PANDORA Annual Report 2017

P A N D O R A A N N U A L R E P O R T 2 0 1 7 G O V E R N A N C E & M A N A G E M E N T 3 8 C O N T E N T S P RODUCT DE V E LOPMENT R E S PONS I B L E BUS I NE S S P RACT I C E S AND T RANS PAR ENCY TAX DE S CR I P T I ON A major part of our revenue comes from products that have been on the market for less than a year. Because we design and craft most of our jewellery, we are dependent on an effective design process that ensures our designs match our consumers’ preferences and market trends as well as marketing and retail excellence. R I S K Risk that new jewellery designs do not meet customer expectations or gain the desired traction in the markets. ACT I ONS TAK EN • PANDORA new product introduction process • PANDORA drop strategy and collection management based on retail insight and product life cycle data and portfolio analysis, throughout the value chain • Use of external and internal design talent DE S CR I P T I ON The design, sourcing, crafting and distribution of our products relies on our ability to maintain and develop responsible business prac- tices throughout our value chain. We rely on our ability to provide internal and external clarity and transparency about our ethical aspirations, performance and results. R I S K Potential non-conformity with our Code of Ethics and external reg- ulatory requirements. ACT I ONS TAK EN • As a leading member of the Responsible Jewellery Council (RJC), PANDORA works closely with peers, independent experts and non-government organisations to create shared value by identify- ing generic risks within the jewellery supply chain, set auditable standards to counter these risks and inspire the entire jewellery supply chain to commit to responsible business practices • Risks in our own supply chain are handled through our “Respon- sible Supplier Programme”, which focuses on training, dialogue, audits and continuous improvements • Responsible business practices are governed internally through PANDORA’s Code of Ethics, supported by Group-wide staff train- ing and our Ethics Hotline • Our new crafting facility in Lamphun is LEED Gold certified • Increased transparency and consumer-oriented communication For more information on PANDORA’s ethical aspirations, efforts and results, please refer to the section on Corporate Social Responsibility. DE S CR I P T I ON PANDORA operates globally with a vertically integrated supply chain organisation and so has a significant number of intercompany transactions, which are subject to tax legislation that is complex and open to interpretation. We put a great deal of effort into com- plying with local tax legislation, but we also recognise that situa- tions may arise in which the tax authorities’ understanding of how the legislation should be applied differs from ours. R I S K The risk for PANDORA includes: • local authorities possibly challenging our tax set-up • entering new markets • internal compliance, systems and processes on tax may fail • different interpretations of the Board of Investment agreements (BOIs) in Thailand ACT I ONS TAK EN • Transfer pricing settlement made with the Danish tax authorities, including incorporation of transfer pricing principles for a signif- icant part of PANDORA’s transactions • Ongoing dialogue with tax authorities in all relevant markets • Global Group tax risk identification and management process • Publishing Group Tax Policy on Group website