DIRECTORS’ REPORT Continued COMPETITIVE LANDSCAPE RISKS LITIGATION The Australian retail industry inwhich Myer operates remains On 23 December 2016, legal proceedings were served against highly competitive. The Company’s competitive position may be Myer Pty Ltd by Perpetual Limited and Bridgehead Pty Ltd (the negatively impacted by new entrants to the market, existing Landlord) in relation to the Myer Chadstone store. The Landlord competitors, changes to consumer demographics and increased alleged that there was a mutual mistake in the drafting of the online competition,which could impact sales. To mitigate these variable outgoings provisions in the lease for the Myer risks, Myer continues to select optimal merchandise assortment Chadstone store or that those provisions had been with the right categories and brands. misinterpreted. The Landlord sought, amongst other things, TECHNOLOGY RISKS, INCLUDING CYBER SECURITY rectification of the lease and payment of alleged unpaid outgoings in respect of a period between 2000 and 2016 With Myer’s increasing reliance on technology in a rapidly totalling $19.14 million, plus GST, as well as interest and costs. changing digital environment, there is a risk that the malfunction On 29 January 2018, the Supreme Court of Victoria handed of IT systems, outdated IT infrastructure, or a cyber-security down judgement in favour of Myer and dismissed the claims violation could have a detrimental effect on our sales, business made by the Landlord. efficiencies, and brand reputation. To offset these risks, Myer On 20 March 2018, the Landlord served Myer with an continues to invest and develop our in-house technology application for leave to appeal the decision to the Court of capabilities andengagewith reputable third-party IT service Appeal. providers to ensure that we have reliable IT systems and issue management processes in place. On 30 December 2016 proceedings were served against Myer BRAND REPUTATIONRISKS by a former shareholder, TPT Patrol Pty Ltd as trustee for the Amies Superannuation Fund (TPT Patrol), bringing a group Myer’s strong brand reputation is crucial forbuilding positive action for itself and on behalf of a defined (but unnamed) group relationships with customers, suppliers and contractors which in of shareholders in the Federal Court.These proceedings were turn generates sales and goodwill towards theCompany. A filed on behalf of TPT Patrol by Portfolio Law Pty Ltd. TPT significant eventorissue could attract strong criticism of the Patrol alleges loss and damage said to have resulted from Myer brand,which could impact sales orour share price. Myer statements made in the context of Myer’s full year FY2014 has a range of policies and initiatives to mitigate brand risk, results. Myer believes the TPT Patrol claim has no proper basis, including a Code of Conduct, a Whistleblower Policy,an Ethical denies any liability under it and is vigorously defending it. The Sourcing Policy,marketing campaigns, and ongoing hearing is scheduled to conclude on 10 October 2018. environmental and sustainability initiatives. Given the above, no provisions have been recognised at 28 July PEOPLE MANAGEMENTRISKS 2018 in respect of the Chadstone or TPT Patrol disputes. Safety is a high priority at Myer toensure the wellbeing of all of 1 1 .MATTERS SUBSEQUENT TO THE END OF ourteammembers, customers, and suppliers. Failure to THE FINANCIAL YEAR manage health and safety risks could have a negative effect on Myer’s reputation and performance. We conduct regular detailed ChrisFroggatt has notified the Board that she does not intend to risk assessments at each store, distribution centre,and at our seekre-election as a director of the Board at this year’s AGM.* support office, as well asregular education sessions. Louise Tebbutt stepped down as Executive General Manager Myer needs to attract and retain talented senior managers to Human Resources, Risk and Safety effective ensure that our leadership team has the right skills and 14 September 2018. experience to deliver our strategy. Failure to do somay Mark Crispey will step down as Chief Operating Officer on adversely impact Myer’s ability todeliver on its strategic 31 October 2018. imperatives. During the year, we made a number of new appointments toourExecutive ManagementGroup, and we On 11 September 2018 Myer entered into a binding Term Sheet provided our team members withaccess to training and for the refinancing of its debtwith its current banking syndicate. development to further develop their skills. The terms of thenew secured facility initially provides core and STRATEGIC AND BUSINESS PLAN RISKS working capital tranches totalling $400m, creatingample liquidity, and relaxed covenant conditions with Fixed Cover Afailure to deliver our strategic plan could impact sales, share Charges Ratio of 1.40xand minimum Shareholders’ Equity of price, and our reputation. The cornerstone of our strategic plan $400m. is the ‘customer’ and ensuring every decision made putsthe Mr PaulGoodall wasappointed as Store Development Director customerfirst. That all team members, brand partners and reporting to John King and is expected to commence in suppliersprovide our customerswith the service, brands and October 2018. productstheydesire and expect, both in-store and online. REGULATORY RISKS No other matter or circumstance has arisen sincethe end of the financial year which has not been dealt with in this Directors’ From time to time, Myer may be subject to regulatory Report or theFinancial Report, and which has significantly investigations and disputes, including by the Australian Taxation affected, or may significantly affect: Office (ATO),Federal orStateregulatory bodies including the (a)theGroup’soperations in future financial years; Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC), and (b)theresults of those operations in future financial years; or the Australian Securities Exchange (ASX). The outcome of any (c)theGroup’sstate of affairs in future financial years. such investigations ordisputes may have a material adverse effect on Myer’s operating and financial performance. Myer has an established governance framework to monitor,assess and report on such occurrences to senior management when they arise. *In October 2018 it was announced that Lyndsey Cattermole AMwould join Myer as a Non-Executive Director. Myer Annual Report 2018 21