Risk related to collective bargaining
A significant portion of Ahold’s employees are represented by unions and are covered by collective bargaining agreements. As the collective bargaining agreements with those unions expire, the Company might not be able to negotiate extensions or replacements on terms acceptable to the Company. Although Ahold considers its relations with the relevant trade unions to be stable and has organized its human resource functions to support the Company’s union relations and collective bargaining negotiations, any failure of our operating companies to effectively renegotiate these agreements could result in work stoppages or other organized labor actions. Ahold may not be able to resolve any issues in a timely manner and its contingency plans may not be sufficient to avoid an impact on the business. A work stoppage due to failure of one or more of its operating companies to renegotiate a collective bargaining agreement, or otherwise, could have a material adverse effect on Ahold’s financial position, results of operations and liquidity.
Risks related to information security
Ahold’s business operations generate and maintain confidential commercial and personal information concerning customers, employees, suppliers, and the Company. Our information security policy mandates that we implement and maintain controls, processes and tools which ensure confidentiality, privacy, integrity and availability of confidential and sensitive information. We also manage and monitor compliance with our policy and with the various legal and regulatory requirements. However, disclosure of confidential information to unintended third parties may negatively impact Ahold’s competitive position and corporate reputation or result in litigation or regulatory action. This could have a material adverse effect on Ahold’s financial position, results of operations and liquidity.
Risks related to business and IT continuity
A number of Ahold’s critical business processes and functions are concentrated in a limited number of centralized facilities and/or are dependent on IT systems and infrastructure, key personnel, an IT outsourcing provider and other key suppliers for which Ahold has limited or no comparable back-up available. If any of these critical business processes or functions suffer a severe disruption which renders such facilities, critical IT systems or infrastructure, key suppliers or key personnel unavailable, Ahold could experience disruption to its supply chain, store and administrative operations. Ahold continues to invest in recovery plans and security initiatives with respect to its facilities and its technology systems which support its critical business processes and takes steps to mitigate the dependency risks associated with our key strategic suppliers. However, these measures cannot fully prevent business interruptions that could have a material adverse effect on our financial position, results of operations and liquidity.
Risks related to food and product safety
The growing internationalization of our supply chain, the increased penetration of Ahold’s own brand products in its assortment and increasing levels of regulation continue to render food and product safety one of Ahold’s most significant business risks. Ahold’s food and product safety policies and practices cover the complete supply chain, from farm and production level to the Company’s own operations. However, we may face food and product safety problems, including disruptions to the supply chain caused by food-borne illnesses and negative consumer reaction to publicity surrounding any incidents, which may have a material adverse effect on our reputation, sales, financial position, results of operations and liquidity.
Risks related to corporate responsibility
Increased regulatory demands, stakeholder awareness and the growing sentiment that large retailers must address environmental and sustainability issues across the entire supply chain mean that Ahold’s brand and reputation may suffer if it does not adequately address relevant corporate responsibility issues affecting the food retail industry. Furthermore, if we fail to effectively increase the fuel and energy efficiency of our operations or to reduce waste, our operational and cost competitiveness may be adversely affected. Ahold continues to develop a broad range of coordinated and focused programs to address issues such as climate change, energy efficiency, waste reduction, labor standards in the supply chain, sustainability, healthy living, community engagement and corporate responsibility reporting. If these programs are not successful or are otherwise inadequate, Ahold’s reputation and competitive position could suffer. See Ahold’s Corporate Responsibility Report 2009 for additional information about our policies and programs in the area of Corporate Responsibility.
Risks related to business transformation
Ahold is making changes in its U.S. and European businesses to create a strong platform for future growth. The reorganization in both continents delineates areas of responsibility and will further simplify and standardize processes and structures so that the Company can integrate acquisitions more easily. These projects are carefully planned and implemented and proceed with a high degree of ongoing attention from executive management. However, it is possible that some transformation initiatives will not be completed in a fully effective or timely manner. Any inability to effectively implement these changes could impact numerous processes and procedures across the organization. Key associates might choose to leave Ahold rather than relocate, or prior to project completion. Business and IT resource knowledge and availability are limited. The timing of required changes across the business could conflict, causing processes to fail or changes to be delayed. Therefore, these transformation activities could cause disruption as systems, processes and resource talent changes and could adversely affect Ahold’s financial position, results of operations and liquidity.