The economy is a major influence on consumer spending. Trends in employment, inflation, taxation, consumer debt levels, weather and interest rates impact consumer expenditure in discretionary areas. Changes in Government policies (e.g. Cycle to Work) may also affect our customers' ability to benefit from our products and services. In addition there is, at the time of publishing this report, uncertainty surrounding the outcome of the EU membership vote.

The Group mitigates these risks by maintaining a focus on the defensive characteristics of its needs driven product groups. A firm focus is maintained on cost control. Targeted promotions and excellent service are designed to attract and retain customers. We ensure that marketing and merchandising can be revised quickly to react to weather conditions.

We also ensure that we have representation with Governmental decision makers in the areas supporting our core categories.

The aim of the Group's business strategy is to deliver long-term value to our shareholders. The Board understands that if the strategy and vision are inappropriately formulated, communicated, or executed then the business will suffer.

Key investments could fail to deliver sufficient returns. The Autocentres and Cycle Republic businesses could fail to meet growth expectations.

The Group has set out its 'Moving Up a Gear' strategy. Strategic issues are regularly reviewed at Board meetings. Regular assessment is made to ensure that strategy remains appropriate, and that the business is making progress in meeting its strategic objectives. KPIs relating to strategy have been communicated clearly, both within the business and to the market. These KPIs are regularly discussed by the Board. Our budget process recognises the importance of strategic initiatives.

The Group has delegated authorities processes to approve significant investments, including review by an Investment Committee and the Board. Autocentres and Cycle Republic have dedicated, experienced management teams supported by appropriate infrastructure and allocated resources. The performances of both businesses are closely monitored by the Board.

The retail industry is highly competitive and dynamic. The Group competes with a wide variety of retailers of varying sizes and faces competition from UK retailers, in both stores and online, as well as international operators. The car servicing market is a service-based market with a number of different-sized providers where trust is extremely important to customers. Failure to compete with competitors on areas including price, product range, quality, service and trustworthiness could have an adverse effect on the Group's financial results.

The Board is aware of the risks faced from UK retailers both in-store and online, and from the national car-servicing networks and smaller independents.

We have a significant investment programme to support 'Moving up a Gear'. The investment programme is allowing us to improve the service we provide to customers by improving the quality of our stores, IT infrastructure, training, customer knowledge (including e-receipts) and website (including optimisation for mobile and tablet devices). Excellent service is fundamental to differentiating ourselves from our competitors.

The national geographical coverage of our stores underpins our 'Click & Collect' offering. Our WeFit service is a key differentiator. Our Cycle Repair and extended Parts, Accessories and Clothing range offer confirm our credibility within the Cycling market.

The Group seeks to continually strengthen its own-brand retail offer and develop opportunities to differentiate the Halfords brand, including TV, radio, press and social media advertising. Our products benefit from association with well-known cyclists and designers.

Our Autocentres business continually seeks to provide innovative solutions for their customers, such as 'brakes4life'.

The Group operates in an environment governed by legislation and codes in areas including, but not limited to, Listing Rules, trading standards, advertising, product quality, health and safety, hazardous substances, Bribery Act and data protection.

The Group recognises that failure to comply with ethical standards could expose the business to reputational risk and loss of goodwill.

Regulatory requirements are closely monitored by our Company Secretarial team which includes colleagues with relevant professional qualifications and experience. The Group has Quality Assurance and Compliance teams working in both the Retail and Autocentres businesses. Specialist Health and Safety teams ensure that the Group has adequate policies and risk assessments. Retail margin erosions are minimised by a dedicated profit protection team.

Colleagues and management are trained to identify and handle in-store regulatory issues using Gears training modules on our online Learning Management System. We have a whistleblowing hotline that allows colleagues to raise concerns in confidence.

We operate a Code of Conduct that clearly sets out our expectations of suppliers. We have a corporate delegated authorities framework (How We Do Business) setting out key authorisation levels. Anti-Bribery and Corruption training has been delivered through face-to-face and online training sessions.

The Group has a dedicated Investor Relations team which ensures that there is frequent and appropriate communication with investors and the wider financial community.

The Group has a dedicated Corporate Social Responsibility Committee, which calls upon cross-functional support as required. The Group has a comprehensive record of community engagement through events such as children's bike workshops, and support of the Re-Cycle charity

Halfords sources a significant proportion of the merchandise it sells in its stores from outside of the UK, either directly or via third-party suppliers. Consequently, the Group is subject to the risks associated with international trade (particularly those which are common in the import of goods from developing countries) including, but not limited to, inflation, currency fluctuation, the imposition of taxes or other charges on imports, the exposure to different legal standards, the burden of complying with a variety of foreign laws and changing foreign government policies and natural disasters. UK withdrawal from the EU could impact on our supply chain.

The Group could also be impacted in the event of disruption to domestic logistic arrangements; for example, unavailability of distribution centres or road transport problems.

Extensive research is conducted into quality and ethics before the Group procures products from any new country or supplier. The Group's strong management team in the Far East blends expatriate and local colleagues. It understands the local culture, market regulations and risks and we maintain very close relationships with both our suppliers and shippers to ensure that disruption to production and supply are managed appropriately.

We work with suppliers in a number of territories to reduce the risks of disruption.

We maintain firm security and protection measures at our distribution centres. We have business continuity plans to manage any incidents that may occur. Our logistics are overseen by an experienced, dedicated warehouse and logistics team who maintain contacts with a range of logistics businesses who could be utilised if necessary.

The Board recognises that the quality and safety of both our products and services in our stores and autocentres are of critical importance and that any major failure will affect consumer confidence and our reputation. Failure to protect the Group's reputation and brand could lead to a loss of trust and confidence. This could result in a decline in the customer base and affect the ability to recruit and retain good people. There is also the risk that our service proposition fails due to inconsistent levels of service at individual stores and individual centres.

The Group constantly seeks to enhance its position as the store or centre of first choice in each of the markets that it serves.

Our Gears training programme uses online modules to ensure that colleagues are consistently knowledgeable about our products and able to deliver quality services to customers. This online training is reinforced by face-to-face learning and assessments. Stores use an accreditation matrix to ensure that all building and fitting is undertaken by competent colleagues. Product knowledge among colleagues is promoted through specialist conferences for selected staff (e.g. BikeHut managers).

We have also implemented measures to ensure that we attract and retain the best colleagues: engagement surveys aim to identify opportunities to reduce colleague turnover; colleagues who have successfully passed 'Gears' training programmes receive a premium; we have again been recognised as one of the Sunday Times "25 Best Big Companies to Work For"; our recruitment processes are now centralised to improve efficiency and consistency.

Our products are risk assessed and rigorously tested for quality and safety by qualified engineers in our dedicated quality team. We monitor customer comments and complaints and, when necessary, we have established recall processes.

Our Autocentres utilise a comprehensive quality assurance process with checks by centre managers. Technicians are regularly checked to ensure quality of workmanship, and the priority status allocated to individual jobs is reviewed to ensure safety and prevent overselling. There is a dedicated Operations Quality team. We utilise mystery shoppers.

In common with most businesses, Halfords is dependent on the reliability and suitability of a number of important IT systems where any sustained performance problems (including those caused by cyber attack) could potentially compromise our operational capability for a period of time impacting on stores, centres or warehouse, multi-channel and distribution systems. With ambitious growth plans for our multi-channel offer, our trading capacity could be affected by internal and external systems' resilience and interdependencies.

Commercial data could be lost or stolen through cyber attack, sabotage, or other security breaches.

Extensive controls are in place to maintain the integrity of our systems and to ensure that systems changes are implemented in a controlled manner. Halfords' key trading systems are hosted within a secure data centre operated by a specialist company remote from our support centre. These systems are also supported by a number of disaster recovery arrangements including a comprehensive backup and patching strategy, and a hotlink secure data centre hosted in a different location. IT recovery processes are tested regularly.

We review our IT security processes and risk assessments on an ongoing basis and our IT team has dedicated IT security and continuity experts. We utilise appropriate firewalls, physical and logical system access controls. We have undertaken network penetration testing.