Key risks

Strategic risk

Risk area and possible impact
How does GrandVision mitigate this risk?
Customer preference

Becoming less relevant to our consumers, due to competition, or due to our products and services and the way in which they are offered. Declining street traffic due to changing consumer habits with ongoing digitization plays an increasing role and requires new tools and new skills.

  • We invest in our people, products, (digital) marketing campaigns, sales promotions and store optimization that enable us to remain relevant to our consumers
  • Our investment in multiple e-commerce solutions and the omni-channel customer journey, whereby the customer decides how, when and where they want to buy from GrandVision
  • By investing continuously in a portfolio of high-quality Exclusive Brands that are appealing to our customers
  • By continuing to invest in the GV Academy to train our employees, and in systems and processes that allow us to deliver the highest standards in quality and customer service.
Portfolio risks

Possible adverse impact on growth and profitability, not being able to expand further, or specific regional or country issues, such as Brexit.

  • The portfolio is being continuously reviewed and optimized as required. Closing or relocating stores is an integral part of this strategy. Our franchisees are independent operators, but the Company applies strict criteria of governance, and looks to improve performance on an ongoing basis
  • Comparable growth as our most important performance parameter is monitored daily and if needed, measures are taken to improve it, such as promotions, campaigns, incentives, assortment changes and others
  • We continuously look for growth opportunities across our countries, and enter new territories if needed. Post-acquisition, we spend a lot of time integrating new businesses and improving performance with the help of existing or new management, where this is deemed necessary
  • We continuously monitor the performance of the countries and regions, and invest significantly in emerging markets to further accelerate future growth
  • Additionally profit protection plans are developed and updated throughout the year for every business unit. Geographic diversification is also part of GrandVision’s strategy and allows us to spread risks across regions
  • In 2016 we were confronted with the unexpected outcome of the UK referendum on Brexit. Numerous mitigating actions have been put in place for example renegotiating key supplier agreements, cost reduction programs, further FX hedging and revisiting our pricing strategy in order to reduce the financial impact going forward.
Industry risks

Changing consumer patterns due to healthcare contributions changing, or vision correction alternatives that become more popular could impact future growth and profitability.

  • GrandVision operates successfully in many countries where no eye care reimbursements exist
  • As one of the largest companies in the industry, we have a proven ability to adapt to changing market dynamics while still operating profitably
  • The Company believes eye correction alternatives will be very slow to take hold as many customers prefer to wear glasses over medical solutions that involve surgery.
External economic & political risks, reputational risk and natural disasters

Possible adverse impact on our reputation, brand values and/or growth and profitability.

  • Our diversified portfolio more than 40 countries is a strong mitigating factor against individual country or regional economic risk. We monitor these risks through the normal course of business and use a range of measures such as commercial promotions, financial hedging, internal reorganizations or cost saving, to counter the potential impact in the near term.
  • Due to our increasing external profile, our reputational risk increases in various areas, for instance, increasing regulatory (compliance) requirements, data protection and cybersecurity, social media, code of conduct and product liability. GrandVision mitigates these risks by strongly emphasizing the tone at the top, applying a strong internal control framework, audits, policies, training, and e-learning tools, internal communication and the focus on managing our external expectations
  • We have Business Continuity plans in place in case of natural disasters or other calamities plus specific insurance limits will help to reduce the financial impact of such events.

Operational risk

Risk area and possible impact
How does GrandVision mitigate this risk?
Talent

Inability to recruit, train and retain qualified management and suitably skilled employees to support our expansion.

  • This topic is treated with the highest priority in every country where GrandVision operates. The GV Academy supports training programs in all countries, including e-learning tools. We strive to maintain attractive working conditions and benefits for our employees
  • We establish strong connections with universities and higher education foundations and are exploring transnational leveraging of education.
Supply chain

Inability to deliver products to the stores due to either operating issues in theTechCenters or lack of supply or quality issues.

  • GrandVision runs TechCenters in different locations to mitigate geographic and operational risks
  • To have multi-year contracts in place with key suppliers after competitive tender processes
  • To employ high quality control standards throughout our organization
  • The company engages with specialized audit firms to perform quality checks with our main suppliers
  • The increasing centralization of our supply chain and the reduction in the number of key suppliers allows us to improve our quality and reliability standards
Systems and information

Inability or delays in new system implementations that impact daily processes. Cyber security and data protection are increasingly relevant for GrandVision.

  • We work with well-known and experienced partners to help implement such systems in phases over multiple years, under the supervision of a Program Management Office. Steering groups are in place to safeguard delivery quality, timing and budgets
  • Data security is an area of major importance and the Company is committed to being compliant with all relevant laws and regulations. It is also investing more in technology and systems to further improve the data protection measures for the group. In 2016, we rolled out our Cyber Security and Data Protection Policies and appointed Data Protection Officers throughout our organization.
Business transformation

Inability or delays in the roll out of global capability tools to all countries.

  • The change management program is managed by the Program Management Office in close cooperation with the countries & global functions and the help of detailed roadmaps. Every work stream is led by a member of the GrandVision Senior Management team. A phased global rollout only happens after the capability is fully tested and has gone live in one or more pilot countries.

Financial risks

Risk area and possible impact
How does GrandVision mitigate this risk?
Treasury and insurance

Significant changes in financial markets that impact the financial condition or performance of the company.

  • We have a five-year €1.2 billion credit facility in place with ample headroom. In 2016, the facility was extended by one more year until 2021. We also maintain a minimum €200 million of financial headroom to manage our liquidity position on a daily basis
  • We regularly enter into FX contracts to manage the currency exposure. We also enter regularly into discussions with our main suppliers to mitigate currency impact via various means like sharing mechanisms, changing sourcing location or adjusting the invoicing currency prices. GrandVision does not hedge translation risk
  • In 2016, we renewed all Group insurance policies and reviewed the need for new policies or adjusted limits
  • In 2016, we concluded €150 million of new interest rate swaps to fix our interest rates for longer time periods.

For more details see note 3 to the Consolidated Financial Statements entitled "Financial Risk Management".

Legal and compliance risks

Risk area and possible impact
How does GrandVision mitigate this risk?
Ethical, legal, tax, compliance and regulatory risks

Failure to comply with internal and external policies, rules and regulations, including the protection of all the company’s tangible and intangible assets.

  • At GrandVision, we are committed to complying with the laws and regulations of the countries in which we operate. In specialist areas, the relevant teams at global, regional or local levels are responsible for setting detailed standards and ensuring that all employees are aware of these, and are trained sufficiently to comply with regulations and laws that are relevant to their roles. Legal and regulatory specialists in the company monitor and review our practices to provide reasonable assurance that we remain aware of and in line with all relevant laws and obligations. A GrandVision Compliance Framework is in place which sets out policies, reporting, e-learning, training requirements and localization guidelines.
  • In 2016 nearly 100% of all employees took the code of conduct and whistleblower procedure e-learning module. In addition, competition law compliance training and e-learning was provided globally to all relevant employees
  • Compliance with national and international tax regulations is ensured through GrandVision’s Tax Control Framework. The Tax Control Framework enables to effectively monitor, control and manage the group-wide tax positions. The Framework also creates adequate and timely awareness at Group level of possible worldwide tax exposures. In 2016 we created a Virtual Global Tax Team consisting of members from across regions of presence. The global tax team possesses relevant tax knowledge and insights to identify and adequately respond to tax exposures. Insights are made available throughout the business through the existence of adequate procedures and processes. GrandVision strives to maintain strong working relations with tax authorities; In countries where possible through the conclusion of collaborative working (horizontal monitoring) arrangements
  • The GrandVision Governance Framework sets out proper corporate decision-making procedures and reviews processes for all legal entities.