Our approach to risk management

The delivery of our strategic objectives and the sustainable growth (or long-term shareholder value) of our business, is dependent on effective risk management. We regularly face business uncertainties and it is through a structured approach to risk management that we are able to mitigate and manage these risks and embrace opportunities when they arise. These disciplines remain effective as we face increased economic volatility resulting from the aftermath of COVID-19, which has been exacerbated by geopolitical uncertainty triggered by the war in Ukraine.

The diversified nature of our operations, geographical reach, assets and currencies are important factors in mitigating the risk of a material threat to the Group’s sustainable growth and long-term shareholder value. However, as with any business, risks and uncertainties are inherent in our business activities. These risks may have a financial, operational or reputational impact.

The Board is accountable for effective risk management, for agreeing the principal, including emerging, risks facing the Group and ensuring they are successfully managed. The Board undertakes a robust annual assessment of the principal risks, including emerging risks, that would threaten the business model, future performance, solvency or liquidity. The Board also monitors the Group’s exposure to risks as part of the business performance reviews conducted at each Board meeting. Financial risks are specifically reviewed by the Audit Committee.

Our decentralised business model empowers the management of our businesses to identify, evaluate and manage the risks they face, on a timely basis, to ensure compliance with relevant legislation, our business principles and Group policies.

Our businesses perform risk assessments which consider materiality, risk controls and specific local risks relevant to the markets in which they operate. The collated risks from each business are shared with the respective divisional chief executives who present their divisional risks to the Group Executive.

Emerging risks are identified and considered at both a Group and individual business level, with key management being close to their geographies. These risks are identified, as part of the overall risk management process, through a variety of horizon-scanning methods including: geopolitical insights; ongoing assessment of competitor activity and market factors; workshops and management meetings focused on risk identification; analysis of existing risks using industry knowledge and experience to understand how these risks may affect us in the future; and representation and participation in key industry associations.

The Group’s Director of Financial Control receives the risk assessments on an annual basis and, with the Finance Director, reviews and challenges them with the divisional chief executives, on an individual basis.

These discussions are wide-ranging and consider operational, environmental and other external risks. These risks and their impact on business performance are reported during the year and are considered as part of the monthly management review process.

Group functional heads including Legal, Treasury, Tax, IT, Pensions, HR, Procurement and Insurance also provide input to this process, sharing with the Director of Financial Control their view of key risks and what activities are in place or planned to mitigate them. A combination of these perspectives with the business risk assessments creates a consolidated view of the Group’s risk profile. A summary of these risk assessments is then shared and discussed with the Finance Director and Chief Executive at least annually.

The Director of Financial Control holds meetings with each of the non-executive directors seeking their feedback on the reviews performed and discussing the key risks, which include emerging risks, and mitigating activities identified through the risk assessment exercise. Once all non-executive directors have been consulted, a Board report is prepared summarising the full process and providing an assessment of the status of risk management across the Group. The key risks, mitigating controls and relevant policies are summarised and the Board confirms the Group’s principal risks. These are the risks which could prevent Associated British Foods (ABF) from delivering our strategic objectives. This report also details when formal updates relating to the key risks will be provided to the Board throughout the year.

Key areas of focus this year

Effective risk management processes and internal controls

We continued to seek improvements in our risk management processes to ensure the quality and integrity of information and the ability to respond swiftly to direct risks. During the year, the Audit Committee on behalf of the Board conducted reviews on the effectiveness of the Group’s risk management processes and internal controls in accordance with the 2018 UK Corporate Governance Code. Our approach to risk management and systems of internal control is in line with the recommendations in the Financial Reporting Council’s (FRC) revised guidance ‘Risk management, internal control and related financial and business reporting’.

The Board is satisfied that internal controls were properly maintained and that principal and emerging risks are being appropriately identified and managed.

Geopolitical uncertainty and Russia’s war in Ukraine

The global inflationary impacts of COVID-19 have been exacerbated by the geopolitical uncertainty caused by

Russia’s war in Ukraine. This has resulted in economic uncertainty in almost all of the markets in which we operate, and has adversely impacted energy pricing, commodity costs and supply chains. Our management teams are monitoring the situation closely and continue to demonstrate agility and an ability to take appropriate mitigating actions to secure raw materials, maintain production and provide a reliable supply to our customers. This is an ongoing challenge and its impacts will depend on the duration of the current crisis and the geopolitical repercussions.

Household budgets

Household budgets, in a number of markets in which we operate, are facing real pressures as a result of high inflation, increased interest rates and general economic uncertainty. This means that some consumers are having to make challenging and difficult choices in respect of what they spend and where they spend it. Whilst we continue to offer safe, nutritious and affordable food and affordable, quality clothes to our customers, the full consequences of the current cost of living crisis remains uncertain. The impact on our businesses will depend on the extent of government intervention and the duration of any economic downturns.

Recent global financial data suggests that there is an increasing risk of recession across a number of the key economies in which we operate and the possibility of a prolonged period of stagnation. All of our businesses have developed strategies considering the potential changes in both end consumer and our customer behaviours and demands, the implications for the business and where investment or changes to business models may be appropriate.

Regulatory changes

Our businesses continue to face a large number of regulatory changes with new requirements being developed in a number of areas including the Task Force on Climate-related Financial Disclosures (TCFD), Environmental, Social and Governance (ESG), and extended producer responsibility regarding packaging and plastics. For each of these areas, groupwide initiatives are well advanced to meet the specific requirements. The extent of change will have an impact on the capacity of management at the time when they are dealing with the ongoing challenges resulting from economic uncertainty, alongside the day-to-day growth of our businesses.

In response to Task Force on "Climate" related Financial Disclosures (TCFD) requirements we have conducted a comprehensive risk assessment across the whole supply chain, focused on climate related risks and opportunities at a divisional level, aligned with the risk management processes at ABF and our decentralised structure. Details of this are provided on pages 83 to 93 of the Annual Report.

In anticipation of the government’s response to the BEIS white paper: Restoring trust in Audit and Corporate Governance published in 2021, we are nearing the completion of a business wide programme, supported by external consultants. The programme formalises our approach to internal control matters and to provide a documented trail to support our assessment of the effectiveness of key controls which minimise the risk of a material misstatement in our financial statements.


ABF has a clear sense of social purpose: it exists to provide safe, nutritious and affordable food, and clothing that is great value for money, to hundreds of millions of customers worldwide. ABF is set on a mission: to continue to make food and clothes available and affordable and also carbon neutral as quickly as we can. The people in our businesses are motivated by the excitement that comes from driving social and environmental improvement. ESG isn’t simply a matter of risk mitigation. ESG factors, including the potential implications of climate change, are considered as part of our well-established risk management framework and they also frame opportunities for our businesses to become better. Our leaders are empowered to include the prioritisation of mitigation of environmental impacts as a central aspect of their business plans, sharing learnings from other ABF businesses and applying industry best practice. The Board reviews each business segment in depth every year, and ESG factors are central to the analysis and discussion.

Our culture and values, and particularly our devolved decision-making model, empowers the people closest to risks to make the right judgements to mitigate risks. In respect of ESG, each of our businesses has prioritised and is devoting most resources to those ESG factors which are of greatest relevance and will make the greatest long-term difference.

They are also challenged by the centre through detailed reviews of the Group’s environmental performance, health and safety performance, and its diversity, equity and inclusion and workforce engagement programmes.

Our principal risks and uncertainties

The directors have carried out an assessment of the principal risks facing ABF, including emerging risks, that would threaten our business model, future performance, solvency or liquidity. The Group’s principal risks and uncertainties and the key mitigating activities in place to address them are outlined pages 96 to 101 of the Annual Report. These are the principal risks of the Group as a whole and are not in any order of priority.

ABF is exposed to a variety of other risks related to a range of issues such as human resources and the attraction, development and retention of people, community relations, the regulatory environment and competition. These are managed as part of the risk process and a number of these are referred to in our 2022 Responsibility Report.

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