Ocado Regulatory News (OCDO)

Objective

Risks

Mitigation Action/Control

Change During The Year

DRIVING GROWTH

Risk of decline in high service levels in the retail business.

· Weekly monitoring of the key indicators and the underlying drivers against targets.

· Continuing initiatives intended to improve resiliency and operational performance of the Hatfield and Dordon CFCs. There are ongoing plans to make the scaling of operations at Erith and Andover smoother.

· These arrangements help reduce the impact of operational problems in CFCs on customer service levels.

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The risk has decreased because CFC capacity at both Erith and Andover continues to increase.

Failure to maintain a retail proposition which appeals to a broad customer base and sustain growth rates while managing any change in sourcing which may follow the end of the current Waitrose sourcing agreement in 2020.

· Continuation of LPP basket matching price comparison and competitive pricing.

· Growth of the Ocado own-label range alongside continued provision of the Waitrose range.

· Growth of branded ranges and expansion of supplier base.

· Alternative sourcing scenarios and other arrangements are planned in the event that the Waitrose sourcing relationship is not renewed.

· Continuation of investment and optimisation of the marketing channels to acquire new customers.

· Continued improvement of webshop and apps.

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This risk has increased because competitive pressure remains high and the Group is moving closer to the expiry of the current sourcing arrangements.

Risk of not having sufficient management, technology and engineering capabilities to be able to execute effectively the requirements for multiple Ocado Solutions contracts simultaneously in many international locations.

· Increased hiring of staff both in UK and overseas.

· Review of team structures and creation of new key management roles and processes to position the Group for delivering a larger number of complex projects.

· Increased hiring of managers and subject matter experts in retail, operational and central support areas.

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The risk has increased during the period because the Group needs to deliver more largescale and complex projects and it is now broader, in that it applies to developing sufficient engineering capability.

Risk of delays in the generation of new capacity in the UK.

· Dedicating resources to the modularisation of technology and logistics systems to enable faster replication.

· New capacity continues to increase as the Andover CFC and Erith CFC develop.

· Regular steering meetings and management oversight for new CFC projects.

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This risk has decreased during the period because both the Andover and Erith CFCs have continued to increase capacity.

MAXIMISING EFFICIENCY

Risk that the long-term cost of ownership of our fulfilment solutions is not priced at a level that is attractive for our clients while still providing acceptable returns for our shareholders.

· Regular review of IT prioritisation process and rate of software development and regular platform steering meetings.

· Resources and capabilities will be scaled and reallocated to help meet Ocado Solutions project deadlines. A new role of Group Transformation Director was created to prepare and help execute a detailed plan to ensure timely and coordinated scaling of operations.

· There is an ongoing programme of design improvements for the platform.

· The amount of capital invested in our platform is carefully controlled and we have the ability to reduce costs by scaling back the speed of the development.

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UTILISING PROPRIETARY KNOWLEDGE

Technological innovation supersedes our own and offers improved methods of food distribution to consumers.

· Engagement with a wide number of international grocers to understand market needs.

· Experienced teams in place who understand the current solutions and are aware of global alternatives used in other industries.

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This risk has increased because the rate of innovation of MHE, robotics and technology solutions in the grocery e-commerce market is increasing, creating a more competitive market for the Ocado Solutions offer.

Protecting our IP.

· Ongoing effort to identify patentable inventions and to apply for patents, with an increased number of patent applications. Expansion of IP team to help with IP protection work.

· Ongoing review of our patent portfolio and discussion of other IP issues by the Ocado Innovation Committee.

· Where necessary we take steps to protect our IP from unauthorised use.

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Infringing a third party's IP.

· Conducting "freedom to operate" searches on selected technologies in selected jurisdictions and monitoring IP filings by a large number of companies.

· Where appropriate, obtaining specialist or legal advice including to help ensure our ability to use our IP is not restricted by infringement claims.

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OPERATIONAL

A risk of a food safety or product safety incident.

· Experienced legal, food and product technology professionals monitor compliance against policies and procedures.

· Supplier approval and certification process.

· Food and product safety policies and quality management with operational procedures.

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A risk of changes in regulations impacting our business model or the viability of Ocado Solutions deals.

· Regular monitoring of regulatory developments to ensure that changes are identified.

· Some due diligence carried out at appropriate stages in the Ocado Solutions process.

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Risk of negative implications caused by final Brexit terms such as increase in import costs or difficulty in hiring employees.

· Regular monitoring of government reporting on Brexit negotiations to understand impact on the business including our ability to hire employees from the EU, an assessment of trade tariffs on imported goods and impact of disharmonisation of UK and EU regulatory standards in a range of areas.

· We are taking a range of steps to mitigate the impact of Brexit on the Group including for supply of products and materials and for changes to regulation.

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Lack of clarity on any post Brexit trade arrangements as the exit date approaches increases the risk and uncertainty on the extent to which our operations and performance will be impacted by Brexit.

Risk of major cyber attack or data loss impacting the retail business or the Ocado Solutions business.

· IT systems are structured to operate reliably and securely. The security of our IT systems is regularly tested by third parties.

· An information security governance programme is helping increase security and privacy internal controls.

· No customer payment card data is held in Ocado's databases.

· A new Data Protection Officer was hired to oversee the Group's GDPR compliance programme.

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The overall information security risk exposure has increased during the period largely as a result of an increasing external threat environment, the new General Data Protection Regulations and the increasing overall profile of the Group.

Business interruption.

· IT systems are structured to operate reliably and securely.

· Dedicated engineering teams on site with daily maintenance programmes to support the continued operation of equipment.

· Disaster recovery testing and business continuity plans continue to be progressed and updated.

· High level of protection for CFCs and equipment, combined with business interruption insurance to transfer residual risks.

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Ocado Group plcCompany Secretary

Neill Abrams

email: company.secretary@ocado.com

Investor RelationsDavid Shriver +44 1707 228 000

investor.relations@ocado.com