Analysis of Corporate Governance, Risk, and Performance: M&S Report

This report provides a comprehensive analysis of corporate governance at Marks & Spencer (M&S). It begins with an introduction to corporate finance and its importance, followed by a background of M&S as a multinational retailer. The main body of the report delves into strategic and operational risks faced by M&S, such as trading performance recovery risk, business transformation risk, inventory damage, and failing to monitor competitors. It offers suggestions for improvement, including developing a suitable operating model and managing cash flow. The report then identifies and analyzes four external stakeholders: customers, suppliers, government, and investors/creditors, assessing their impact on M&S. It evaluates the effectiveness of M&S's corporate governance practices, highlighting the importance of leadership, collaboration, and transparency. The report concludes by examining the impact of effective corporate governance on M&S's financial performance, including improvements in internal efficiency, prevention of poor disclosure practices, and the role of risk management. The report emphasizes the importance of stakeholder engagement and the board's role in ensuring high-quality decision-making and sustainable business practices.

Corporate Governance
and Financial Regulation

Table of Contents
INTRODUCTION................................................................................................................................3
MAIN BODY.......................................................................................................................................3
Background of company..............................................................................................................3
FOUR external stakeholder.........................................................................................................4
Evaluate the effectiveness of corporate governance..................................................................10
Impact on corporate performance of M&S................................................................................10
CONCLUSION..................................................................................................................................13
REFERENCES...................................................................................................................................14

INTRODUCTION
The main system related with practices, rules and process which help a company to control
and direct the operations is known as corporate finance. It mainly includes, balancing the
different stakeholder interest such as managers, suppliers, lender, shareholder, customers and
governments in order to maximise the results in suitable manner. In order to better understand
the importance of corporate governance Mark & Spencer is selected. In this report, operational
and strategic risk and measures to remove such risk, main 4 external analyses, effectiveness of
corporate finance and its impact over corporate performance is discussed.
MAIN BODY
Background of company
M&S is one of the largest multinational retailer main headquarter is in London, England
and covering different other countries all over the world. The company mainly deals in cloths,
grocery item and other household product under its own brand name. The company became the
first British retail company in year 1998 which makes a pre-tax profit above 1 billion GBP. In
present time due to several rivals firms the cloth sales have reduced to a high percentage and the
sales of food items have increased as M&S also started selling other branded goods such as,
Kellongs corns flakes.
In dynamic business environment there have been different risk and challenges which are
faced by M&S. Some of operational and strategic risk and useful suggestions are discussed
below:
Strategic risks:
Trading performance recovery risk: In situation of Covid-19 the trading productivity of
company has been affected and continues with a significant destructive consequence over other
strategic policies in formation with UK retail more than widely. This also lead to decline in cloth
and home product business as customer have totally shifted to online mode of shopping.
Business transformation risk: A non-occurrence to penalize M&S business transmutation and
social alteration inaugural with pace, consistency and cross-business buy-in will prevent the
cognition to modify work skilfulness and also competitiveness.
Liquidity and financing risk: Significantly reductions in selling over long and uncertain times
could influence on the company's capability to operate as well as safeguard additional,
3

committing credit facilities, alongside its incapacity to manage expenditures efficiently with
amended objectives.
Operational risk:
Inventory damage: Almost all items purchased and e-commerce companies which manage
inventory on warehouses may be affected by natural or climate happenings. Not only would
major catastrophe damage cellular infrastructure, it often leads to significant losses in food stores
and other independent retailers selling peregrinable products in M&S.
Failing to monitor competitors:If M&S ignore the activities of their competing companies, this
could certainly not lead to customer loss and the lengthy health of their business being negatively
impacted.
Forced closure:This might be enticing to withdraw M&S business insurance owing to the
coronavirus, which may lead to discomfort throughout the long term. If clients suspend ones
strategy, their shop may become more susceptible to misuse, destruction of property, as well as
other possible liabilities.
Suggestions to improve and remove these risks are as follows:
 The internal management must develop a suitable operating model which help in sharing
the M&S brand values, customer data, employee and support activities.
 There must be regular independent review of main and important functions or program
which further will be provided to Audit committee.
 There should be function to manage the cash and liquidity with the support of, freeze of
discretionary expenses, dividend referral, uses of important government measures, tax
referral payments.
FOUR external stakeholder
All those entities which are not part of company internal operation but impact the overall
performance are known as external stakeholders. Some of the important stakeholder are
discussed underneath:
Customers: These group of peoples are considering to be the most important stakeholder as they
are closely exposed to the risk of M&S performance. In case if food items are not good for use
because of long storage, then customers are exposed to the risk which can impact their health.
4

Suppliers: These are the stakeholder which supplies essential product or raw material to the
company so that finished goods are always available for the customer in order to fulfil the
demand.
Government: Different laws and regulation are imposed and implemented by government
authorities in various areas such as customer protection, health and safety act, competition and
taxation.
Investors and creditors:This external stakeholder used to make suitable investment within the
company activities and practices so that a decent return can be made in for their interest. They
are mainly exposed to the risk of lower return due to insignificant or dynamic business
conditions.
Stakeholder analysis
Stakeholder Impact How much
stakeholder
Claims influence?
Reasons
Customers High 5 For M&S retention of
customers is essential. That's
because keeping a current
customers is considerably
lower than touching down a
new one, including both
charge of advertising and
maintenance. Moreover,
payment instruction spending
more funds around each
acquisition is more highly
probable. Thus, people must
deliver outstanding customer
service if manager of M&S
want to guarantee the profits
were also delectable as well
as their withholding rates are
much higher.
Indeed, more than 90%
of clients unhappy about
5

their customer service
skills will simply not
return back to
M&S instead of trying
to tell users whether this
is incorrect and that
company can enhance it.
Therefore it is
throughout the best
interests to constantly
provide performance
community services in
addition to increasing
the stabilisation time
and enhancing their
income.
Suppliers Moderate 3 Unsurprisingly, the risks that
really are comparatively
unlikely to occur usually lead
to the best impact even
though, when those who
occur, swirling risks affect
the whole organisation.
Although these risks could be
abolished completely, their
effects can and must be
decreased. This is also
accepted by regulatory
authorities worldwide and
rules and guidelines on
providers' control in order to
manage that risk and
therefore its possible future
impact on organisations as
6

well as the government have
been enforced.One danger
tends to lead to the next is
being said. The origin of this
sentence is not known.
Interruptions to the
production process, service
and product scarcities and
quality problems could lead
to poor business results,
declines in stock prices,
problems of brand equity, but
most of all the capacity of an
individual to provider
patients, affecting public
safety. There are many
different types of
interruptions in the
production process and they
can be very costly; costs well
over and above sales loss.
Governments High 5 Government influences not
just universal healthcare
system rules of the industry
and moreover actual
proposals, legislation, court
rulings, taxation and state
spending on the whole
economic system. These
political decisions are
continually shifting but are
portion of all companies'
dynamic business
environment. Public
programs to address
electricity usage
environmental degradation
7

have impacts on all
companies in the United
States and beyond, but have a
particular and significant
impact on sustainable
businesses.
Investors and
creditors
Low 2 The have a low impact
over the company
performance, however
they can demand for a
profit in any situation
which may be difficult
for the company in
situation of lean period.
There have been various
policies and standards
which are imposed by
M&S in order to
maintain the functioning
of investors
If interested parties show little control and low rates, the main players where the impact is
significant in making business choices could even generally ignore the others interested parties
mostly with top levels of likelihood and impact. If in this segment of the matrices there is only
one major stakeholder, for instance the high ranking leadership of the corporation, there must be
no problem. Scenes of difficulties perhaps in this segment there have been 2 or more
stakeholders with different interests and targets.
 Interested but power-poor stakeholders can aim to increase one‘s authority by joining an
alliance with one or so other interested parties.Fortunately, as long as the system remains
highly interested, limited energy, a group may be treated in the type of the matrices to
maintain it notified of what is going on, but policy decisions of the corporation would not
be impacted as far as the team goals are concerned.
8

 Keeps interested parties with dominant strength but minor application in an affair
satisfied to avoid exercising their potential to manipulate the sound decision of that same
financial institution. The government can be quite a stockholder for just a corporate
environment.
Evaluate the effectiveness of corporate governance
Corporate governance consists of the system of practices, process and rules that is used
by organisation for the purpose of laying down controlling and directing functions. It involves
balancing the company interest that includes the shareholders, customers, suppliers, financiers,
executives, community and the government, corporate governance is also encompassing at very
of management that is starting from formation of action plans to laying down of internal control
and different performance measurement techniques that can lead towards proper corporate
discloser (GOVERNANCE FRAMEWORK, 2021).
In M&S it is believed that effective governance can be achieved by techniques of
leadership and collaboration, the major duties of board is to enhance, compliment and support
the executive work (Alvarez., 2016). There is robust interrogation of actions and plans to ensure
high quality of decision making across areas of performance, responsibility, unaccountability and
strategy. The governance framework is endorsing by board and published on their website to
ensure that all the key stakeholders are aware of the standards that have to be followed for better
business performance.
Impact on corporate performance of M&S
Implementation of effective corporate governance practises has led to improvement of
financial performance of the organisation as there has been a positive impact on the internal
efficiency of Marks and Spencer. There is prevention of poor disclosure practises that is leading
to higher transparency in the way different functions are performed (Nicholson, Gimmon and
Felzensztein, 2017). For eg, a multinational insurance firm used AI to draw up business
requirements to define plain and easy claim situations appropriate for automated processes. In
order to find the right expert claim manager for a particular case and dramatically boost its
claims handling precision, the retail industry has also been designing a "best match" routing
strategy.
9

In recent years the board has been able to build a sustainable business through use of
profitable and consistent growth that is leading to a surety that M&S is acting responsibly in
meeting the needs of shareholder and being accountable to them for all the respective actions of
the organisation. Marks and Spencer is working towards setting out of governance framework,
individual board profiles and matters that are to be researched for board & committees for future
reference (CORPORATE GOVERNANCE, 2021).
Governance activities in M&S are dedicated to the best in practice. It manages the global
benchmark, efficiency and performance to ensure future improvements. Every three years the
board received an external review and feedback from new posts. Its annual report is published by
its board of directors and its committees. The records gathered resulted in the year 2012-13
covering key areas for the development and continuity of people, routine engagement with
shareholders, physical representatives, publishing and transparency, training, skills and
knowledge of directors, opportunity behaviour, risk tolerance and a board discussion framework
and greater scrutiny.
It impacts the financial performance in following ways; International employment before
the return of goods cost 6.1% with normal employment held down 10.3%. This has generally
been proven using Hong Kong commercial enterprise sales and reasonable market prices.
Decrease in licensing operating profit represents £ 8 million in property-to-franchise commission
issued following the closure of our company's Hong Kong-owned property markets and sales, as
well as the depreciation. fair market price action. Property earnings increased, except for the
impact of Hong Kong’s retraction. Profits of £ 2.1 million on property evacuation markets
largely reflect the recovery of historic VAT credits.
Role of risk management
Due to risk mismanagement, food revenue fell 0.6%, with homogeneous income 2.3%, or
1.5% if adjusted for Easter. Income reflected the combined effect of investment on rates and
product trading as we reduced increases. However, over the second half, we saw an improvement
in style with volumes up 1.8% in the fourth quarter, adjusted for Easter. The company opened
forty-eight new stores during the year in line with our new growth focus format in the best return
areas only, although home offering has declined over the 12 months as ours have gone complete
closure program.
10

UK clothing and household income fell 3.6%, partly due to our store closure program,
with LFL sales down 1.6%. Discounted sales were down due to the deliberate reduction in stock
for sale. The UK apparel and home apparel turnover grew by 9.8%, once ahead of the apparel
market, with a sharp rise in women swear as we developed our website and business delivery
proposal and we focused on key classes such as clothing in our `` Must Haves '' campaign.
The role of the staff management team
Lower labour costs, the best contribution from financial savings from administrative
restructuring, closures and other efficiencies as well as correcting wage inflation. Other property
prices fell due to lower declines, our closing schedule and the fact that a number of properties
met their useful lives, which also offset rents and inflation over the year.
The increase in circulation and warehouse costs was largely offset by the use of inflation and
channel change taxes, as well as tariffs associated with warehouse closures, with some
compensation being made by the increase in efficiency at Donington Castle. The increase in
advertising spends reflected investments in our food company and the expected increase in costs
in the second half of the year due to the timing of the campaigns. Medium prices have fallen as
incentive taxes have been declining year on year, the benefits of technology transformation
programs and cost efficiencies outweigh opposition to machinery financing.
Role of debtors
M & S Bank's earnings prior to the one-off change had fallen from £ 12.7m to £ 27.6m.
This was largely due to an increase in staggering debt provision due to the impact of revised
projections of currency signals, which include the impact of Brexit, and a small increase in debt
terrible because of a buyer's opportunity to refuse. The underlying profit margins were up
slightly due to more competitive pricing. M & amp; S Bank's profits after the product switch
increased by £ 1.1 million to £ 6.7 million.
11

CONCLUSION
In the last of report, it is concluded that corporate governance is the method, process,
techniques which is implemented by the company internal manager in order to manage and direct
the operations. The concept of corporate governance is very much crucial for the external and
internal stakeholder as it clearly describe the business integrity and direction so they can analyse
the risk and make a suitable decision.
12