Reputational damage from adverse publicity

A good reputation is critical particularly in selling our own brand products. Any event that damages our reputation such as adverse publicity about the quality, safety or integrity of our products could quickly affect our results. Instances of food-borne illnesses, food tampering or other health concerns, even those unrelated to our products, can result in negative publicity about the foodservice industry and dramatically reduce our sales.

• Bidfood continually monitors the social media platforms where we gain customer feedback and insight on product and service experience. We have an independently managed tip-off line for any dissatisfaction to be reported. We ensure a quick direct response is triggered as soon as contact is made and will seek professional guidance to amend any material issue reported.

Product liability claims

As a reseller of food products, we may be exposed to liability claims should our products cause injury or illness. The impact, if we do not have adequate cover for a liability related to defective products, could be significant. It is critical that we source from the best possible suppliers both locally and internationally.

• We generally seek supplier contractual indemnification and insurance coverage. We have group liability policies in place. The selection of our suppliers is based on ensuring they respect our standards and provide the transparency required in the rigorous evaluation procedures completed.

Product cost volatility

Foodservice distribution is characterised by high inventory turnover at relatively low profit margins. Volatile product costs have a direct impact on margins. Our profit levels may be negatively affected by product cost deviation.

• We do not to enter into long-term customer agreements on pricing. As such, our businesses are able to react quickly to changes in product pricing. We adopt a decentralised model where purchasing decisions are based on the quality and price of the local product, and according to customers ever changing needs.

Group purchasing organisations

Some customers purchase through group purchasing organisations (GPO) in order to reduce prices paid on the foodservice orders. Recently this includes the emergence of "informal" buying groups using Peer to Peer apps such as "WhatsApp" to facilitate communication and price comparison between customers.

• We offer innovative, real-time engagement with our customers through our bespoke industry leading e-commerce solutions. We are small enough to be agile and meet the most demanding requirements; but global enough to source even the most hard-to-find product. Fundamental to our success is the strength of the real personal human connection we strive to develop with our customer.

Intense competition

Foodservice distribution is highly competitive, driven by local presence, geographic reach, private label offerings, purchasing power, cost efficiencies and meeting varied customer requirements. The cost of switching is very low as are the barriers to entry in this market.

• The group structure although decentralised provides a channel into markets not available to competitors. Each Bidfood local operation has access to a global platform to present new culinary trends, unique product ranges and introducing a variety of cuisines.

Industry disruptors

The ever changing landscape of how we engage in the world today, combined with the real-time immediate gratification requirements of business to date has seen new technologies and entrants into our market, changing the expectations of our customer base.

• Bidfood has invested in solutions development capability, driving online innovation to an established customer base. By listening to their needs, we have adapted our approach and continue to develop solutions, not being stuck with "the way it has always been done". We are vigilant in this task ensuring we remain ahead of the competition curve.

Timely infrastructure investment

Timely future investment in infrastructure development is key to creating the capacity demanded by growth. Expansion requires distribution centres and depots to be large enough to be economically viable, yet small enough to be agile and customer focused.

• Investing in our own purpose-built facilities for food preparation and processing has been a key focus in the year to date. We invest in depots with state of art sustainable capabilities and efficient vehicles to remain ahead of the cost curve.

Driver development

The role of the driver and recruitment in this role is presenting itself as a challenge globally. Supporting this role with training, positive working conditions and innovative tools to make it easier for the driver, recognising the importance of the role and supporting career opportunities is critical.

• We have invested in driver training programmes coupled with incentives and better work environments. With onboard tracking and monitoring systems we are able to improve our drivers safety.

Extreme weather conditions and natural disasters

Some of our facilities and our customers' facilities are located in areas that may be subject to extreme, and occasionally prolonged, weather conditions. Such extreme weather conditions may interrupt our operations and may impede our access to customers.

• We ensure robust disaster recovery plans established in all businesses. Our network of smaller warehouses and distribution centres allows us to support any business interruption through assisting those impacted sites. We have the necessary global insurance policies in place protecting our assets and business interruption risk.

Fuel and other transportation costs

Fuel costs often negatively affect consumer confidence and discretionary spending. Increasing fuel costs increase product prices, and delivery costs. These factors affect our sales, margins, operating expenses and returns.

• Ongoing communication with our customers regarding pricing changes and product sourcing challenges is key to our success. Problem solving these obstacles to find mutually beneficial solutions has stood us in good stead and grown our trust relationship with our customers.

High dependency on technology

To effectively serve our customers requires IT systems able to support our operations. These include purchases, orders, warehouse management, efficiently loading trucks, storage space optimisation and e-commerce. Technology disruptions can negatively impact our customer service, decrease volumes and result in increased costs and lower returns.

• Our decentralised model ensures that we do not have a global dependency on a single system, but are locally independent and therefore a material group-wide system failure impact is unlikely. We have invested and continue to develop our technology, business continuity and disaster recovery plans.

Cyber security

We rely upon IT networks and systems to process, transmit and store electronic transactions in virtually all of our business processes. This gives rise to cyber security risks such as security breach, espionage, system disruption, online platform hijacking or unauthorised access to information.

• We have rolled out a group-wide rapid response plan. We have implemented measures to prevent security breaches and cyber incidents. Insurance policies have been purchased, awareness programmes rolled out and ongoing vigilance for attacks are key to our risk management programme.

Environmental, health and safety compliance

Compliance is non-negotiable. Non-compliance results in lawsuits, investigations and reputational damage. We face a broad range of international, national and local laws and regulations governing issues such as discharges to air, soil and water; hazardous substances; contamination exposures; employee health and safety; and fleet safety

• The cost of compliance is significant, and although we are committed to ensuring we remain compliant, the risk is ongoing. We invest in assurance teams, compliance tools and engage outsourced professional standard setters to promote the highest levels of quality and safety demanded.

Debtor collection

Economic conditions are tough and this could impact on customers' ability to pay us timeously. Even when contracts with these customers exist, if customers are unable to meet their obligations, it does adversely affect our collections, resulting often in negotiating discounts or financing terms.

• Finance teams around the world monitor and manage the ongoing financial risk our businesses are exposed to. By staying close to the customer, monitoring the detail, maintaining a robust internal control environment we have been able to effectively manage this risk.

Growth through organic expansion and acquisition

Bidcorp may selectively pursue opportunities to supplement organic growth with strategic acquisitions. Any such acquisition or joint venture may change the scale of Bidcorp's business and operations and may expose it to new geographic, political, social, operating, financial, legal, regulatory and contractual risks.

• A global executive management team provides insight on all transactions. We ensure full and proper due diligence is complete before the acquisition is decided upon. We engage local management teams who are close to and understand their market to run these new acquisitions in line with the decentralised Bidcorp governance framework.

Succession planning

Bidcorp's ability to operate or expand effectively depends largely on the experience, skills and performance of its senior management team and technically skilled employees.

• With a robust and significant global footprint, international opportunities are provided to those with career progression requirements. Utilising experienced management skills to grow our teams ensures a strong succession plan is in place.

Economic, political or social instability

Bidcorp is a geographically diverse business exposed to the changes or instability affecting the global economic, political or social environment in the various regions which could affect an investment in Bidcorp.

• Our globally diverse footprint, although exposed to high-risk environments, is a risk we monitor on an ongoing basis. We continue to grow in these markets and have a successful track record to date