Poundland's Corporate Governance: Risks, Recommendations, and Analysis

This report offers a detailed analysis of Poundland's corporate governance, evaluating its practices against the UK corporate governance code. It examines the firm's approach to transparency, responsiveness, participation, effectiveness, efficiency, and accountability. The report identifies key risks, including demand and business environment challenges, particularly in the context of the firm's expansion into France. Recommendations focus on strategies such as low-cost sourcing to maintain competitive pricing and facilitate rapid business growth. The analysis also assesses the composition and independence of the board of directors, as well as the firm's financial reporting and stakeholder relations. The report highlights the importance of transparency, responsiveness to stakeholders, and effective risk management in ensuring Poundland's long-term success and adherence to corporate governance best practices. It concludes with an evaluation of the firm's performance and offers insights into areas for improvement to enhance its governance framework.

1

EXECUTIVE SUMMARY
The current business report analysis of Poundland is done with respect to corporate governance.
In order to evaluate corporate governance of a firm by comparing it with the UK corporate
governance code, making sure that firms develop good corporate governance mechanisms in
their businesses.
As per the given case, the firm intends to expand its business to France, knowing that there are
some risks it can face. The current report specifically looks into two main risks, Demand and
Business environment, Recommendations are also provided. The initial recommendation for the
firm is to purchase items at a low price from the suppliers, as this will make the product available
at a low price for the customers. This could also help them in expanding their business at a fast
rate in the UK.
2

TABLE OF CONTENTS
Executive Summary……………………………………………………………………………….2
Introduction......................................................................................................................................4
Corporate Governance.....................................................................................................................4
Effectiveness and Efficiency............................................................................................................7
Accountability..................................................................................................................................8
Part B...............................................................................................................................................9
Risk Management............................................................................................................................9
Conclusions/Reccomendations......................................................................................................11
References......................................................................................................................................13
3

INTRODUCTION
Increasing market complexities will give rise to corporate governance practices that need to be
adopted by an entity in order to improve their performance. This report, goes on to recognize the
status of complacency procedures followed by Poundland. Identifying the various risk factors
and their overall management, by adopting the best appropriate systems in improving the
reliability of information conveyed by the firm to its external market.
Transparency
It is regarded important that any information about an entity should be presented to the
stakeholders in order to have all of the information interpreted. The information included in the
financial statements need to be presented in understandable media in order to improve overall
performance of an entity (Calomiris and Carlson, 2016). Corporate governance demands highly
transparent rules and regulations followed by an entity in order to reflect its overall business
performance.
Poundland gives preferences to the entire code of conduct imposed by the external environment,
which is followed in order to improve its overall performance.
The performance of an entity will improve by adopting legislation of child labour, forced labour,
freedom of association and collective bargaining, non-discrimination, hours worked and wages
compliance.
Transparency and disclosure requirements are needed to be followed by an entity in order to
remove all deficiencies of the organization (Casey, 2016).
All these parameters are regarded as one of the important factors in evaluating the current
performance of an entity in relation to the external market aims and the objectives.
The internal weaknesses of an entity are evaluated in order to determine its future performance,
as this is regarded as an important technique in judging the capabilities and skills of the owner in
order to attract a wide number of customers.
Any material changes in the external market will affect an entity's financial performance need to
be included in the firm in form of disclosures, By giving disclosures at the end of financial
statements in order to reflect true performance of an entity and also meets various legal
requirements imposed on an entity.
4

DTR 1.1 states that business entities should have approval of the statutory body who are held
responsible for making future decisions.
In Corporate finance, DTR is a terminology which depicts Disclosures and
transparency rules need to be followed by an entity in order to reflect their true business
performance in front of the external business environment.
DTR 1.2 is related with the auditing of the financial statements in which an entity should have at
least one member which is competent enough to judge the performance of the business.
DTR 1.3 is concerned with the independence of accounting of financial statements in which the
biased person will not evaluate the accounting of the kinds of business transactions.
DTR 1.4 talks about the monitoring and overall evaluation process in which existing financial
resources are assessed in order to generate higher market returns of an enterprise in the near
future. This will also focus on internal as well as external monitoring of all the business
transactions incurred in an enterprise, which will be analyzed with the passage of time.
Responsiveness
Stakeholders are important individuals in the framework of an enterprise. An entity owner
modifies their goods according to the tastes and preferences of customers and all other
stakeholders in the external market (Tricker and Tricker, 2015). The responsibility of Poundland
is to care about the higher expectations of all the stakeholders.
The quality of all the services will increase with the passage of time, which helps in increasing
performance of an entity. The retaining of all the customers within their business in order to
achieve desired aims and the objectives within a given time period.
Stakeholders are a group of individuals who will affect the performance of an entity and actions
of the business (Eling and Marek, 2014). Business negligence will be improved with limited
time. Various parameters are set by entities in order to retain all the stakeholders in their
business, as they will determine the overall success or failure of the business. Key performance
indicators will be set by an entity according to which their overall actions are implemented in
enhancing the role of the business in the current dynamic world.
Responsiveness an important feature to be used by an individual in adopting several corporate
governances to present their business in front of the external market.
5

Relations with the shareholders will be maintained in order to achieve desired aims and
objectives. The determined responsibilities of the chairman guide the firm towards the
achievement of desired aims and the objectives. This will be accomplished at different phases in
order to comply with all the legal rules attached with the current problem. True dividend rates
are designed to help all shareholders make the important decision of staying in an organization
for a long period.
Legal requirements of SEBI will be adopted in order to accomplish the trade obligations of
shares purchased or sold by an entity, catering to the variety of needs and expectations (Eling
and Marek, 2014). The responses of all the employees are essential to know in advance, as
dissatisfied employees will not be able to perform greatly when it comes to generating higher
returns for an enterprise. The main motive of any organization should be to satisfy their needs by
providing them with the deserving salary/wages, depending on the level of work done. The
position of an employee needs to be increased according to their capabilities, to inspire them to
increase their current set of skills which leads to production of higher incomes for the business.
Poundland focuses on the hidden needs and the expectations of employees by opening colleagues
and welfare which gives a common platform to all the employees in the organization.
Under this platform, an employee can enhance their qualities as this is regarded as the
extracurricular for the employees, to bring out their inner talent (Eling and Marek, 2014). The
unique talent of an individual is essential to upgrade their current status in the market and the
business entity. This is a unique forum created by Poundland to know their employees better by
creating a friendly environment for all of them. This friendly environment will help the
enterprise to increase the overall productivity, inspiring them to do work at a different pace.
Participation
The word participation refers to the internal or external support of an entity. During the course of
which they are expected to perform their actions legitimately (Larcker and Tayan, 2015)
A business is generally a collaboration of both male and female employees working towards
achieving common goals and objectives of an enterprise within a given time frame. The
6

transformation of current services is important according to the demands of the customers in the
external market, who control the business functions of an entity. The image of the firm needs to
be maintained as it is essential to create competitive advantages over its variety of users takes
place in the external market. This would be done against a competitive seller, rival investors,
customers (Young and Thyil, 2014). All these members are located in the external market but
have enough strength in order to regulate the overall market performance of an entity.
Good governance will be delivered to its external party in such a way that it satisfies all the
stakeholders in the business and pushes them to accomplish the desired market objectives.
Exactly as how Poundland is doing at the moment. The ratio of employees in Poundland is equal
among male and female, signifying that it promotes social equality by appointing both genders.
But, the higher authority is mostly enjoyed by male members, which reflect the male chauvinistic
society we live in.
Effectiveness and efficiency
Poudland is a retail firm operating in the UK. It competes on a high level with large sized firms
like Asda, Tesco and Sainsbury etc. In every organization, all the aspects of management must
be effective & intact, as this helps its performance to be improved to a great extent. As per UK
government standards, the board and committee in Poundland must have an appropriate balance
of skills. This means that if in the team of Board of Directors there are 10 members, in that case
all of them must have unique and different skills (Baker and Anderson, 2010). Apart from this,
there must be different years of experience of the Board of Directors. There must be
independence given to the Directors in terms of work. Meaning that the Directors must be able to
make their decisions independently. Corporate governance is assumed to be effective in the firm
when Directors can independently take decisions and have vast experience and knowledge. On
the analysis of the annual report of Poundland it can be observed that there are 9 members in the
Board of Director committee, and it can be observed that all Directors are independent in nature.
Most of them have vast experience in their domain in respect to the retail industry. However,
there are few ones that do not work in the retail sector and have no experience in that area. But
still, individuals are hired as Directors by the business firm (Council, 2012). Some of the
Directors that do not have experience in the retail sector are Kevin O Byrne and Miles Roberts as
7

well as Mary Bernard. These three people are not from retail domain and are already working
under Poundland, having experience of industries other than retail.
It can be said that there are lots of things in the firm going as per the UK corporate governance
code. The UK corporate governance code clearly mentions that there must be a formal and
transparent procedure for the appointment of new Directors in the board (The UK corporate
governance report, 2016). This rule has been followed by the firm in its annual report and is
being considered when they intend to appoint anyone as a director.
It can be put forth, that there is a transparency in the procedure that is followed for the
appointment of Directors in the board.
Accountability
Accountability refers to the system under which the liability of individuals and their actions in
business are clearly determined.
In a firm, accountability of all directors is clearly determined by their actions taken making them
accountable to the business and its shareholders. As per the UK corporate governance code, the
board must present a fair and balanced assessment of the firm position. It can be observed from
the firm's annual report that varied facts and figures have been presented in a systematic way,
can be easily understood by an individual. Also, providing a detailed information about the firm's
market share and its performance during a year's span (Spitzeck and Hansen, 2010).
Moreover, financial statements are also provided in the annual report in a systematic way. All
items are classified separately in these statements under different heads. Thus, it can be said that
any individual by taking a look at the financial statements can easily measure the firm's
performance by comparing figures with each other for the two financial years.
Apart from this, schedules are also provided in the annual report which reflects the way in which
different variables of the financial statements are computed. It can be said that facts and figures
are presented in a fair and balanced manner.
As per UK governance code, directors must jointly determine the level up to which they are
willing to take a risk in the business. As per rules, an organization must maintain sound risk
management and internal control system in the business. The firm is complying with this
provision of governance.
8

The annual report has clearly mentioned the strategic risk in the business, in terms of maintaining
its status as Europe's leading value general merchandise retailer. Keeping the value differential
equivalent to £1. Steps taken by Poundland are not clearly defined with respect to the discussed
area (Adjaoud. and Ben‐Amar, 2010). Instead, they have mentioned that a celebrity is endorsing
its products and 99 stores being added in the last fiscal year. It can be said that mitigation steps
were taken by the firm to maintain price difference of £1 are not clearly defined. However, steps
that are taken to maintain leading position are clearly communicated in the report (Khan, 2010).
Risk management strategy in respect to the transportation of goods is communicated clearly in
the annual report.
It is also stated that the firm has sufficient number of plans in case its IT systems, related to
transportation of goods fail. Overall it can be said that corporate governance system of the firm is
satisfactory and all elements of the CG code have been complied with.
In some cases it is identified that to some extent Poundland failed to follow any provision of
code completely. Provisions of the code, specifically, wouldn't be the priority concern for
investors and the firm itself, as the business operates under uncertain conditions and are subject
to change. It is very important to make some flexible decisions in such kinds of situations.
Overall it can be said that firm is complying with UK corporate governance code and its
corporate governance system is excellent.
Part B
Risks and recommendation
Poundland intends to expand its business to France. Before opening a business in the France it is
necessary to analyze the market. It can be observed that the French retail industry is growing at
the rate of 2.8% on a year on year basis. In the last financial year, the retail industry of the same
nation was growing at 4.8% on a year on year basis. It can be said that the growth rate of sales
declined sharply in the French market and this is the major risk that firm is facing in its business.
It can be said that sales declined at a sharp rate in France (Islam and McPhail, 2011).
This happened because the economic condition of the nation is not that good. The unemployment
rate is already high at 10%. It is the rate at which unemployment prevails in the Indian market
and other developing economies. It can be said that better economic conditions and a low
9

unemployment rate are expected in France. Due to the high unemployment rate, employed
people are bearing the burden of the unemployed. Due to this reason, savings of the people get
declined and in order to handle the situation people are cutting their personal expenditures. Due
to this reason, less demand for retail products is observed in the France. Hence, retail businesses
earns less amount of revenue
(France retail sales YoY, 2017). The decline in growth rate reflects that demand for products
declined sharply in the retail market. Due to this reason firms are earning a low amount of return
in their business.
It can be said that there is a very high risk in the business. In order to manage this risk, a number
of steps can be taken by the business firm ((Ballot and Fontane, 2010). Under this, it can make
available products at a cheaper rate to the customers. In order to ensure that this will happen,
practically, a sound strategy will be prepared and under this, goods will be purchased from the
suppliers at a very low price. In this order, the entire risk will be managed.
Unstable economic conditions of the French economy
Poundland being a retailer business have expanded their current business into a new economy
in order to gain higher market shares(Casey, 2016). Expanding their business into France in
order to achieve their desired market aims and objectives to enhance overall performance is what
is being done. However, the risk faced by an enterprise owner by expanding their business is not
beneficial for an entity.
Proper risks management systems need to be adopted by an individual in order to remove the
current weaknesses of an entity. Their main motive is to get reliable market growth by uplifting
the current market conditions. It is essential to ascertain the potential risk to be faced by
Poundland while expanding their business into the new economy (Wang and Hussainey, 2013).
Political unsuitability of the French economy is a basic risk that could be faced by an entity that
needs to be rectified with the passage of time.
A Recent study has revealed that the GDP of France has grown by 1.1%, which on its own is not
beneficial for an enterprise who intends to open a new business in the France.
The slow economic growth will not generate higher market returns for an entity as Poundland
currently is growing well in the retail industry in other areas of the world. The good political
10

conditions and the stable economic market of an economy will generate higher market returns for
an entity but in the current case scenario, Poundland will generate a higher outcome in the future.
The deficiency lies in the current economy of France which is suppressed with the effect of
various foreign entities located there. The standards of business have increased, which act as a
barrier for every new enterprise who opens up their business in the France.
CONCLUSION AND RECOMMENDATIONS
On the basis of the above discussion, it is concluded that corporate governance plays an
important role in the growth of any business firms. This is because it ensures that all operations
internal to business are performed systematically. If the business operations are performed in a
systematic manner then it can run in a smooth manner and profitability enhance itself. It is also
concluded that when any firm expands its business in a foreign market they are prone to face
rough competition from their rivals. Moreover, there are uncertain economic conditions which
create many challenges for a company. Hence, it can be said a firm must formulate proper risk
management strategies in its business. By doing so risk can be mitigated and the business can set
itself easily in a foreign market.
It is recommended that Poundland must follow the given business strategy. All items will be
purchased from local producers and will be sold under the label of the relevant business firm. It
is possible to implement the currently proposed business strategy. This is because it is very
difficult for the local suppliers to sell their product in the market directly. People normally
hesitate from purchasing local products.
Hence, it is very difficult to sell an own product in the market. Thus, local firms will be ready to
sell their product under the brand name of the Poundland. Due to less demand of the product in
the market, firms will sell their product at a very low price to Poundland.
This will enable Poundland to sell its product at a low price relative to the competitors. Also
enhancing the sale of its product in the market where already growth rate is very low. This
strategy will surely work out for Poundland. The reason to this is because the same strategy is
followed by the Lidl and Aldi in the UK. These firms are small in size but they managed to
enhance their business at a rapid pace in the UK. Thus, it can be said that strategy will prove
effective for the business firm.
11

Risk identified by an entity in an unstable political conditional and economic market, here, the
French economy is the essential risk faced by Poundland. It can be recommended to the firm to
conduct a pilot survey before taking their decision, this helps in determining the actual market
position (Calomiris and Carlson, 2016). This market survey will help in ascertaining the number
of competitors located in the external market. The Inflation rates, currency rates should be
evaluated by an individual before making any important business decisions. This is in order to
capture another important business segment by expanding their business.
An entity expands their business by analyzing the market trends and patterns which help them in
improving their overall performance.
Thereupon, the external market obligations need to be analyzed wholly in advance before
entering the market, facilitating Poundland to get a competitive advantage over the variety of
customers.
REFERENCES
Books and journals
• Adjaoud, F. and Ben‐Amar, W., 2010. Corporate governance and dividend policy:
shareholders’ protection or expropriation? Journal of business finance & accounting. 37(5‐6).
Pp.648-667.
• Baker, H.K. and Anderson, R. eds., 2010. Corporate governance: A synthesis of theory,
research, and practice. John Wiley & Sons.
• Ballot, E. and Fontane, F., 2010. Reducing transportation CO2 emissions through pooling
of supply networks: perspectives from a case study in French retail chains. Production Planning
& Control. 21(6). pp.640-650.
• Calomiris, C.W. and Carlson, M., 2016. Corporate governance and risk management at
unprotected banks: National banks in the 1890s. Journal of Financial Economics. 119(3). pp.512-
532.
12