Material focus areas, risks and opportunities

Our decentralised, asset-light and everyday essential products and service business model is an effective risk management tool. We cannot control macro conditions but we can control how we respond.

The Bidvest board appointed a risk committee to assist in recognising all material risks to which the group is exposed and ensuring that the requisite risk management culture, policies and systems are in place and functioning effectively. Risks are assessed on an enterprise-wide level and their individual and combined impact considered. Internal audit assist in evaluating the effectiveness of the risk management process and comment on this in their own assessment reports. Management is accountable to the board for implementing and monitoring the processes of risk management and integrating this into day-to-day activities. Divisional risk committees are engaged to actively focus management on critical issues faced at a business and industry level. The key strategic risks are reported to the group risk committee for consideration at board level. The risk committee membership is reviewed annually.

The material risks identified have emerged as a result of analysing and understanding the direction in which each entity is moving as well as the overlay of the group's strategy and macro conditions.

1   Challenging economic outlook and constrained consumer

Material focus areas

Remaining competitive and relevant.

 
Management response

Bidvest has a portfolio of defensive, cyclical and growth assets that are strongly cash generative.

Bidvest is a customer-centric organisation. The protection of its core business strength and reputation is critical.

Bidvest encourage creative approaches and innovation and embrace the ability to adapt quickly and proactively to changing customer requirements, market dynamics and digital advancement.

Impact on KPIs
  • HEPS growth
  • ROFE
  • Sustainability & Strategic actions
  • TSR vs peer group
  • Balance sheet strength and liquidity
   
Flow through to Strategy

Agility, a can-do attitude and appropriate disruptive strategies result in innovative solutions and open up additional opportunities, thereby maximising its diverse portfolio and allocating capital for growth.

2   Increasing regulation and cost of doing business

Material focus areas

Complex and value-sensitive business environment.

 
Management response

Managing the proliferation of regulatory and governance requirements across industries add costs in an already price-sensitive market. These complexities consume a growing amount of management time and resources.

Management focuses on key senior relationships with strategic customers to allow for mutually beneficial contract outcomes. Thorough due diligence is done on potential business partners.

Continuous right-sizing and the introduction of technology lower the cost of doing business.

Impact on KPIs
  • HEPS growth
  • ROFE
  • Sustainability & Strategic actions
   
Flow through to Strategy

Bidvest's decentralised model allows it to adapt and implement value-adding solutions and structures while complying with relevant legislation at operational level. This contributes to maximising the diverse portfolio.

To manage the cost of compliance, particularly in regulated entities.

3   COVID-19

Material focus areas

Disruption of operations, supply chains and demand as well as employee wellness.

 
Management response

Health, safety and rapid response protocols were rolled out across all businesses to protect employees, customers and the operations.

The pandemic brought about socio-economic shifts and long-term structural changes. Strategic actions were taken to make sure that operating models remain relevant and future-fit.

A Group-wide comprehensive employee wellness program was rolled-out and the R400 million fund was established.

Impact on KPIs
  • Sustainability
  • Balance sheet strength and liquidity
   
Flow through to Strategy

Rapid response together with numerous interventions provides a solid platform for Bidvest to emerge stronger, to the benefit of all stakeholders.

4   Cyber assaults

Material focus areas

Cost-effective, efficient and impenetrable IT systems.

 
Management response

The Group's IT governance framework supports effective and efficient management of people, technology and information. Specific attention is given to cybersecurity and data protection.

Group IA ensures adherence to the IT frameworks and guidelines.

Comprehensive group-wide property damage and business interruption insurance is in place.

We advocate exploring and finding solutions enabled by technology.

Impact on KPIs
  • HEPS growth
  • ROFE
   
Flow through to Strategy

Enable and empower the decentralised business model to operate in the most cost effective manner, to operate optimally and grow.

 

5   Loss of agency and distribution rights, port leases and licences

Material focus areas

Fostering positive long-term relationships with key suppliers, landlords and licensors.

 
Management response

This remains a cornerstone of the way Bidvest does business and is recognised as a major strength. Management is constantly challenged to manage and grow these relationships.

The group builds sustainable, value-adding relationships.

Impact on KPIs
  • HEPS growth
  • TSR vs peer group
   
Flow through to Strategy

Constant communication and monitoring of demand changes allow Bidvest businesses to be pro-active and part of the solution.

6   Shortage of skills

Material focus areas

Developing and maintaining high calibre staff.

 
Management response

Bidvest focuses on maintaining and rewarding a high performance culture.

It encourages entrepreneurial attitude and develops people through training academies, graduate and learnership programs and recognition.

The short/medium-term disruption in the event of sudden departures due to lack of skilled management is well understood.

Impact on KPIs
  • Sustainability
  • HEPS growth
   
Flow through to Strategy

Bidvest understands that people create wealth, companies report it. Home-grown talent thrives in our entrepreneurial, decentralised model.

Other risks:

1. Excessive capital investment in terms of both operational asset management and acquisitions

2. Reputational risk embedded in sub-contracting and third party relationships

3. Environmental impact consciousness

4. Travel in a post-pandemic era