks are also assessed on the likelihood of the risk occurring after taking into account controls in place to mitigate them. A scale of 1 to 5 is used, where 1 is “Rare” and 5 is “Almost certain”. A risk rated 5 means the controls in place will not prevent the risk from occurring due to factors outside the Group’s control.

The GRC sets out the risk policy detailing the objectives, scope, approach and roles and responsibilities. The GRC meets twice a year and is chaired by a non-executive director. The membership of this committee comprises two non-executive directors, the CEO and CFO. The Group Audit and Risk Officer, the Group Legal Manager and the CIO are invited to the meeting.

The Board reviews the list of strategic and critical risks regularly as required by King IV and also approves the risk tolerance of the Group.

Management and mitigation of major risks to the Group

Risk level 2018 Risk level 2017 Risk Context Mitigating factors
Highly competitive local market
hinder growth in Supply Chain
  • The continual requirement from customers to cut costs.
  • Continuous focus on customer service and service delivery at all levels.
  • Expanding the competitive product offerings to the market.
  • Acquisition of businesses operating in targeted areas of the market that complement the Group’s existing offerings.
African socio-economic environment, including commodity cycles
  • Understanding the commodity and capital investment cycles.
  • Management closely monitors trends and cycles.
  • Diversification of commodity exposures.
  • Drive costs and revenue initiatives to support the achievement of financial targets.
Changing regulatory environment
  • Compliance with a wide range of regulatory requirements including licensing, consumer protection, B-BBEE changes, new legislation and AARTO regulations.
  • The development of new revenue models.
  • Specialist regulatory and Government relations consultants that understand the legislative and regulatory environment.
  • The Group Company Secretary, who is also the Group’s Compliance Officer, is responsible for monitoring all changes to the legal and governance framework.
Customer concentration
  • The Group faces intensive competition in all the markets in which it operates.
  • The ability to compete depends on the Group’s network, quality of service and the use of market leading technologies.
  • Continued efforts to achieve new business.
  • A wide range of services at competitive prices.
  • Continued efforts to offer more value to customers.
  • Continual development of IT-based logistics solutions to improve control and monitoring of the supply chain by its customers.
General political, economic and industry uncertainty and deteriorating business confidence
  • Current economic conditions remain uncertain, different sectors of the economy are experiencing varying fortunes.
  • Infrastructure projects in Southern Africa are not moving to the development stage as quickly as expected.
  • Impact of labour unrest on the logistics industry and industries serviced by the Group.
  • Where possible, the Group passes the cost of fuel price, toll fee and wage increases to the customers through generally accepted escalation arrangements.
  • The Group maintains a conservative Statement of Financial Position and preserves its resources to meet the challenges of the economy and the industry.
  • The Group has a Human Resources function that manages labour force challenges.
Retention of critical management and skills
  • The skills shortage in South Africa makes it imperative for the Group to retain and develop key management and specialist skills.
  • The Group focuses on career development, fair reward as well as education and training to develop its people.
  • The Group looks to promote from within and ensures that succession planning is implemented in all the business units.
The long-term effect of Brexit on the UK and Eurozone economies
  • The uncertainty regarding the Brexit vote as to the timing of implementation and the renegotiation of trade agreements between the UK and Eurozone countries.
  • The Group continues to monitor developments closely.
The threat of cyber-attacks and data breaches
  • The increasing threat of cyber attacks and data breaches is alarming, and is no doubt set to escalate as hackers become more daring and tools more sophisticated.
  • Super Group continues to invest heavily in measures to ensure that any future attacks are mitigated. The Groups cyber-security forum meets monthly to evaluate and discuss new and better ways of combatting this global threat.
LOW risk   Moderate risk   HIGH risk