CP’s recent Retail Finance Forum brought together a lively group of finance professionals from some of the UK’s biggest retailers. It was a welcome opportunity for them to get together and discuss the hot issues affecting them.
The Forum welcomed Andrew Gibson, Risk Assurance Partner and Tom Proverbs-Garbett Associate Director ESG both from RSM UK to lead a discussion on Corporate Governance.
As always, the focus of the Forum was to provide finance leads with an opportunity to get together for an informal collaborative roundtable event. Full of content and useful insight. Both round the table and over a tasty lunch where useful connections were made and the conversation continued.
CORPORATE GOVERNANCE
With his extensive experience of internal controls, governance and risk management Andrew was well-placed to lead this session with Tom. They’ve supported leading UK and global companies, including the FTSE 100/250.
The timing of their session was particularly interesting with the King’s speech setting out the new government’s agenda taking place only the day before.
Though the UK Corporate Governance Code was updated and published by the FRC only relatively recently in January 2024, there’s a view that the whole issue of corporate governance controls will likely be revisited by a labour government. This is likely to be for all relevant companies, not just those in retail.
Whilst in opposition the Labour Party made very clear their concerns about the behaviours of ‘big business’ bosses and shareholders. There have been controversies regarding the treatment of employees, low pay, insecure contracts and poor workplace safety.
Along with high-profile household names going under. From retailers, Wilkos’ bad decision-making by the owners to issues with BHS’ pension arrangements still being very fresh in people’s minds. The impact not just on those businesses’ employees and their supply chains was significant.
Add to those headlines concerns about ‘greenwashing’ along with consumer interest in supply chain issues which means that companies are increasingly subject to scrutiny. By shareholders, the FRC and the public. No wonder corporate governance is anticipated to be very much at the forefront of the new government’s thinking.
The political context at the time of publishing the Code meant that the changes were more minimal than anticipated. Andrew and Tom explained what the 2024 Code intends to deliver:
- Strengthened but proportionate reporting on risk management and internal controls
- An increased emphasis on ‘comply or explain’
- Outcomes-based reporting to deliver more relevant and concise annual reports
- A more relevant Code in areas such as culture and diversity
There was considerable discussion in the room about what this focus on outcomes-based reporting means. In particular the processes for collecting data, use of internal controls and the assurance of data and the ultimate impact on the content of annual reports.
There was a definite feeling from attendees that there is a mismatch between what auditors expect to see, what’s reported to Boards and then how that is represented externally.
The key takeaways from Andrew and Tom’s session were:
- It’s critical to understand ‘materiality’ in your context – note the FRC guidance
- Undertake a scoping exercise now covering risks, controls and mitigation
- Define and implement an assurance strategy – is there a need for an enhanced internal audit role?
- Focus on outcomes in reporting – what was the impact?
- Culture and risk management go hand in hand.
AROUND THE ROUND TABLE
After the governance session, the rest of the morning was devoted to our usual roundtable format. Giving attendees to talk through some of the pain points and hurdles facing them. Checking out the approaches of their peers. As always people around the table were generous in sharing their practical tips and insight.
Topics covered include those linked to the governance session which came before.
Another was the different approaches taken to the use of office space, particularly post-pandemic lockdowns and the emergence of hybrid working. And linked to hybrid and remote working practices the development of performance management controls.
There was an in-depth discussion around long-term IT transformation projects, their costs, prepayments and the fixed asset register and the approach to recording this in accounts.
The thorny issue of CGUs came up again. Many retailers selling through websites are still grappling with what costs to allocate accordingly to stores or whether the website is a CGU in its own right. There was a consensus around the need for auditors to have a clear and consistent approach which is in line with modern retail practices.
WANT TO JOIN THE CONVERSATION?
Chatham House rules were firmly in place for the Forum, so we haven’t broken any confidences or given away all the answers shared. But hopefully this taster you a feel for the wide range of topics covered.
We’ll be hosting the Retail Finance Forum again along with other retail focussed events. Keep an eye on our events page for details once they’re finalised. The Retail Finance Forum is a great event for finance leads from retail businesses to mingle with your peer group. If you’d like to tap into this treasure trove of insight and lively discussion, drop us an email through the link below so we can add you to our potential invite list. We do limit places to help facilitate conversation.
Or if any of the above has sparked some thoughts you’d like to discuss do get in touch.
