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Operating risks

Risk of liability for defective products

In order to minimise the risk of placing defective products in the markets, the DIA Group guarantees the quality and safety of its products, both private label and national brands, through an advanced quality management program that is certified under ISO 9001:2008 which covers every stage of the supply chain, from the point when each product is negotiated and developed until it reaches the store:


Supplier selection:

During the final selection stage of private-label suppliers, candidates must pass a strict initial homologation audit that guarantees the safety of all the factories where DIA products are manufactured.

All of these audits to private label suppliers follow DIA’s own standards or well-recognized standards such as IFS and BRC.

Thanks to auditing, the general management of activities, space and equipment, and specific conditions of production and quality management system are evaluated.

Product validation:

The technical department supervises the specifications of each product before it is placed in the market.

As a requirement for a product to be added to the private-label range, each product must be submitted to, and a consumer tasting needs to be passed that evaluates consumer perception of the sensory and design characteristics of the products. All DIA product tastings are carried out following the UNE 87004:1979, UNE 87023:1995 rules.

Supplier audits and consumer tastings are also performed periodically once the product is placed in the market, in order to guarantee quality and safety, and to ensure that customer perception towards DIA products is maintained over time.

Quality control

During the development stage, with the signing of the Quality Policy and the Quality Program, an agreement is reached with suppliers regarding the frequency of analysis, control parameters and tolerances that will be applied in the quality control of the products received by DIA.

All of DIA’s warehouses have a quality laboratory which conducts quality control processes on the articles receives.

The DIA Group has a total of 43 internal laboratories equipped with scales, pH meters, thermometers, refractometers, penetrometers, volumetric material (test tubes and volumetric flasks), equipment to measure dimensions (rulers, callipers, micrometers, go-no go gauge type rings and loop calibrators, sieves) and laboratory consumables.

The Quality Control Department is made up of 267 professionals, of which a total of 126 work in the abovementioned internal laboratories.

In 2016, a total of 743,616 internal analyses were conducted as part of this quality control program.

In addition, the DIA Group cooperates with approved external laboratories where it carries out further analyses, in addition to the internal control process. The number of external analyses managed in 2016 amounted to 21,365. 

Quality assurance

The warehouse and store self-monitoring systems define the hygiene and sanitary conditions for the DIA Group to guarantee that the quality and safety of products is maintained throughout the supply chain.

In order to ensure the application of these standards, the Quality Control Department carries out continuous controls and periodical audits in warehouses and stores during which it supervises and evaluates aspects such as order and cleanliness, expiry management, and the cold chain.

These audits allow the DIA Group to identify and correct ahead of time any circumstance that could have an effect on the processes, thus guaranteeing the safety and quality of the products, which are stored in optimum conditions throughout the supply chain, thus offering customers safe, quality products.

SAC - Client satisfaction and service

The DIA Group’s main objective is to satisfy its customers, and we think that the information we receive through the SAC is an important source of information to identify defective products and avoid, as far as possible, proceeding with their distribution.

Contact with customers allows us to engage in direct management, at times limiting the risk arising from customer dissatisfaction with defective products.

With the aim of mitigating this risk, the DIA Group has an insurance policy with tailored coverage in terms of civil responsibility related to defective products.

The quality documents include details of suppliers’ responsibility regarding product safety and legality. 

Risks associated with production, supply, and distribution 

The products sold by the DIA Group are produced or come mainly from the country in which it operates, or from neighbouring countries. This implies a risk in countries that are more exposed to situations of political and economic instability, a high degree of workplace conflict, and possible contingencies arising from natural disasters.

Given that some of the products distributed are perishable, an incorrect evaluation of demand or the impossibility of preserving the products in stock can complicate stock management and have a negative impact on the Group’s operating results.

Regarding the distribution of products, the company has a series of transport and distribution contracts (it fully entrusts these activities to third parties). Any significant interruption in the operations of the transport network, or insolvency of its suppliers or transport companies, can lead to delays in the distribution of products and a possible destocking in stores. In addition, non-compliance with tax or social security obligations by the transport companies could imply additional costs related to eventual subsidiary responsibility in countries were the law so stipulates.

If external suppliers and transport companies do not carry out deliveries, or do not fulfil their tasks, or deliver late, or if there are any other additional costs associated with these delays or shortcomings, could generate further costs and have an unfavourable impact on our activities.

In order to mitigate the above risks, the Group relies on the following management systems or tools:

  • DIA bases its competitive strategy on operating efficiency across the entire value chain, based on high-tech logistics and IT systems.
  • In terms of the transport of goods from the DIA Group’s logistics platform to stores, a standard contract is used to hire the transport companies that are responsible for the loading, transportation and unloading of goods. This contract establishes the internal rules required for the performance of the service in terms of quality and prevention of workplace risks.
  • A strict and ongoing control procedure has been established to ensure that the tax and employment obligations of the transport companies are complied with. This is guaranteed by means of periodical checks to ensure that they are always up to date with their payments.
  • To reduce risks in case of problems with transport companies, the DIA Group has a policy of diversification and distribution of the warehouse bulks among a significant number of companies. Thus, a specific problem can be quickly resolved by the others or by new companies, limiting the impact on DIA’s business.
  • DIA has established binding corporate rules to be accomplished by the entire DIA Group to guarantee quality throughout the supply chain, as well as contingency plans and the diversification of operations. All of these procedures allow the necessary actions plans to be implemented immediately in the event of incidents that pose a risk to DIA’s business.
  • The logistics platforms and warehouses are provided with software that gives real-time information about stocks and allows a daily production and transport plan to be established.
  • In order to manage the stores, the Group has developed an Automatic Ordering tool (APT2), which places product orders according to stock levels, sales forecasts, expiry dates, and positioning in the store. This program also optimises truck loading, improving transport costs and reacting to changes in the service model.

Regulatory risk 

The DIA Group’s business is subject to a broad range of regulations (labor, environmental, tax, data protection, retail trade, franchising, food handling and safety, competition and other legislation) in the different jurisdictions in which it operates. The differences in regulatory requirements applicable in each jurisdiction may present a significant challenge from an operational point of view, by requiring that the DIA Group adjust its business to varying regulatory schemes.

The operations of the DIA Group could also be affected by changes in the rules applicable to it, in particular in relation to any amendments of regulations affecting opening hours, the construction and opening of new stores, or the establishment of prices and taxes. Any violation of the applicable rules could result in fines, penalties, administrative sanctions, and even potential sanctions of a criminal nature.

The DIA Group is responsible for identifying, measuring and minimizing legal risks, continuously observing the applicable regulatory framework and reporting on compliance with legal obligations to the internal operations heads.

To develop and properly fulfil this function, the Company has an organizational structure consisting of Human Resource Management, Financial and Fiscal Management and Legal Departments in all jurisdictions in which it operates, which identify applicable regulations and monitor compliance.

To properly perform the functions of identification of the regulatory and supervisory framework of compliance, the DIA Group has undertaken the following actions:

1.- Establishment of a process control and monitoring rules.

The Legal Department has what has been termed a "regulation map", which identifies and details all regulations applicable to the Group, with a focus on key legislation in the main processes of the supply chain, and which has been classified into six sections:

  • Legislation applicable to the negotiating process of the product: the DIA Group’s relationship with its suppliers of services and goods, competitors, regulatory boards, brands, etc.;
  • legislation applicable to the logistics activity: to the exercise of the activities of warehousing, distribution and transportation of goods; 
  • legislation applicable to the wholesale and retail trade;
  • legislation applicable to business premises, urban leases, condominiums, local taxes, business hours, etc.;
  • legislation applicable to the relationship between DIA and its customers, protection of personal data, consumption, payment methods, advertising and sales promotion, etc.;
  • legislation applicable to DIA, as a listed company, on stock market issues, internal code of conduct, etc.;

In turn, the Legal Department is responsible for informing the rest of the Company on the content and scope of the new and/or regulatory changes, designing and holding training sessions, either in classroom or e- learning mode, when legislative developments have a significant impact on the activity of the DIA Group.

In order to carry out this function, the Legal Department has established a procedure for monitoring and updating policy and communication to carry out this function, and have defined the resources, responsibilities and internal and external tools needed to perform this function and achieve the dual objective of having a regulatory map updated and an organization informed about their legal obligations.

2.- Implementation of Regulatory System Compliance.

The DIA Group has established policies and procedures to inform and train employees on certain principles of behavior and to prevent and detect misconduct. Accordingly, it is worth highlighting the following:

(i) Code of Ethics and Ethics Consultation and Information Channel

On 27 July 2015, DIA’s Board of Directors approved the Second Code of Ethics, which came into effect on 1 January 2016 (available at www.diacorporate.com).

The Company has decided that the Code of Ethics is the best instrument to implement an enforcement policy from the top down, leading by example for employees with certain types of conduct or behavior. As with the other standards defined by the Company, all employees must comply with the principles of conduct contained in this Code.

The main new updates on the Second Code of Ethics is the communication of the code to franchisees and to goods and services providers who can consult and report unethical practices carried out by DIA’s employees and administrators.

One of the other main updates is the ability to consult and report anonymously, although anyone who identifies themselves will still be guaranteed full confidentiality, with no reprisals.

DIA has also established an Ethics Consultation and Information Channel (via email and postal address) at group level and at the level of each jurisdiction in which DIA operates to clarify questions of interpretation and analyze and resolve potential breaches of the Code, in accordance with internal and external regulations that are applicable. The Ethics Committee at the corporate level is responsible for managing the Ethics Consultation and Information Channel, advertising its existence and overseeing its proper functioning.

(ii) Crime Prevention Model

The DIA Group has implemented a crime prevention model to establish the most appropriate procedures and internal control policies to prevent the commission of acts contrary to the law and, where appropriate, to reduce or hold harmless the Company in accordance with Organic Law 1-2015 of 30 March, which modifies the Organic Law 10/1995 of 23 November of the Penal Code.

To this end, the organization has designated a person responsible for the prevention of crimes; this person is to permanently report to and assist the Director of the Compliance and Ethics Committee at corporate level and is responsible for the maintenance and proper operation of the crime prevention model. During 2016, the crime prevention model was analysed and assessed by a consulting firm with forensic experience. Accordingly, the model implemented in DIA has appropriate and efficient control measures in place to try to prevent and detect the commission of offenses that could entail criminal liability for DIA.

(iii)  Anti-fraud and Anti-corruption Program

In May 2016, the Board of Directors approved the Policy for Crime Prevention and Antifraud, which is available at www.diacorporate.com.

DIA has implemented an Anti-fraud and Anti-corruption Program in all the jurisdictions in which it operates. As a result of this program, in each country the DIA Group has a fraud risk matrix analysed in terms of frequency and impact that includes controls to avoid this type of conduct. The company has designated a person responsible for fraud prevention, and who is in turn responsible for crime prevention.

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