Principal risks and uncertainties PRINCIPAL RISKS AND UNCERTAINTIES ASSESSMENT The Board confirms that it has carried out a robust assessment of the principal risks facing the Group, including emerging risks, and those that would threaten its business model, future performance, solvency or liquidity. The Board’s assessment of the principal risks and uncertainties facing the Group and the mitigation in place is set out on pages 79 to 88. CHANGES TO PRINCIPAL RISKS IN THE YEAR We did not identify any new or emerging risks in the year, either through our Board and Audit and Risk Committee is likely to have on our business, and the scale of the action that reviews, or at the discussions of ‘What keeps us awake at we need to take in response. The Board is keen for Dunelm night?’ which we held at our Board meeting in June. to take a leading role and seize the opportunities as well as The Covid-19 crisis has continued to impact our business during managing the risks. As described elsewhere in this report, the year. Last year we debated whether to add ‘pandemic risk’ accountability for sustainability and climate change has been to our register of principal risks. We decided instead to add assumed by our CEO, Nick Wilkinson, with members of the ‘Resilience’, defined as ‘failure to withstand the impact of an Executive Board taking ownership of each of the main areas of event or combination of events that significantly disrupts all Carbon Reduction, Circular Economy and Community. Purely in or a substantial part of the Group’s sales or operations (e.g. terms of principal risks, although we retain Climate change and pandemic)’. We considered that this was more appropriate to environment as a risk in its own right, there are impacts across address a wider range of unexpected high-impact challenges, many of the other risk areas, reflecting the impact that this will although the mitigations are broadly the same. have on our strategy and operations. At our Board meeting in June 2021, we debated The second principal risk which has heightened is IT systems, ‘What makes Dunelm resilient?’, a summary of which data and cyber security. As with all businesses, we are is set out below: increasingly dependent on data and information technology; this is increasing more quickly for us than others as digital • Clear customer and sustainability-focused purpose, sales account for a rapidly increasing share of the total. At the backed by strong shared values that are ‘lived’ same time, the threat from cyber criminals is increasing. throughout the business • Focus on ‘long-term thinking’ and ‘doing the right thing’ The third risk that has increased is Supply chain disruption. • Quality of Board and leadership team Changes in global supply chain capacity, labour shortages and ongoing disruption from Covid-19, as well as geo-political • Conservative financial approach – strong balance instability could interrupt supply of product to all businesses. sheet, cash flows and liquidity; low-cost property The Board have mitigated some of this disruption through portfolio; ‘value for money’ mentality investment in capacity, proactive planning and building on • Clear strategy, backed by detailed and credible plans our strong supplier relationships but this risk is developing and investment fast and the inflationary pressures from these changes could • Strong brand, focus on product design, quality, impact profitability. value and – increasingly – sustainability, more than one channel to market, backed by ever-improving Our actions to address these risks are reflected in our proposition online and in-store strategy and the Board’s activities throughout the year. • Engaged, committed colleagues Sustainability is a key part of our revised purpose, is reflected in our FY21 Focus Areas and capabilities, and has been a • Strong relationships with key suppliers, partners and formal discussion topic at our Board’s strategy days and four advisers meetings during the year. Increased investment has also been • Sound governance, controls, processes and risk approved in our FY22 budget and five-year plan. Similarly, IT management, with clear mitigations and back-up plans is a key element of many of our FY22 Focus Areas, data is a in place foundational capability, and we have increased investment in • Stable shareholder base, with sizeable family holding both in our FY22 budget and five-year plan. At Board level, and good quality institutional shareholders enables we have increased our capability in environmental, social long-term focus and governance matters through the appointment of Arja Taaveniku, and are actively seeking another NED with digital and finance experience. Although we did not identify any new principal risks, there are three risks where the potential impact has increased over the We did remove one principal risk from our register – Brexit. year. The first is Climate change and environment, including As a result of the plans put in place by management, and biodiversity. The work that the Board and management team the limited amount of sales and sourcing from the European have conducted to better understand this risk, together with Union, the impact of Brexit on Dunelm was minimal. There are theincreased focus of government, investors, customers and some ongoing actions but these are now being managed as colleagues, has helped us to start to assess the impact that this part of day-to-day activities. DUNELM GROUP PLCANNUAL REPORT & ACCOUNTS 2021 79 STRATEGIC RREPORT GOVERNANCEFINANCIAL SSTATEMENTSOTHER IINFORMATION