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It is important to learn the lessons of the Covid-19 pandemic and going forward there is the risk of not just future pandemics but also other unpredictable and unexpected adverse events. In 2020 the pandemic put a further significant squeeze on profitability and brought great challenges for the whole industry. As the competitive landscape is redrawn by new business models and players, profitability in the industry has been squeezed by increased competition. During the pandemic awareness of the importance of sustainable development was furthered reinforced among consumers and as a result there is increased focus on sustainable solutions among companies in the industry, with the H&M group at the forefront. The industry’s shift to being increasingly digital was accelerated further in 2020 when the Covid-19 pandemic made even more customers start shopping online because a large proportion of physical retail stores were temporarily closed to reduce the spread of infection. Customers are looking for a smooth, simple and inspiring experience in which stores and online interact and enhance each other, and in recent years the H&M group has therefore made substantial investments to provide this. More and more purchases are being made online – and mainly from mobiles, which have become an important part of the shopping experience. Operational risks Major shift in the industry further accelerated by the Covid-19 pandemicįor a number of years society has been influenced by the growing digitalisation that has rapidly changed consumers’ shopping habits. The description includes how the H&M group works according to the COSO framework, which is issued by the Committee of Sponsoring Organizations of the Treadway Commission and has five components: Control Environment, Risk Assessment, Control Activities, Information and Communication, as well as Monitoring Activities. The H&M group’s approach to risk management and internal control is described in more detail on pages 21–33 of the corporate governance report. A description of the H&M group’s operational and financial risks is given in the section operational risk, with more detailed information concerning financial risks being given in the annual report 2020, note 2, Financial risks. There are risks and uncertainties affecting the H&M group that are related to the shift in the industry, fashion, weather conditions, macroeconomics and geopolitical events, sustainability issues, foreign currencies, taxes and various regulations, but also in connection with expansion into new markets, the launch of new concepts and how the brand is managed. If a risk-related event is beyond the company’s control, work is aimed at mitigating the consequences. Other risks are determined to a greater extent by external factors. Some can be managed through internal procedures, and in some cases the group can influence the likelihood of a risk-related event occurring. Operational risks are mainly associated with the business and the external risks that affect the group.
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The H&M group carries out regular risk analysis for both operational and financial risks.