General business review case study
The business review should be fair and balanced and therefore cover all of the major segments in the business. It should also cover main achievements in the year as well as key failures or losses.
Case study extract
Retail Ltd’s online sales have grown in the year. The company has increased its Facebook followers by 3.4 million as part of the strategy to move to an online only offering.
Comments
The extract above has only focussed on the increased sales in the growing business segment, whereas the improved version below shows that there was a reduction in revenue and profit overall. For this reason, it is also useful to include figures to support the explanations in the business review.
Improved version
Retail Ltd’s online sales have grown in the year by 23% (2019 - £20.3m; 2018 - £16.5m) due to a successful social media advertising campaign. The campaign cost £2m but the online sales only generated an additional gross profit of £1.8m. Despite this resulting in a net loss for online sales during the year, the campaign generated an additional 3.4 million new Facebook followers. This exceeded the objective of gaining an additional 2 million followers this year and has put the business in a strong position to progress with its strategy to move to an online only offering within the next three years.
Sales in Retail Ltd’s physical stores dropped by 32% (2019 - £18.5m; 2018 - £27.2m) primarily due to a continued reduction in high street footfall and the closure of three stores during the year.
The overall net loss for the year was £1.6m (2018 – profit £2.4m). At the year end, the company had net assets of £6.4m (2018 - £10.2m). The Directors have forecast that there are sufficient resources in the company to continue with its current strategy and that the company is set to return to a profit-making position in the year to come.
Principal risks and uncertainties case study
Some examples of principal risks and uncertainties are given below, but they must always be entity specific. A good starting point would be to think about areas that are discussed regularly at board meetings and could cause significant risk to the business. The strategic report should focus on explaining the most important risks and uncertainties to the business, rather than just providing a long list.
Examples of principal risks and uncertainties might include:
- Competition
- Liquidity
- Cyber crime
- IT system failure
- Data protection
- Quality/returns/brand damage
- Technology change
- Succession planning
- Staff turnover
- Regulation
Case study extract
The directors believe the main risks facing the company are competition and quality.
Comments
The strategic report should explain why these are the main risks and uncertainties, as well as describing the potential impacts on the business and what is being done to manage them. They should be linked to the objectives and KPIs of the business and be consistent with the rest of the strategic report.
Improved version
Competition is a significant risk to the company. Footfall has reduced by 3% in the physical stores and there are an ever increasing number of global competitors online. Our focus is to provide consistently good quality products to retain existing customers, as well as attract new ones through positive customer reviews. During the year, the company changed several of its suppliers and implemented new control processes to ensure the quality of products – these changes have had a positive impact and the number of orders from repeat customers has grown by 25% on the previous year.