Woolworths Group is identified as one of the major “Australian” entity with extensive retail interest across “New Zealand and Australia”. Woolworths is recognized second when it comes to the largest retail giants after Wesfarmers which is a retail conglomerate situated in Perth. It is not only considered as the largest 19th retailer but also having an enormous market share in the areas of holding poker games, liquor and hotel services. Forming of a strong customer base is focused on creating a better store led culture and improve on expansion of the present customer base. Some of the important focus led by the strategic management team is discerned with sustainable momentum in the sales and emerging business of drinks with an increased convenience. This has been seen to be conducive for creating more worth among the customers and strengthening the position of the portfolio by adhering to the shareholders value. Moreover, the important objective of the company has been discerned with emerging as one of the leading retailer giants by incorporating the system of end to end in the system’s excellence (Woolworthsgroup.com.au. 2018).
The primary discourse of the study is considered with addressing several implications of “ASX Corporate Governance Principles for Woolworths Group”. The discussion scope of the audit risk committee has been able to highlight on significant initiatives has been able to reduce such risks. The last part of the learning’s is able to depict the income statement and performance of financial ratios from the balance sheet of the company.
Woolworths Group ensures that corporate governance is given central importance and significantly contribute to the long-term shareholder value. It strives to act morally and sensibly at all times. The Group has ensured that the approvals of the CG are following “ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Principles)”. The role of board is recognized with the presenting and serving the interest of the shareholders. It is further responsible and accountable for setting the strategy direction to enhance the shareholders’ value. The implementation of the strategy approved by the board is delegated to the management via formal “delegation of authority to the CEO”. The board is responsible for “financial oversight, effectiveness of risk management framework, financial reporting, performance evaluation, performing regulatory function, social responsibility, material transactions and corporate governance”. The review of board performance is depicted through outcome of the reviews with the external facilitator (Woolworthsgroup.com.au. 2018).
It is worth noting that performance feedback received with the individual directors are seen to be evaluated as per chairman discussions. The various forms of written contract by the CEO and senior executives members show the main form of the “terms and conditions” of his/her appointment inclusive of the “remuneration entitlements and performance requirements”. Furthermore, the remuneration assessment and performance in terms of the management has been performed with various types of remuneration entitlements. The assessment of remuneration along with management performance has highlighted the important areas of company’s way of as a examining the management standings. The approval of the CEO and Group Executive Committee members” and “people performance committee reviews” are made by the board, which is able to assess the remuneration entitlements along with clearly suggesting the various method of management performance. The different types of decisions which are particularly conflicting in nature and involves high amount of personal interest then directors are generally not involved in any such decision. Director considering to have a “conflict of interest or material personal interest” needs to report immediately to the company. It needs to be further understood that the general allowance is given by the board committee to the directors so that it enables them to exercise their responsibilities and powers which are in control of the board. The charter committee and the board of director are seen to be review the matters related to board in the company portal (Woolworthsgroup.com.au. 2018).
The significant nature of the information assessment for the company secretaries are put forward for assessment via chairman who is able to discuss on various matters related to functioning of the board committee. “People Performance Committee”, “nomination committee”, “Audit committee”, “Risk Management” and “Compliance Committee (ARMCC)”, along with the “sustainability committee” are identified as the board committees” for assisting the company in carrying out the intended objectives. The directors are further designed to obtain an appointment letter which sets out the duties, company expectations along with terms and conditions of the appointment. The direct induction program seen to include the site visits and editing meetings with the CEO, company secretary and the senior management for discussing board practices and procedures (Woolworthsgroup.com.au. 2018).
Woolworths Group is recognized as a complex business entity which is exposed to wide range of “strategic, financial, operational and compliance related risks”. These perils are inherent in the “retail and online businesses” including “food, liquor, petrol, general merchandise” as well as “accommodation, bar, dining and gaming operations”. The enterprise risk management framework of the group along with the “governance structure” is designed to provide adequate support for managing the material risks for conducting business. It needs to be further discerned that the risk management framework has included relevant regulations and standards which are complied with “ASX Corporate Governance Principles and Recommendations and the Australian/New Zealand standard AS/NZS ISO 31000:2009 Risk management – principles and guidelines”. The risk management policy of the company also reflects the complete “philosophy of groups approach to risk management” and setting out the important roles and responsibilities within the group. The enterprise risk management processes are responsible for identifying, monitoring and reporting of the risks which has impacted the success of “strategic objectives” and operating plans (Griffiths 2016).
“Woolworths Group” is identified to continually implement and identified opportunities for improving the overall “risk management framework” which is reviewed by ARMCC during the reporting period. The major material business risks for the company is identified with “economic, environmental and social sustainability risks”. In the retail trading environment, the strategies risks are considered with competition driven by technology disruption, new entrants and changing customer expectations along with other external and internal risk factors. The failure to effectively respond to these factors and competitors have adversely affected the business performance and market share. Some of the most noted financial risks is considered with the availability of funding and management of capital and liquidity required for group’s business operation and growth. The failure of the company to turnaround the general merchandise in the last financial year may significantly impact on profitability of the business. As per the group’s policy, the operational events are exposed to several risk factors including “product safety standards, information technology, security asset, data breaches and business disruptions” due to cyber-attacks. Some of the most noted operational risks are included with letdown for the organization due to bad weather, disruption in the business and failure to meet various types of safety operations. In addition to this, there may be industrial disputes because of supplies chain interruptions and technology failure. The violation of any sort of opposing changes could result in negative impact on the group’s reputation and profitability. The implications of this has been further seen with fines along with several adverse consequences. The main problems related to the compliance is mainly seen with the laws pertaining to contractual arrangement, the consequences for these are seen to be exposed to various types of changes in legislation. (Chen et al. 2015).
As per the companies and of consolidated income statements it is discerned that both profit and revenues have improved in 2017 compared to 2016. This is evident with a total revenue of 55475 in 2017 and 53473 in 2016. In addition to this, the profit has significantly improved from $ 726.3 in 2016 to $ 1422.1 in 2017.
The depictions based on profitability analysis ratio has highlighted that the net profit margin had significantly improved from 1.36% in 2016 to 2.56% in 2017. It has been further discerned that return on equity was – 58.8% in 2016 which has improved to 92.74% in 2017. There has been a positive increase in return on assets as well which is evident with ROA of 3.09 in 2016 and 6.21 in 2017.
The effectiveness of stock clearance has also significantly improved from the previous year which is evident with an improving inventory turnover ratio of 9.74. The total asset turnover ratio has also increased from 2.28 in 2016 to 2.4 in 2017.
Reducing nature of the liquidity ratio analysis clearly suggests that Woolworth Group was unable to keep appropriate portion of liquid cash which is required for day-to-day operation. The short-term liquidity calculation along with quick ratio is discerned with 0.83 current ratio into 2016 and 0.79 current ratio in 2017. Similarly, in this case indicated discerned that the company has been insufficient in maintaining appropriate liquid cash
The important depictions on the debt ratio has shown that Woolworth Group has been successful in reducing the overall debt obligations from 2016 to 17. This trend is evident with a debt equity ratio of 8.57 in 2017. In addition to this, the debt to total assets ratio has improved from 0.63 in 2016 to 0.57 in 2017.
The potential initiatives taken by the group to eliminate strategic risk this is depicted with the approval from the board for driving customer first “culture and investment growth enablers” which includes store network, digital channels and other technologies. Woolworths also strives to establish the delivery offices for driving the transformation initiatives. The present standings of the company selected for study focuses on delivering connected customer strategy along with an augmented focus towards the digital loyalty and digital business all along the company. The different types of short-term and long-term incentive plans are aligned with customers initial strategy. In addition to this, the corporate social responsibility strategy has identified the goals to improve the overall sustainability and environmental impact of the business operations (Cohen, Krishnamoorthy and Wright 2017).
The risk mitigation of financial aspect is done by the board after approving treasury policies for governing the management of financial risks associated to the group. Some of the main initiatives under this type of risk mitigation is identified with “group’s financial risks, including liquidity, interest rate and foreign currency risks”. The company has a board approved turnaround plan that is applicable to general merchandise and monitored on regular basis for anticipating the recognised sale of petrol business which would further improve the capital position (Sullivan and Gouldson 2017).
The group has been further discerned to establish “policies, training, standards and business operation along with “safety of health and wellbeing, food and product safety” being the most noted standards. Some of the main investment are seen in the areas of operational capability across cyber security, processes and technology. It needs to be understood that the company has taken several initiatives to improve the “Business Resilience Framework” for managing the response to the main operational incidents and business disruptions (Crowley 2016). The compliance framework of Woolworths group includes a variety of policies which are established for facilitating “legal, regulatory compliance and internal protocols”. The group is identified to take the liase with the government and various related bodies as per the proposed legal and regulatory modifications. The training program under the “Woolworths Group Code of Conduct” is identified with promoting the awareness of “legal, regulatory and internal policy requirements” (Parkinson 2016).
In terms of mitigation of the auditing risks “Deloitte Touche Tohmatsu” is recognized as the “Group’s external auditor”. Furthermore, “ARMCC” makes the relevant recommendations in terms of “selection, appointment, re-appointment or replacement of the external auditor. The aforementioned bodies which is managed by “group risk and assurance team”. Services for the management pertaining to the context of dependent and on the board in relation to internal control, risk management framework and corporate governance of Woolworths Group is evaluated with various types of interm risk. In addition to this, “ARMCC” is for the depicted to perform the internal audit functions executed as per planning of internal audit (Luiz 2016).
Conclusion
The significant discussions on implementation of ASX CG council principles has confirmed with the adherence to “ASX CG. The role of board is recognized with the presenting and serving the interest of the shareholders. The board committees are recognized with the important elements ranging from “nomination committee”, “Audit committee”, “Risk Management” and “Compliance Committee (ARMCC)”. Some of the various other inclusions of this management framework is identified with sustainability committee” along with “People Performance Committee”. The important nature of the findings pertaining to risk assessment has illustrated that business is exposed to wide range of operational, “strategic, financial and compliance related risks”. These risks are inherent in the “retail and online businesses” including “food, liquor, petrol, general merchandise” as well as “accommodation, bar, dining and gaming operations”. The illustration of the income statement and balance sheet ratio has depicted that the company has considerably improved in terms of profitability ratio, debt equity ratio and efficiency ratio. However, there has been significant drawback with unavailability of enough liquid funds which needs to be improved on an immediate basis
References
Chen, Y., Gul, F. A., Veeraraghavan, M. and Zolotoy, L. (2015) ‘Executive equity risk-taking incentives and audit pricing’, Accounting Review, pp. 2205–2234. doi: 10.2308/accr-51046.
Cohen, J., Krishnamoorthy, G. and Wright, A., 2017. Enterprise risk management and the financial reporting process: The experiences of audit committee members, CFOs, and external auditors. Contemporary Accounting Research, 34(2), pp.1178-1209.
Crowley, M., 2016. Is the level of sustainability reporting an indicator of future value of a company? (Doctoral dissertation).
Griffiths, P., 2016. Risk-based auditing. Routledge.
Luiz, J., 2016. Woolworths South Africa.
Parkinson, M.M., 2016. Corporate governance during financial distress–an empirical analysis. International Journal of Law and Management, 58(5), pp.486-506.
Sullivan, R. and Gouldson, A., 2017. The governance of corporate responses to climate change: an international comparison. Business Strategy and the Environment, 26(4), pp.413-425.
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