Carrefour - 2017 Registration Document

MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Risk management 2017 REGISTRATION DOCUMENT | CARREFOUR 4. 196 Partnerships and franchising Since most of the Group’s stores under banner are operated as franchises and the Group’s growth relies on partnerships in several countries, the evaluation, selection, support and oversight of these various franchisees and partners may have an impact on financial and operational performance, and on the Group’s reputation in the event the partners’ practices do not comply with regulations or the Group’s standards and values. It is important to carry out a partner risk analysis when considering a new partnership or when monitoring existing partnerships. As part of the implementation and execution of franchise and partnership agreements, support documentation for business operations is provided to franchisees and partners. This documentation covers the Group’s business and financial methods, its quality, health and safety standards, the Ethics Principles and the Graphic Charter. The documents are periodically updated, and franchise advisers offer support for their implementation through regular visits to partners and franchisees. Some Group projects are carried out through equity-accounted companies, where the Group’s level of influence and control and its ability to manage risk may be limited. Control of the supply chain In an interdependent global market with a large number of suppliers and increased cross-docking, in both traditional retailing and e-commerce, the performance of logistics processes and continuity of supply to the Group’s stores, both consolidated and franchised, as well as the delivery of customer orders placed through e-commerce, are essential to customer satisfaction and the achievement of operational and financial targets, with greater risk in emerging markets and multinational corporations’ growing responsibility for their supply chains. Given that purchasing is a key way of standing out from the competition, the Group’s organisation is adapted to its international scope while capitalising on its knowledge of local markets and relying on entities dedicated to sourcing new products. Risk mapping of the purchasing function describes the purchasing processes, identifies purchasing risks and classifies identified risks in terms of source, position in the process, cause and effect. Particular care is paid to the risk of disruption in the supply chain. This involves identifying a warehouse’s exposure to risk, classifying and quantifying the potential impacts of the risk of disruption in the supply chain and prioritising investment to improve the level of control. Over a number of years, the Group has developed expertise which ensures the flow of supplies to its stores, relying on integrated logistics platforms and service providers, along with business continuity plans in the event of an unusual situation. inventory and real-time information, and large-scale data analysis for improved customer relationship management). In France, under a back office simplification plan, the Group has simplified information systems (simpler ordering, inventory management, pricing verification, deliveries, real-time inventories, possibility to reserve products through e-commerce channels, better in-store margin control, etc.) and optimised data management and usage (360° vision of products, customers, Under the Caravelle project, the Group has set up a multi-format food supply chain, revised the logistics barycentres in each region and revamped its non-food model. This has resulted in shorter distances between the warehouse and the store, fleet sharing, optimised delivery rounds and loading time gains, lower inventory levels because of a reduced number of stocking locations and improved in-store service rates. Product quality, compliance and safety Ensuring quality and safety of the Group’s own-brand products and complying with health standards in stores are major issues which can significantly impact reputation and financial performance, and which may in some cases result in liability for the Group. The same is true in terms of monitoring logistics as well as recall and withdrawal procedures for all products sold (national brand product listings). The Group Quality Department has developed a number of standards and tools which are deployed in all countries where the Group operates. The country-level Quality Departments are also part of the Quality network, with regular meetings and discussions aimed at increased sharing of best practices and ensuring a consistent approach. The Group has also launched a major employee training programme and regularly communicates with customers about food safety. In addition, the system includes a procedure for swiftly removing any potentially dangerous product from inventory and taking it off the shelves. This procedure is evolving in order to provide additional automated solutions to increase the safety level even further. Carrefour brand products are subject to more stringent procedures and controls, from design to marketing, as part of a comprehensive approach presented in the Registration Document in Section 2 on Corporate Social Responsibility. Safety of people and property Compliance with health and safety regulations and the protection of Group assets are important priorities. Insufficient consideration of these issues could negatively impact the Group’s reputation, operations and financial performance, and may also have legal consequences. An appropriate crisis management system in case of a major event is an important part of limiting its potentially significant negative consequences, especially with regard to business continuity. The Group’s risk prevention organisation ensures the personal safety of employees and customers and the security of property at all Group sites by using human, technical and organisational resources appropriate to the risks. Risk mapping of the safety and security of people and property identifies the external and internal environments, the construction and operation stages, critical control points and tools associated with each risk.