The Retailer Spring Edition 2022

THE RE TA I L ER

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RETAILERS NEED STRONG RELIABLE INTERNAL CONTROLS IN THESE CHALLENGING TIMES

Matt Dalton Partner Mazars

Arlene Wewege Associate Director Mazars

R etailers rapidly responded to the pandemic by digitally transforming and need to make sure internal control environments have evolved at the same pace. Retailers are facing steep energy prices, supply chain issues and rising inflation, alongside the three significant events that have turned the world on its head: Brexit, the pandemic and now the Russianwar against Ukraine. These significant challenges and events require retailers to re-think their processes and strategies on how they do business. Retailers could be forgiven for thinking that things were looking up again. After a rocky two years, January saw sales improve and retail seemed to be making a comeback as the pandemic pressures eased. But the cost-of-living crisis andwar in Ukraine has rocked consumer confidence and cast a shadow over the sector. With new uncertainties mounting, organisations need to continually review their strategies once again. This follows the massive transfor mation to business processes and practices made to cope with the impact of the pandemic.

Experience shows us that emerging risks need to be discussed and brought into the boardroom on an ongoing basis. This is no longer a formal annual exercise – it requires constant horizon scanning. The retail industry has responded quickly, and now is the right time for organisations to make sure they have designed and embedded effective internal controls in their newprocesses to ensure resilience and efficiencywhilst mitigating future risks to their strategies. Ultimately, having an effective internal control environment leads to fewer surprises (earlywarning systems), better decisions and enhanced trust and confidence for investors and stakeholders. The stronger reliable controls are designed and embedded, the easier it is to shift focus to new risk areas. A well-controlled business allows for focus on strategy, achieving goals and increasing profitability. Why talk about controls now? Since the start of the pandemic, change in the retail sector has been nothing short of epic. Responding to public health measures, retailers accelerated their digitalisation programmes to move business online and continue serving consumers stuck at home in lockdowns. Online retail sales have grown substantially. Figures from the Office for National Statistics show 27%1 of sales are now online compared to 19% in February 2020 shortly before Covid-19 hit the UK. In fact, online sales peaked at almost 38% in January 2021 and show little sign of falling back to pre-pandemic levels.

benefits of a strong internal controls environment

Improves PERFORMANCE

Improves quality An effective control framework raises your brand though improved process execution and reduced costs

Promotes agility Provides your operational teams a practical and efficient way to support your transformation agenda

Increases confidence

Robust controls lead to fewer surprises and enables stronger financial performance

Leads to better decisions and creates confidence for stakeholders and investors