Operational risks
Ahold might not be able to negotiate future collective bargaining agreements on acceptable terms, which could result in work stoppages
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, Ahold might not be able to negotiate extensions or replacements on terms acceptable to the Company. Although we consider our relations with the relevant trade unions to be stable, any failure of our operating companies to effectively renegotiate these agreements could result in work stoppages or other 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. The failure of one or more of its operating companies to renegotiate collective bargaining agreement on acceptable terms could have a material adverse effect on Ahold’s financial position, results of operations and liquidity.
Ahold faces risks related to IT outsourcing
Ahold outsources various IT services in the United States and the Netherlands and is dependent on its outsourcing service provider for these services. We may encounter unforeseen technical or service level delivery difficulties with our outsourced IT services. We may be unable to resolve such issues or resolving them may lead to cost increases and distract management attention. Although Ahold has a right to conduct audits to determine the functionality of these outsourced services, it may face disruptions to its IT applications and infrastructure if outsourced IT systems fail to perform as specified or if the parties that provide these services do not fulfill their obligations. Any failures could potentially have a material adverse effect on Ahold’s financial position, results of operations and liquidity. In addition, IT outsourcing might not achieve the expected benefits and cost savings or fail to achieve them as quickly as expected.
Ahold faces risks related to information security
Ahold’s business operations generate and maintain confidential commercial information and personal information concerning customers and employees. Ahold has an information security policy to ensure the confidentiality, integrity and availability of this kind of information. We have tools in place to support compliance with this policy and to monitor compliance. However, disclosure of confidential commercial or personal information may negatively impact Ahold’s competitive position and corporate reputation, result in litigation or regulatory action and have a material adverse effect on Ahold’s financial position, results of operations and liquidity.
Ahold faces business continuity risks in relation to its dependence on a limited number of centralized facilities, IT systems and key personnel to support its critical business processes and functions
Several 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 and key personnel for which Ahold has limited or no comparable back-up available. If any of Ahold’s critical business processes or functions or those of key strategic suppliers are interrupted by catastrophic events (such as natural disasters, pandemic illness, IT or outsourcing failures), which render facilities, critical IT systems or infrastructure or key personnel unavailable, Ahold could experience disruption to its supply chain, store and administrative operations. We continue to invest in disaster-recovery plans and security initiatives to protect our facilities and the technology systems supporting our critical business processes and take 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.
Ahold faces 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 regulatory and consumer focus continue to render food and product safety one of Ahold’s most significant business risks. Although Ahold’s food and product safety policies and practices address the complete supply chain, from farm and production level to Ahold’s own operations, we may still face food and product safety problems, including disruptions to the supply chain caused by food-borne illnesses, which may have a material adverse effect on Ahold’s reputation, sales, financial position, results of operations and liquidity.
Ahold faces risks related to corporate responsibility
Increasing transparency, regulatory demands and stakeholder awareness, and the growing sentiment that large retailers need to address environmental and sustainability issues across the entire supply chain, mean that Ahold’s brand and reputation may suffer if it does not adequately manage the range of corporate responsibility issues affecting the food retail industry. Furthermore, our operational and cost competitiveness may be adversely affected if we fail to effectively increase the fuel and energy efficiency of our operations and reduce waste. 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 be adversely affected. See Ahold’s Corporate Responsibility Report 2008 for additional information about Ahold’s policies and programs in the area of corporate responsibility.