RNS Number : 4028O

Sainsbury(J) PLC

29 May 2020

29 May 2020

J Sainsbury plc

(the "Company")

Annual Report and Financial Statements


The following documents have today been posted or otherwise made available to shareholders:

   --    Annual Report and Financial Statements 2020 for the year ended 7 March 2020; 
   --    Notice of Annual General Meeting to be held on 2 July 2020; and 
   --    Form of Proxy for the 2020 Annual General Meeting. 

In accordance with Listing Rule 9.6.1R, a copy of each of these documents will be uploaded to the National Storage Mechanism and will be available for viewing shortly at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

   The above documents may also be viewed online at   www.about.sainsburys.co.uk/ar20 20 and www.about.sainsburys.co.uk/ agm2020 . 

A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's Preliminary Results Announcement on 30 April 2020.

That information together with the information set out below which is extracted from the Annual Report and Financial Statements 2020 (the "Annual Report 2020") constitute the material required by Disclosure Guidance and Transparency Rule 6.3.5R, which is required to be communicated to the media in full unedited text through a Regulatory Information Service.

This announcement is not a substitute for reading the full Annual Report 2020. Page and note references in the text below refer to page numbers in the Annual Report 2020. To view the preliminary announcement, slides of the results presentation, the transcript of the presentation and the webcast please visit www.about.sainsburys.co.uk/investors/results-reports-and-presentations .


 Investor Relations     Media 
 James Collins          Rebecca Reilly 
 +44 (0) 20 7695 0080   +44 (0) 20 7695 7295 

Our Principal Risks and Uncertainties

The COVID-19 pandemic has demonstrated that risk and issue management is an inherent part of doing business and has tested Sainsbury's risk and resilience processes. The short-term impact of COVID-19 on our principal risks was assessed by the Board. The results of this assessment are set out on pages 7 to 9. Below and on the following pages, we set out an overview of the risk management framework, the principal risks at year end, ongoing mitigations and how these align to our strategy. The Board will continue to monitor the principal risks and flex mitigations, in particular, to respond to the medium and longer-term impacts of the pandemic as they become clearer.

Risk management framework

The management of risk is based on the balance between risk and reward, determined through a careful assessment of both the potential outcomes and impact as well as risk appetite. Consideration is given to both reputational and financial impact, recognising the significant commercial value of the Sainsbury's brand. The risk management process is aligned to our strategy and each principal risk and uncertainty is considered in the context of how it relates to the achievement of the Group's strategic objectives.

The following table provides an overview of the key risk management activities undertaken by leadership that allow the Board to fulfil its obligations under the 2018 Code. Please refer to page 55 for the role and remit of these.

 Division/function leadership 
  Bottom-up risk identification                   *    Divisional risk maps reviewed and challenged 
                                                  *    Monitor risk actions 
 Governance forums 
  Risk identification and monitoring              *    Divisional risks relevant to forums' area of scope 
                                                  *    Governance forum risk maps 
 Operating Board 
  Bi-annual corporate risk updates                *    Corporate risk map and monitor actions 
  and deep dives 
                                                  *    Risk deep dives 
                                                  *    Emerging risk map 
 Audit Committee 
  Corporate risk updates, deep                    *    Corporate risk map 
  dives and approval of the risk 
                                                  *    Risk deep dives 
                                                  *    Risk policy and framework 
                                                  *    Internal audit reporting 
 plc Board 
  Review of risk process, corporate               *    Annual internal controls certification by management 
  risks and approval of risk disclosures 
                                                  *    Principal risk and uncertainty disclosures 

Our risk management process is designed to identify key risks and to provide assurance that they are fully understood and managed in line with management's risk appetite.

The plc Board has overall responsibility for risk management and internal controls, and for reviewing their effectiveness at least annually. Certain responsibilities have been delegated to the Audit Committee as outlined on page 71.

The risk management process is embedded at the Operating Board level and is supported by the bottom-up risk process within divisions and governance forums. The Operating Board maintains an overall corporate risk map, which is reviewed four times a year by the Audit Committee and is formally discussed with the Board.

To support risk discussions, the corporate risk map captures the principal risks to achieving Sainsbury's objectives and identifies the potential impact and likelihood at both a gross and net level. The Operating Board reviews the risk map twice a year to discuss and agree the level of risk that the business is prepared to accept for each key corporate risk. The target risk position is captured to reflect management's risk appetite where this differs to the current net position. This enables the Operating Board to agree and monitor appropriate actions as required.

Operating Board members certify annually that they are responsible for managing their business objectives and internal controls to provide reasonable, but not absolute, assurance that the risks in their areas of responsibility are appropriately identified, evaluated and managed. This is reported to the plc Board.

Internal Audit and Risk provides the Audit Committee with a risk management update at each meeting, which includes the key risk activities undertaken within functions, governance forums and at divisional and corporate levels.

 Developments in our risk management process: 
  Emerging risks and opportunities were reviewed formally in 
  the year. Whilst emerging risks are regularly discussed and 
  identified as risks "to watch" through our bottom-up risk 
  assessment process, this year a supplementary review was facilitated 
  by Internal Audit and Risk. The review assessed a range of 
  scenarios to identify emerging risks and opportunities that 
  may impact our business, considering their potential timeframe 
  and degree of certainty. The outcomes were reported to the 
  Operating Board and Audit Committee. Going forward, this assessment 
  will be completed annually and aligned to corporate planning. 
  The business has also continued to monitor and respond to 
  risks and uncertainties relating to the impact on our operations 
  of Brexit , which we continue to disclose as a specific principal 
  Climate change risks were subject to a specific risk review. 
  Risks identified from the bottom-up and emerging risk assessments 
  were reviewed to confirm completeness. Their impact on our 
  overall risk assessment was then considered. 
  Climate change risks identified are considered in the existing 
  principal risks we are disclosing and have been taken into 
  consideration in assessing impact and likelihood, where appropriate. 
  As signatories of the Task Force on Climate-related Financial 
  Disclosures (TCFD), we will implement their recommendations 
  in 2020/21. This will include using scenario modelling to 
  further assess the impact of current and emerging climate 
  change on our business model. 

The annual risk management process is illustrated in the table below.

                    Quarter 1               Quarter 2             Quarter 3              Quarter 3 
                  March to June         July to September          September            December to 
                                                                  to December              March 
 Divisions/        Divisional              Divisional             Divisional            Divisional 
  functions       risk workshops          risk check-in          risk check-in         risk check-ins 
                    (bottom-up              (quarterly         (risk validation)         (quarterly 
               risk identification)        in 2020/21)                                  in 2020/21) 
                                                                                    annual certification 
                                                                                         risks are 
                                                                                       and monitored 
             ----------------------  ----------------------  -------------------  ---------------------- 
 Governance        Governance              Governance             Governance            Governance 
  forums            forum risk              forum risk            forum risk             forum risk 
                    workshops                check-in              check-in               check-in 
                  (consolidated             (quarterly           (consolidated           (quarterly 
                     view of               in 2020/21)              view of             in 2020/21) 
                 risks reviewed)                               risks validated) 
             ----------------------  ----------------------  -------------------  ---------------------- 
 Operating        Emerging risk             Corporate           Emerging risk            Corporate 
  Board             assessment               risk map              workshop               risk map 
                  move to align             half-year              to review          year-end review 
                   with 2020/21               review               bottom-up 
                    Corporate          (review consolidated      and scenario 
                     Planning                  view             based emerging 
                                        of risks/actions)       risks (2019/20) 
             ----------------------  ----------------------  -------------------  ---------------------- 
                                    Risk deep dives aligned to business priorities 
 Audit             Review and               Corporate          Risk management           Corporate 
  Committee          approve                 risk map               update                risk map 
                    principal               half-year                                 year-end review 
                    risks and                 review                                    Approve risk 
                  uncertainties        (review consolidated                              framework 
                                        of risks/actions) 
             ----------------------  ----------------------  -------------------  ---------------------- 
                                   Risk deep dives as requested by Audit Committee 
 plc Board          plc Board 
                    review of 
                  risk process, 
                    risks and 
                and uncertainties 
             ----------------------  ----------------------  -------------------  ---------------------- 
 Internal                         Facilitate the risk management process and prepare 
  Audit and                                     reporting to all Boards 
                 Internal Audit                                 Internal Audit         Annual review 
                    risk-based                                    risk-based                 of 
                    half-year                                      half-year           risk framework 
                       plan                                          plan 
             ----------------------  ----------------------  -------------------  ---------------------- 

The specific risk management activities undertaken in the financial year to 7 March 2020, and proposed changes for next year, include:

- The Internal Audit and Risk team facilitated risk workshops with divisional leadership teams to identify the key risks which may prevent the achievement of objectives. A risk map is maintained for each division setting out key risks and their gross, net and target positions. A consolidated view of relevant risks was then discussed at each key governance forum - safety, data governance and operational resilience. In 2020, we will move to quarterly check-ins with all divisions and governance forums.

- Divisional management and governance forums reviewed key risks and the effectiveness and robustness of the mitigating controls as part of their normal business activities.

- Emerging risks and opportunities were formally assessed. Emerging risks and opportunities will continue to be monitored, with this assessment aligned to corporate planning in 2020.

- The Operating Board reviewed and challenged the output of the bottom-up risk process including new risks, risk movements and key themes. The corporate risk map was updated as appropriate.

- The plc Board reviewed the risk management process and corporate risks at the year end and approved the Company's principal risks and uncertainties disclosure, including the disclosure relating to the impact of COVID-19 on principal risks (as set out on pages 38 to 45 and on pages 7 to 9).

- Internal Audit provided independent assurance to management and the Audit Committee over specific risk areas as part of their audit plan.

- As set out over the following pages, risk deep dives were undertaken with the Operating Board and/or Audit Committee for seven of our 12 principal risks. Deep dives will continue, with focus on assessing whether we are within our risk appetite.

The most significant principal risks identified by the Board and the mitigations are set out below in no order of priority.

The net risk movement from the prior year for each principal risk and uncertainty has been assessed.

Mitigations in place, supporting the management of the risk to a net risk position, are also described for each principal risk and uncertainty.

Where principal risks have been included in the risk modelling, undertaken as part of the preparation of the viability statement (see page 46), this has been indicated with the following symbol: *.

Key risk movements

As noted, the principal and emerging risks are discussed and monitored throughout the year to identify changes to the risk landscape. Risks are reviewed in line with the Company's strategic objectives.

The key risk movement disclosed relates to the net risk impact for data security increasing to reflect the level of fines being imposed in the UK market for data breaches.

Brand perception

  We are a multi brand, multi channel business incorporating 
  Sainsbury's, Argos, Habitat, Tu , Nectar and Sainsbury's Bank. 
  Our business must continue to evolve to meet customer needs 
  and maintain customer loyalty. Customer lifestyles, behaviours 
  and expectations are changing and we need to continue to differentiate 
  our offer to retain and attract customers. We also need to 
  protect our brand so that customers, suppliers and stakeholders 
  continue to trust us. 
 Direct oversight 
  Operating Board, Customer Trading Forum and Sainsbury's Bank 
  Management Board 
      Link to strategy 
        *    Be competitive on price 
        *    Offer distinctive products and new categories 
        *    Fast, friendly and convenient 
  No change to net risk exposure 
        *    We continually focus on evolving our ways of working 
             to ensure we continue to meet our customers' needs so 
             that our brands continue to remain relevant 
        *    We have a wide, differentiated product offer, which 
             gives our customers more reasons to shop with us 
        *    We change and evolve to meet the needs of our 
             customers through our digital strategy and technology 
             developments, so that we are there for them whenever 
             and wherever they want to shop with us, with great 
             products and services at fair prices. To deliver this, 
             we will continue to listen to and understand our 
        *    Nectar supports our strategy of knowing our customers 
             better than anyone else. The acquisition has given us 
             more control over how we reward and recognise our 
             customers and we have since launched digital Nectar 
             to give customers offers which are personalised to 
        *    In terms of brand protection, many of the mitigation 
             activities set out against the risks above also help 
             prevent or reduce the risk of losing the trust and 
             loyalty of customers, suppliers and broader 
        *    We launched an all-encompassing target to become a 
             Net Zero business by 2040, as we know this is a 
             material concern and motivation for our customers 
             both now and in the future 



  There remains economic and regulatory uncertainty in the UK 
  following leaving the EU in January 2020 and a lack of clarity 
  around future trading arrangements following the transition 
  period. These uncertainties could have an adverse effect on 
  customers, supply chains and colleagues, potentially impacting 
  trading performance across the sector. 
 Direct oversight 
  Operating Board 
      Link to strategy 
        *    Be competitive on price 
        *    Personalised and seamless physical and digital 
        *    Be a place where we all love to work 
  No change to net risk exposure 
        *    The Brexit Response team has been in place during the 
             last year to actively prepare for a no deal scenario. 
             The Brexit Response team co-ordinates activities 
             across the Trading, Retail, HR, Legal and Finance 
             teams to help ensure that, in the event of no-deal at 
             the end of the transition period, appropriate 
             mitigations are in place to reduce the impact on 
             customers, supply chains and colleagues 
        *    These activities continued to focus on three key 
             areas of risk in the event of a no deal: 
        *    Delays at borders, reducing fresh product 
             availability and choice 
        *    Cost impact associated with tariffs, loss of trade 
             and currency fluctuations 
        *    Impact of changes in EU migration throughout our 
             supply chains 
        *    We will continue to engage actively with the 
             Government, industry and regulatory bodies to assess 
             the specific impact on our business as and when their 
             focus returns to this matter 

Business continuity, operational resilience and major incident response


  A major incident or catastrophic event could affect the business 
  or its individual brands' ability to trade. Sainsbury's exposure 
  to operational resilience and major incident risks may be 
  greater following the acquisition of Argos and Nectar given 
  the increased size and complexity of the business. 
 Direct oversight 
  Group Operational Resilience Committee 
      Link to strategy 
        *    Fast, friendly and convenient 
        *    Personalised and seamless physical and digital 
  No change to net risk exposure 
        *    The Group Operational Resilience Committee (GORC) 
             meets quarterly and is chaired by the Chief Financial 
             Officer, with support from our Company Secretary and 
             Corporate Services Director and Chief Information 
             Officer. The GORC sets the operational resilience 
             strategy for the Group and monitors progress against 
        *    To support this, the Operational Resilience Committee, 
             which includes representatives from operational 
             functions across Sainsbury's, including the Bank, 
             meets regularly to ensure that the operational 
             resilience policy and strategy is implemented 
        *    Business-wide resilience exercises are undertaken to 
             imitate real life business continuity scenarios and 
             test our ability to respond effectively 
        *    Key strategic locations have secondary backup sites 
             that would be made available within pre-defined 
             timescales and are regularly tested 
        *    All key business processes are assessed for 
             operational resilience against a set of minimum 
             standards and contingency measures are regularly 
        *    In the event of any unplanned or unforeseen events, 
             the Incident Response team is convened to manage the 
             response and any associated risk to the business 
        *    The business has plans in place, supported by senior 
             representatives who have the experience and the 
             authority levels to make decisions in the event of a 
             potentially disruptive incident 
        *    Key strategic locations have an automated emergency 
             call cascade solution implemented which allows for 
             emergency communications to be made to all colleagues 
             and for responses to be received back when required 

Business strategy and change*

  If the Board adopts the wrong business strategy or does not 
  communicate or implement its strategies effectively, the business 
  may be negatively impacted. Risks to delivering the strategy, 
  change initiatives forming part of the strategy and other 
  significant supporting change activities need to be properly 
  understood and managed to deliver long-term growth for the 
  benefit of all stakeholders alongside management of business 
  as usual. 
 Direct oversight 
  Operating Board 
      Link to strategy 
        *    Drive efficiency to reinvest 
  No change to net risk exposure 
       Our business strategy, as set out in this Strategic Report, 
       is focussed on: 
       -- Be competitive on price 
       -- Offer distinctive products and new categories 
       -- Fast, friendly and convenient 
       -- Personalised and seamless physical and digital 
       -- Drive efficiency to reinvest 
       -- Be a place where we all love to work 
       -- Net Zero by 2040 
        *    The Board regularly reviews progress against 
             strategic programmes and any risks to delivery, such 
             as the ability to implement and deliver change and 
             new business initiatives. The overall strategy is 
             reviewed at the annual two-day Strategy Conference 
             and a Capital Markets Day was held in September 2019 
             to give investors greater insight into business 
        *    The Operating Board has regular sessions to discuss 
             strategy; supported by a dedicated strategy team. The 
             strategy is communicated and the business continually 
             engages with a wide range of stakeholders, including 
             shareholders, colleagues, customers and suppliers 
        *    Management performs ongoing reviews of our market, as 
             explained on pages 12 to 13 and monitors business as 
             usual performance to determine indicators of 
             potential negative performance because of change 

Colleague engagement, retention and capability

  The business employs over 172,000 colleagues who are critical 
  to the success of our business. Attracting talented colleagues, 
  investing in training and development, maintaining good relations, 
  and rewarding colleagues fairly are essential to the efficiency 
  and sustainability of business operations. An inability to 
  attract, motivate and retain talent, specific skill sets and 
  capability impacts our ability to deliver strategic objectives, 
  including the integration with Argos. In addition, the challenging 
  trading environment requires a focus on efficient operations, 
  which may include change initiatives affecting colleagues, 
  therefore presenting a risk of loss of colleague trust or 
 Direct oversight 
  Operating Board 
      Link to strategy 
        *    Be a place where we all love to work 
  No change to net risk exposure 
        *    Employment policies and remuneration and benefits 
             packages are regularly reviewed and are designed to 
             be competitive, with other companies, fair and 
             consistent, as well as providing colleagues with 
             fulfilling career opportunities 
        *    In addition to strong leadership and nurturing of 
             talent by line managers, formal processes are also in 
             place to identify talent and actively manage 
             succession planning throughout the business 
        *    Reviews are performed to help develop the skills 
             colleagues need to deliver objectives and this is 
             supported by embracing new ways of attracting talent 
        *    Our business priority 'Be a place where we all love 
             to work' reinforces our commitment to giving people 
             the opportunity to be the best they can be 
        *    Colleague surveys, performance reviews, listening 
             groups, communications with trade unions, regular 
             communication of business activities and colleague 
             networking forums such as Yammer, the updated 
             colleague portal (Our Sainsbury's) and the colleague 
             learning portal are some of the methods the business 
             uses to understand and respond to colleagues' needs 
        *    As change initiatives are implemented, the methods 
             described above will continue to be employed to 
             understand and maintain colleague trust and 

Data security*


  It is essential that the security of customer, colleague and 
  company confidential data be maintained. A major breach of 
  information security could have a significant negative financial 
  and reputational impact on the business. The risk landscape 
  is increasingly challenging with deliberate acts of cybercrime 
  on the rise, targeting all markets and heightening the risk 
  exposure to broader business disruption as well as to data 
  breaches. We continue to invest in improving our data governance 
  and information security defences, however, we recognised 
  the net risk increased during the year. This was primarily 
  driven by the value of fines levied in the UK market for data 
 Direct oversight 
  Data Governance Committee 
      Link to strategy 
        *    Fast, friendly and convenient 
        *    Personalised and seamless physical and digital 
  Increased net risk exposure 
        *    A Group Data Governance Committee is established and 
             is supported by focused working groups looking at the 
             management of colleague data, customer data, 
             information security, commercial data and awareness 
             and training 
        *    We have combined our Data Governance and Information 
             Security functions and the Head of Data Governance 
             and Chief Information Security Officer continues to 
             develop information security strategies and to build 
             the necessary capability to deliver against those 
             strategies alongside focusing on improving how we 
             handle data across the organisation 
        *    Various information security policies and standards 
             are in place, which focus on encryption, network 
             security, access controls, system security, data 
             protection and information handling 
        *    All colleagues are required to complete mandatory 
             training on how to keep our information safe. This is 
             supplemented by regular awareness campaigns, focusing 
             on specific aspects of data and information security 
        *    Reviews of key third parties who hold sensitive 
             customer or colleague data continue to take place and 
             progress is monitored by the Data Governance 
        *    A risk-based security testing approach across IT 
             infrastructure and applications is in place to 
             identify ongoing vulnerabilities 
        *    Reflecting the importance of data security, two 
             deep-dive reviews of this risk have been performed 
             with the Operating Board and Audit Committee in the 
             year. These have covered mitigating controls and 
             activities to manage this risk. These discussions are 
             conveyed to the Board as part of our normal 
             governance processes. We have also conducted a review 
             of risk appetite in this area which has been reported 
             to the plc Board 

Environment and sustainability


  The environment and sustainability are core to Sainsbury's 
  values. The key risk facing the business in this area relates 
  to reducing the environmental impact of the business, which 
  could result in a financial and/or reputational risk. 
 Direct oversight 
  Operating Board, Corporate Responsibility and Sustainability 
      Link to strategy 
        *    Net Zero by 2040 
  No change to net risk exposure 
        *    The Corporate Responsibility and Sustainability 
             Committee met twice during the year. The Committee 
             assesses the impact of Sainsbury's corporate 
             responsibility and sustainability strategy on how we 
             help customers live well for less and in terms of 
             building customer trust 
        *    In January 2020 we committed to investing GBP1 
             billion over 20 years towards becoming Net Zero 
             across our own operations by 2040. This is in line 
             with the highest ambition of the Paris Climate Change 
             Agreement to limit global temperature rise to 1.5 
             degrees. We have refreshed our sustainability 
             governance structure with the creation of the Net 
             Zero Steering Group, along with specific working 
             groups, who will be responsible for driving and 
             executing this strategy 
        *    We will use the GBP1 billion investment to support 
             seven commitments focused on reducing carbon 
             emissions, food waste, plastic packaging and water 
             usage and increasing recycling, biodiversity and 
             sustainable diets in order to improve our climate 
             change resilience 
        *    As part of our Net Zero by 2040 strategy, we will 
             provide clear, frequent disclosures on our progress. 
             As signatories of Task Force on Climate-related 
             Financial Disclosures (TCFD), we will use scenario 
             modelling to further assess the impact of current and 
             emerging climate change on our business model and 

Financial and treasury*


  The main financial risks are the availability of short and 
  long-term funding to meet business needs and fluctuations 
  in interest, commodity and foreign currency rates. 
 Direct oversight 
  The Board of J Sainsbury plc 
      Link to strategy 
        *    Drive efficiency to reinvest 
  No change to net risk exposure 
        *    plc Board approved Treasury policies are in place to 
             address liquidity risk, refinancing risk, financial 
             markets risk and counterparty credit risk 
        *    The Treasury function is responsible for managing the 
             liquid resources, funding requirements, commodity, 
             interest rate and currency exposures as set out in 
             line with the Treasury policy and is overseen by the 
             Treasury Committee 
        *    The Treasury function has clear operating procedures, 
             which are regularly reviewed and audited 
        *    A long-term funding plan is formed as part of the 
             annual corporate plan process, which includes an 
             assessment of short and long-term core funding 
             requirements and contingent funding requirements 
        *    A short-term funding plan is formalised as part of 
             the annual budget process, which includes an 
             assessment of the core and contingent funding 
             requirements for the following year and the market 
             conditions for each of the debt markets accessible to 
             the business 
        *    The business funding strategy and Treasury policies 
             are approved annually by the plc Board 
        *    Annually, the Audit Committee reviews and approves 
             the viability and going concern statements and 
             reports into the plc Board 
        *    Finance Commercial review sessions are held each 
             period, chaired by the Chief Financial Officer to 
             review the Company balance sheet, P&L, and net debt 
             in detail with relevant actions and mitigations 
        *    There is a long-term funding framework in place for 
             the pension deficit and there is ongoing 
             communication and engagement with the Pension 
        *    Financial and Treasury risk in respect of Sainsbury's 
             Bank are detailed separately 

Health and safety - people and product*


  Prevention of injury or loss of life for both colleagues and 
  customers is of utmost importance and is paramount to maintaining 
  the confidence our customers have in our business. 
 Direct oversight 
  Group Safety Committee 
      Link to strategy 
        *    Offer distinctive products and new categories 
        *    Fast, friendly and convenient 
        *    Personalised and seamless physical and digital 
  No change to net risk exposure 
        *    Clear policies and procedures are in place detailing 
             the controls required to manage health and safety, 
             and product safety risks across the business and to 
             comply with all applicable regulations 
        *    These cover the end-to-end operations, including the 
             auditing and vetting of construction contractors, the 
             health and safety processes in place in our depots, 
             stores and offices and the controls in place to 
             ensure people and product safety and integrity 
        *    In addition, established product testing programmes 
             are in place to support rigorous monitoring of 
             product traceability and provide assurance over 
             product safety and integrity 
        *    Supplier terms, conditions and product specifications 
             set clear standards for product/raw material safety 
             and quality with which suppliers are expected to 
        *    Process compliance is supported by external 
             accreditation and internal training programmes, which 
             align to both health and safety laws and Sainsbury's 
             internal policies 
        *    Resource is dedicated to manage the risk effectively, 
             in the form of the Group Safety Committee and 
             specialist safety teams 
        *    The Board receives quarterly reports on safety, 
             including a deep dive facilitated by the Head of 
             Group Safety and the Head of Technical Operations 

Political and regulatory environment*

  There is an increasing trend of regulation, together with 
  enforcement action, across all areas of our business. This 
  adds additional cost as we respond to the regulations and 
  drives complexity into our business processes. 
 Direct oversight 
  Operating Board 
      Link to strategy 
        *    Be competitive on price 
        *    Offer distinctive products and new categories 
        *    Fast, friendly and convenient 
        *    Personalised and seamless physical and digital 
        *    Drive efficiency to reinvest 
        *    Be a place where we all love to work 
        *    Net Zero by 2040 
  No change to net risk exposure 
        *    We complete a bi-annual regulatory risk assessment 
             with key areas of the business to identify current 
             and emerging regulation affecting the business, so 
             that we can respond appropriately 
        *    Regulatory updates are regularly presented to our 
             oversight boards and committees, including the 
             Regulatory Pay Forum, which was established in 2019 
             to oversee National Living Wage/National Minimum Wage 
             compliance across the business, with flexibility to 
             support other areas of reward compliance if necessary 
        *    To influence current and emerging regulatory 
             requirements, we continue to engage actively with 
             Government, industry and regulatory bodies 
        *    We publicly communicate matters where we believe 
             industry change is required, with a view to enabling 
             fair competition that is beneficial to our customers 
        *    We communicate our views, and those of our customers 
             and colleagues, regarding geopolitical issues with 
             the aim of informing the debate and ensuring our 
             opinions are represented in the policy and 
             decision-making processes 

Sainsbury's Bank*

  Sainsbury's Bank is exposed to a number of risks. These include 
  operational risk, regulatory risk, credit risk, capital risk, 
  funding risk, liquidity risk, and market risk. 
 Direct oversight 
  The Boards of J Sainsbury plc and Sainsbury's Bank plc 
      Link to strategy 
        *    Be competitive on price 
        *    Offer distinctive products and new categories 
        *    Fast, friendly and convenient 
        *    Personalised and seamless physical and digital 
        *    Drive efficiency to reinvest 
        *    Be a place where we all love to work 
        *    Net Zero by 2040 
  No change to net risk exposure 
             *    The Bank is managed through defined governance 
                  structures that include the Board of Sainsbury's Bank 
                  plc, its Risk Committee and Audit Committee. The 
                  Board of Sainsbury's Bank plc is comprised of 
                  Executive Directors, Non-Executive Directors and a J 
                  Sainsbury plc Operating Board member 
             *    The Bank has a defined risk appetite aligned to 
                  delivery of strategic objectives and has implemented 
                  a risk management framework that is overseen by its 
                  Risk Committee. This Committee monitors the 
                  effectiveness of risk management activities against 
                  strategic, operational, compliance and financial 
                  risks and is updated on and discusses emerging risk 
                  areas. In particular, the Risk Committee reviews the 
                  results of stress testing including the internal 
                  liquidity and capital adequacy assessments 
             *    The actual management of risks is through an 
                  executive governance structure, which manages the 
                  day-to-day operations of the business. This includes 
                  the Sainsbury's Bank Management Board, an Executive 
                  Risk Committee and an Asset and Liability Committee 
             *    Oversight by J Sainsbury plc is provided through: 
             *    Membership of the Board of Sainsbury's Bank plc - one 
                  J Sainsbury plc Operating Board member is on the 
                  Board of Sainsbury's Bank plc and provides updates to 
                  the Board of J Sainsbury plc on Bank matters 
             *    Updates on key matters arising from meetings of the 
                  Risk Committee and Audit Committee are reported to 
                  the J Sainsbury plc Audit Committee 
             *    There are a number of reserved matters where 
                  Sainsbury's Bank plc needs to obtain permission from 
                  J Sainsbury plc 

Trading environment and competitive landscape*


  Effective management of the trading account is key to the 
  achievement of performance targets. The sector outlook has 
  been and is set to remain very competitive. The trading environment, 
  driven by ongoing competitive retail pricing combined with 
  growing inflationary cost pressures, may adversely affect 
  our performance. There is also an ongoing risk of supplier 
  failure, with possible operational or financial consequences 
  for the business. 
 Direct oversight 
  Customer Trading Forum, Operating Board 
      Link to strategy 
        *    Be competitive on price 
        *    Drive efficiency to reinvest 
  No change to net risk exposure 
        *    We adopt a differentiated strategy with a continued 
             focus on delivering quality products and services 
             with universal appeal, at fair prices, helping our 
             customers Live Well for Less 
        *    This is achieved through the continuous review of our 
             product quality, key customer metrics, monitoring of 
             current market trends and price points across 
             competitors, active management of price positions, 
             development of sales propositions and increased 
             promotional and marketing activity 
        *    We continue with our commitment to offer customers 
             even better value with lower regular prices 
        *    In delivering our strategic plan, including our price 
             investment, we will maintain the strength of our 
             balance sheet and have identified a series of 
             measures to conserve cash in the business 
        *    Concerning supplier continuity, Sainsbury's maintains 
             regular, open dialogue with key suppliers concerning 
             their ability to trade 
 Examples of risk deep dives in the last year 
  A programme of risk deep dives has continued, with half of 
  the principal risks being reviewed by the Operating Board 
  or Audit Committee in year. We have set out some examples. 
  We reconfirmed risk appetite for all corporate risks with 
  the plc and Operating Boards in the year. A programme of deep 
  dive reviews, focussed on risk appetite, will continue. 
  Data security 
  plc Board and Audit Committee 
  Biannual risk deep dives are presented by the Head of Data 
  Governance and Chief Information Security Officer to the Operating 
  Board and Audit Committee. The Operating Board also receives 
  reports from the Data Governance Committee. 
  This year, a risk deep dive with the plc Board was held in 
  March 2020. The plc Board reviewed our risk appetite across 
  data and information security risks. 
  Health and safety - people and product 
  Audit Committee 
  The plc Board receives quarterly updates on safety and a risk 
  deep dive is facilitated annually. 
  In addition, the Director of Retail and Operations presented 
  a paper to the March 2020 Audit Committee on how relevant 
  safety and legal risks are managed in the retail estate. 
  Financial and treasury 
  plc Board and Audit Committee 
  An annual funding deep dive covers going concern considerations, 
  our diversified portfolio of secured and unsecured borrowings 
  and core elements of the Group's financing arrangement in 
  place to maintain funding headroom. 
  In addition, the business funding strategy and Treasury policies 
  are approved annually by the plc Board. 
  Business continuity 
  Operating Board 
  The Operating Board performed a deep dive review of our approach 
  to business continuity, operational resilience and major incident 
  management, presented by the Director of Audit, Risk and Resilience 
  in March 2020. 
  The Group Operational Resilience Committee also actively reviews 
  this risk during the year. Quarterly updates are also provided 
  to the Audit Committee. 
  Environment and sustainability 
  Operating Board 
  The Net Zero by 2040 strategy was reviewed in detail by the 
  Operating Board, including an evaluation of risks, and was 
  approved by the plc Board and CR&S Committee. 
  The Sainsbury's Net Zero Steering Group and Value Management 
  Groups actively reviewed this risk during the year and presented 
  reports to the Corporate Responsibility and Sustainability 

Related party transactions

a) Key management personnel

The key management personnel of the Group comprise members of the J Sainsbury plc Board of Directors and the Operating Board. The key management personnel compensation is as follows:

                                      2020    2019 
                                       GBPm    GBPm 
 Short-term employee benefits          12      11 
 Post-employment employee benefits      1       1 
 Share-based payments                   6      10 
                                     ------  ------ 
                                       19      22 

Two key management personnel had credit card balances with Financial Services (2019: five). These arose in the normal course of business and were immaterial to the Group and the individuals. One key management personnel held saving deposit accounts with Financial Services (2019: three). These balances arose in the normal course of business and were immaterial to the Group and the individuals.

b) Joint ventures and associates

Transactions with joint ventures and associates

For the 52 weeks to 7 March 2020, the Group entered into various transactions with joint ventures and associates as set out below:

                                          2020    2019 
                                           GBPm    GBPm 
 Dividends and distributions received      141     18 
 Repayment of loans from joint venture      -      (5) 
 Disposals of joint ventures              (21)      - 
 Rental expenses paid                     (14)    (38) 

Year-end balances arising from transactions with joint ventures and associates

                   2020    2019 
                    GBPm    GBPm 
 Other payables     18      (5) 

c) Retirement benefit obligations

As discussed in note 35, the Group has entered into an arrangement with the Pension Scheme Trustee as part of the funding plan for the actuarial deficit in the Scheme. Full details of this arrangement are set out in note 35 to these financial statements.

S tatement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year, and of the profit or loss of the Group for the financial year. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and have elected to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101 'Reduced Disclosure Framework' (UK Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

   -     select suitable accounting policies and then apply them consistently; 
   -     make judgements and accounting estimates that are reasonable and prudent; 

- state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and Company financial statements respectively; and

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Having taken all the matters considered by the Board and brought to the attention of the Board during the year into account, we are satisfied that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable.

The Board believes that the disclosures set out in this Annual Report provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on pages 48 to 51, confirms that, to the best of their knowledge:

- the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

- the Strategic Report and Directors' Report contained in the Annual Report and Financial Statements include a fair review of the development and performance of the business and the position of the Group, together with a description of the emerging and principal risks and uncertainties that it faces.

By order of the Board

Tim Fallowfield

Company Secretary and Corporate Services Director

29 April 2020

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.



(END) Dow Jones Newswires

May 29, 2020 08:02 ET (12:02 GMT)

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