THG (THG) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

THG disclosed 12 risk factors in its most recent earnings report. THG reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2021

Risk Distribution

25% Finance & Corporate

25% Production

17% Tech & Innovation

17% Legal & Regulatory

8% Ability to Sell

8% Macro & Political

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

THG Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2021

Main Risk Category

Finance & Corporate

With 3 Risks

Finance & Corporate

With 3 Risks

Number of Disclosed Risks

From last report

S&P 500 Average: 31

From last report

S&P 500 Average: 31

Recent Changes

12Risks added

6Risks removed

0Risks changed

Since May 2022

12Risks added

6Risks removed

0Risks changed

Since May 2022

Number of Risk Changed

No changes from last report

S&P 500 Average: 1

No changes from last report

S&P 500 Average: 1

See the risk highlights of THG in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 12

Finance & Corporate

Total Risks: 3/12 (25%)Below Sector Average

Corporate Activity and Growth3 | 25.0%

Corporate Activity and Growth - Risk 1

Added

Customer needs

If we fail to anticipate, understand and deliver against the capabilities and experiences our current and future customers need in a timely manner, they will find alternative providers. As THG continues to grow its business and brands, an understanding of how to continually attract customers whilst retaining our existing customers is essential. This requires a deep and continuous flow of insights supported by processes and systems. By understanding the needs of our customers, THG will continue to differentiate itself from competitors, build compelling value propositions and offers, leverage key drivers to identify opportunities, decrease churn and drive more effective revenue generation. Stable • Utilisation of customer activity and churn data, to understand their appetite for product offerings. • Continuous Net Promoter Score (NPS) surveying allows THG to identify customer challenges rapidly, and respond in a timely manner to emerging trends. • Managed International Customer Service – 24/7 Customer Service for a global audience across live chat, calls, email and social. • Specialised Merchandising executives support the business with brand selections. • Competitor activity and offerings are reviewed regularly to remain abreast of market developments. • Developments in e-commerce trends are monitored to keep abreast of the latest developments and innovations. • Consumers’ changing preferences are monitored internally and by market research to ensure products remain relevant. • Performance targets control key deliverables (net promoter scores, site traffic). • Highly competent buyers and merchandisers are adept at interpreting and acquiring desirable brands. • Product range planning ensures sufficient product offering to cover expected demand. • Buying, merchandising and marketing departments operate cohesively, with regular cross-functional communication. • Customer service levels and complaints are monitored and internet sites are reviewed for customer opinion. • Investment in logistics, fulfilment, delivery, marketing, brand and customer experience to keep our customer appeal. • Use of technology and data to be more targeted and strategic in how we gain new customers and maximise the loyalty and lifetime value of existing customers.

Corporate Activity and Growth - Risk 2

Added

Corporate structure

If we fail to successfully co-ordinate, deliver and execute, at pace, the development of the THG corporate structure, it will impact the successful delivery of our strategy. As part of the continued maturing of our business and to support our ongoing growth and strategic aims, our corporate structure must evolve to provide transparency and clarity to the vision for each element of THG, be it Beauty, Nutrition, Ingenuity or other operating divisions. Improving • Robust processes introduced for the reorganisation and legal entity restructure progressed during 2021 and into 2022. • Ongoing advisory support from third party advisors as part of the restructure. • Realignment and re-engineering of our business processes resulting from the corporate restructure. • Establishment of a standalone Committee for the restructure to oversee action tracking and risk management. • Ongoing recruitment and talent acquisition at senior level, for new roles.

Corporate Activity and Growth - Risk 3

Added

Onboarding and integration

If we fail to successfully onboard and integrate acquisitions whilst continuing to drive our core business, it may impact the pace at which we deliver our strategy. Acquisitions form a critical element of the THG strategy alongside the continuing organic growth of the business. Our strategic acquisitions add scale, skills and breadth to our overall service offering. The successful integration of the acquisitions into our core business are fundamental to us delivering our service offering and achieving our strategic aims. Improving • Formal process for onboarding acquisitions, where processes are aligned to THG standard. • Ongoing advisory support from third party advisors in pre -acquisition due diligence and post-acquisition. • Integrations are delivered by our in-house Integrations team. • Acquisitions and integrations are supported by cross-functional steering Groups, including at least one Executive Sponsor, which meet regularly to review the programme, including status, risks, dependencies and impact. • THG Risk representation in steering Groups to ensure the successful cross-functional execution of acquisitions and integrations and reduce the risk that projects do not deliver their desired outcomes on time or fail to maximise the expected benefits..

Production

Total Risks: 3/12 (25%)Above Sector Average

Manufacturing1 | 8.3%

Manufacturing - Risk 1

Added

Infrastructure

If we fail to scale our infrastructure, systems and processes at pace, whilst maintaining service levels, it will impact the successful delivery of our strategy. World-class infrastructure from source to customer is fundamental to the exacting service levels that we seek to provide to businesses and customers alike. Our infrastructure must be robust, slick and secure and ensure the THG service offering is second to none. Improving • Increasing our Supply Chain capacity directly by building new manufacturing and fulfilment centres globally, to ensure adequate warehouse facilities are available to keep pace with business growth. • Increasing our Supply Chain capacity indirectly via acquisitions. • Strategic programmes underway to ensure that all aspects of the THG estate evolves to support the business as it scales and changes. • THG estate planning is delivered by our in-house Capital Projects team, supported by our Group Property Director. • Capex Committee established to work alongside THG’s Capital Projects team to support and monitor transformation programmes, including management of programme risks and dependencies. • Each programme is supported by cross-functional steering Groups, including at least one Executive Sponsor, which meet regularly to review the programme, including status, risks, dependencies and impact. • THG Risk representation in steering Groups to ensure the cross-functional execution of infrastructure projects are successful, achieving desired outcomes on time and maximising expected benefits. • Engagement of trusted advisors, contract managers and surveyors to support in-house expertise. • The THG estate is protected by 24-hour security, access control and fire protection. • Comprehensive disaster recovery and business continuity plans in place across the Group. • Brexit Steering Committee continues to assess how THG should respond to the uncertainty and inherent risks, including how changes to our infrastructure can mitigate these.

Employment / Personnel1 | 8.3%

Employment / Personnel - Risk 1

Added

Talent

If we fail to attract at pace, and/or retain employees with the critical skills, capabilities, motivation and capacity we need to deliver on our strategy, we will not be successful. As we continue to evolve our priorities, the capacity, knowledge and leadership skills we need will continue to change. THG will not only need to attract the talent and experience we will need to help navigate this change. We will also need to provide an environment where employees can develop to meet these new expectations, an environment where everyone can perform at their very best. By continuing to empower employees and leaders to make decisions, be innovative, and be bold in delivering on our commitments, THG will continue to create an attractive working environment, increasing employee engagement and aligned high-performing teams. Improving • Reviews of our remuneration requirements and mechanisms designed to incentivise and drive the right behaviour with a focus on ensuring fair and equitable pay across the business • Focused development of key staff, through dedicated learning and development tools, to ensure they create the environment which enables colleagues to thrive and perform at their very best • The above, monitored via engagement surveys, follow ups and our Performance management processes. • Ongoing focus on Policy and culture requirements. See “Culture” • Brexit Steering Committee continues to assess how THG should respond to the uncertainty and inherent risks, relevant to Talent. • Throughout 2021, the focus of our Covid-19 Steering Group was to ensure that our colleagues, were being appropriately supported. In the second part of the year, the focus shifted to assisting our office-based colleagues in returning to a safe office environment.

Supply Chain1 | 8.3%

Supply Chain - Risk 1

Added

Third-party reliance

Failure to embed our partners as an integral and aligned part of our infrastructure, fulfilment and go-to-market strategy in a timely manner, will result in us failing to deliver the right capabilities and experiences to our customers. THG places reliance on thirdparty providers to support the delivery of our services to our customers. Any interruption in these services or relationships could have a profound impact on THG’s reputation in the market and could result in significant financial liabilities and losses. Improving • All new suppliers go through a rigorous selection and onboarding process. • Procurement team monitors supplier performance on an ongoing basis, against third-party contract SLAs. • Dual sourcing for most supply categories and in all business units, reducing dependencies on sole suppliers. • Extensive and up-to-date knowledge of supplier base enabling sources to be found relatively quickly. • Ongoing development of Global site standards and conformance agreements to ensure adequate standards are maintained in the supply chain as far as possible, applicable both in-house and with third-party sites. • Assurance on our key third-party suppliers and service providers through Internal and external compliance auditing. • Continuous monitoring of the supply chain activity and news through advanced web-scraping functionality. • Continuous monitoring and forecasting of demand and availability to adjust intake accordingly. • Multiple delivery methods, routes, ports and carrier strategies to minimise the risk of disruptions. • Supply Chain Business Continuity strategies and planning to respond to incidents. • Increasing our Supply Chain capacity by building new additional fulfilment centres globally, with less reliance on third party warehouses (see “Infrastructure”).

Tech & Innovation

Total Risks: 2/12 (17%)Above Sector Average

Innovation / R&D1 | 8.3%

Innovation / R&D - Risk 1

Added

Innovation

If we fail to identify and leverage emerging technologies and invest in modern practices and supporting tools, methods and infrastructure in a timely manner, we will not meet the needs of our customers or our commercial goals. We must be able to rapidly deploy new innovations to our infrastructure, systems and customers by introducing technologies, services, or new ways of working. Innovation requires us to address how we drive change and transformation across our employees, processes and technology, and how we differentiate and drive excellence and efficiencies. Improving • Strategic acquisitions which further enhance the Group’s new product development and in-house capabilities. • Strategic investments in our fulfilment infrastructure, such as the Autostore ASRS. • A fully vertically integrated business model, with full control over NPD, branding and design capabilities, which significantly reduces development timelines. • Collaboration with partners to complement and enable accelerated innovation. • Innovation informed through demand insights, consumer data and feedback from our global retail customer base. • Attracting and retaining the most innovative and inventive talent from across the globe. See “Talent”.

Cyber Security1 | 8.3%

Cyber Security - Risk 1

Added

Cyber security and data privacy

Failure to responsibly collect, process and store data, together with not ensuring an appropriate standard of cyber security across the business, will result in us not meeting our regulatory and contractual obligations, and losing the trust of our stakeholders. Information is the life blood of a digital company – protecting the confidentiality, integrity and accessibility of this data is critical for a data-driven business. Failure to do so can have significant financial and regulatory consequences in the General Data Protection Regulation (GDPR) era. In addition, we also need to use our data efficiently and effectively to drive improved business performance. Stable • The Chief Information Security Officer oversees information security. The Global Privacy Officer oversees information protection. • Multi-year cyber security programmes driving continuous improvement and cyber-risk reduction across technology, business processes and culture. • Continuously improving the data protection strategy, framework and methodology, ongoing data mapping and impact assessment procedures. • The Information Security Risk Management Methodology is deployed to provide objective reviews and monitoring on our assets and systems. • Formal certification schemes maintained across the business. • All colleagues are required to undertake awareness training for information management and data protection, with a focus on the GDPR requirements. • Internal and external validation of compliance through auditing, including risk-based audits of suppliers and other third parties (see “Third-party reliance”).

Legal & Regulatory

Total Risks: 2/12 (17%)Above Sector Average

Regulation1 | 8.3%

Regulation - Risk 1

Added

Regulatory Compliance

Failure to anticipate, understand and implement our numerous regulatory requirements, will result in us failing to meet our regulatory obligations, impacting our ability to deliver our strategy and losing the trust of our stakeholders. We continue to operate ina global market with numerous regulatory requirements ranging from Health and Safety, Food Safety and Product Safety to Taxation and Trading legislation. Remaining aware of changing regulation and ensuring compliance is key to ensuring we protect both THG and our customers and partners. Stable • Divisional Compliance teams, with sector specific knowledge and experience. • Central Compliance team overseeing and challenging the Divisional teams. • Compliance teams with reporting lines into the Chief Risk Officer. • Defined Risk Appetite metrics and Key Risk Indicators which are monitored and updated at each Risk Committee. • Updated Risk Management Framework and Divisional Compliance reporting dashboards. • Horizon scanning inputs are obtained from our Legal partners and reviewed for trends and responses required. • Ongoing planning and preparation, supported by external advisers, to meet our responsibilities as we continue to fulfil more customer orders direct from third party brands via our Ingenuity division. • Group Risk Deep-dive reviews to identify gaps and vulnerabilities • See “Cyber Security and Data Privacy” for related regulatory compliance mitigations.

Environmental / Social1 | 8.3%

Environmental / Social - Risk 1

Added

Environment, social and governance

Failure to achieve our sustainability and environmental, social and governance-related aims, objectives and obligations, will impact our ability to deliver our strategy and result in us failing to meet our regulatory obligations, losing the trust of our stakeholders. We are committed to investing in education, technology, and the environment to give individuals, businesses, and our planet the opportunity to thrive. Our goal is to use our technology, time, and experience to back a generation of diverse, sustainable businesses. Improving • Sustainability is integral to the group ethos with a function headed at an Executive level to focus on creating more sustainable products and supply chain operations and reduce environmental impact. • A Chief Sustainability Officer has been appointed to oversee and lead the Group’s approach to sustainability, including climate-related risks. • THG’s 2030 Sustainability strategy was launched in 2021 and sets out how we will address these challenges and opportunities. • In support of the strategy, the provision of a formal structure with targets underpinned by science, data and technology. • Multiple projects designed to respond to specific ESG risks, for example, the establishment of a dedicated, cross-functional TCFD Working Group, overseen by THG’s Executive Board and the Sustainability Committee. • To ensure appropriate oversight, the Sustainability Committee undertakes regularly reviews of key supply chain topics. • Regular updates and submitting proposals for approval by the Board and Sustainability Committee. • We have a materials sourcing strategy and proactive engagement with suppliers. • Supply chain visibility from our vertically integrated end-toend model • Continuous engagement with our supply base encourages a proactive approach, for example in addressing waste and energy management. • Regulatory compliance across jurisdictions and activities, from packaging and labelling, through to plastics taxation and modern slavery, as well as TCFD, is carefully monitored throughout the business, overseen by the Group Sustainability Team by means of KPIs, internal policy, and tracking progress against the published THG 2030 sustainability strategy.

Ability to Sell

Total Risks: 1/12 (8%)Below Sector Average

Sales & Marketing1 | 8.3%

Sales & Marketing - Risk 1

Added

Ingenuity e-commerce platform

Failure to maintain a reliable, scalable and secure live services environment, will impact our ability to deliver the consistent and resilient experience expected by our customers. As a digital company, we continue to focus on scaling our current and future Ingenuity platform services environment in an agile and speedy manner to ensure the delivery of a consistent and robust cloud platform and associated digital network. THG must provide the right infrastructure and operations for all of our customer products, a hosting platform together with the governance to ensure optimal service availability, performance, security protection and restoration (if required). Improving • Accountability across Platforms and Projects, underpinned by ongoing risk assessments and continuous improvement projects • Ongoing investment in our Ingenuity platform services to ensure that the THG estate evolves to support the business as it scales and changes. • Continuously improving data protection strategy, framework and methodology, ongoing data mapping and impact assessments procedures. • Robust change management processes and incident management protocols, adhered to for all products and services. • Service-level objectives including uptime, responsiveness, and mean time to repair objectives. • Comprehensive disaster recovery and business continuity plans in place across the Group. • Other key mitigation factors detailed under “Cyber Security and Data Privacy” risk.

Macro & Political

Total Risks: 1/12 (8%)Below Sector Average

Economy & Political Environment1 | 8.3%

Economy & Political Environment - Risk 1

Added

Culture

If we do not fully empower our employees and enable accountability in line with our shared values and behaviours, we will be challenged to create a culture, that meets THG’s business ambitions. The development of a shared behavioural competency that encourages employees to always do the right thing, put customers at the heart of the business and drive innovation, is critical in THG’s success. Devolution of decisionmaking, and the acceptance of accountability for decisions, is fundamental to our continued development and sustains our shared Values and Behaviours.THG also supports a culture of empowered leaders that develops ideas and solutions, and that provides employees with a safe environment allowing for honest disclosures and discussions. Such a trusting and empowered environment can help sustain innovation, enhance customer success and drive the engagement that results in increased market share. Stable • Ongoing integration of Values and Behaviours into all our core colleague priorities including objectives, performance management, appraisals, talent attraction, selection and development, leadership development and onboarding. • Establishment of a Diversity & Inclusion Committee, a platform to further improve the employee journey and workplace culture to ensure we are a truly inclusive workplace. • Formal assessment against personal objectives for each colleague as part of established performance management process, which also considers personal application of THG’s Values and Behaviours. • HR Handbook communicated to all colleagues, with e-Learning modules rolled out across the workforce, and annual refresher training. • Training including anti-bribery and corruption training which continues to be delivered across our business units based on assessed risk. The above monitored by: • Whistleblowing and Incident Reporting mechanisms in place to allow issues to be formally reported and investigated. • Engagement surveys & follow-ups. • KPIs and People Dashboards at a divisional level, including DNI metrics and Attrition analysis.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.