We are more cautious than aggressive when it comes to our risk appetite. This approach allows the Group to be adaptable and respond appropriately to turbulence in our local and international context.
Our risk management process
Famous Brands faces a number of risks, including those related to IT, operations, finances, compliance, and strategy. The Board and management are responsible for risk management and must strike a balance between taking calculated risks and exercising prudence.
Our risk management framework, which is aligned with the Committee of Sponsoring Organizations of the Treadway Commission Framework, has remained largely unchanged over the past year. The Group’s risk management approach and mitigation actions correspond with our business strategy and strategic choices, which are designed to facilitate growth and reduce risks.
The Audit and Risk Committee is accountable for overseeing risk management and providing regular updates to the Board. This committee sets out the Group’s risk appetite based on the level of risk it is willing to accept in pursuit of the Group strategy. Famous Brands is careful to avoid subjecting the Group to risks that exceed the risk appetite.
At an operational level, the Group’s current, emerging and potential risks are monitored by a specialised Risk Forum comprising Exco members and representatives from Internal Audit and other divisions. This forum also allows Famous Brands to recognise and exploit innovation opportunities by exploring prospects related to risks.
Every Group entity, local and foreign legal company has a properly constituted Board. There is an established process to ensure that these entities prepare their own risk register, which is tabled at entity Board meetings.
The Risk Forum, Audit and Risk Committee, and management team foster a culture of risk governance and awareness throughout the Group. Our Group Risk Executive provides Famous Brands with professional advice on how to integrate risk management protocols effectively into day-to-day operations. The Group Risk Executive and other risk specialists are involved in the development and execution of the business strategy, including implementing key action plans. They are present in project teams and act as a sounding board on potential issues.
Key risks are identified based on the following:
- Risk-bearing capacity: The capacity to absorb risk‑related losses without threatening the Group’s ongoing sustainability based on its current business model.
- Risk appetite: The amount and type of risk the Group is willing to accept in pursuing its strategic objectives.
- Risk tolerance: The acceptable levels of variation relative to achieving the Group’s strategic objectives.
Compliance monitoring
Famous Brands has a comprehensive regulatory compliance framework in development to map the relevant legislative universe across each geography and reduce the chance of not meeting regulatory requirements. In 2024, we implemented a new governance, risk and compliance (GRC) tool to enhance the management of regulatory compliance in our markets. In 2025, we will operationalise the regulatory compliance framework and GRC tool within the Group.
We track our Protection of Personal Information Act (POPIA) compliance and use the internal audit assurance process to identify areas for improvement. We have aligned our business operations to data protection laws across all our markets.
Managing our risks in 2024
Insurance model and insurer risk management
The insurance market has hardened with insurers repricing risk and reconsidering what risks they will cover. In the Group’s 2023/2024 insurance cycle completed in June 2023, our Group property damages and business interruption (PDBI) premium escalated at over 464% to R22 million (2023: R3.9 million excluding the aggregate deductible) while our annual claims ratio was below 10%.
Our insurance risk has increased because insurers have a low appetite for cold storage facilities and require extensive fire risk management. Furthermore, food facilities are classified as high risk for riots or social unrest, following the July 2021 riots and the low probability of a total grid failure.
In response to this hardening insurance market, we are executing a plan to secure and protect our operating sites and assets against identified risk exposure. We have focused on our fire risk engineering programme to enable better negotiations and pricing with insurers. We continue to work collaboratively with both our broker and lead insurer risk management departments to ensure we meet the underwriting requirements.
In 2024, we began optimising and capitalising our insurance cell captive. The cell captive mainly administers our predetermined and agreed aggregates on motor and PDBI.
Enhancing business resilience
The Group continued to invest in solar installations and backup generators with increased capacity and efficiency to improve our energy independence. In addition, the engineering team was upskilled to maintain and resolve minor generator issues in-house, reducing the risk of production stoppages due to generator failures.
Each operational site has business continuity and disruption plans in place. In 2024, we completed scenario planning and prepared action plans to implement to safeguard the Group during a possible total electricity grid failure. Based on ongoing developments, we have also considered scenario planning for the 2024 South African general elections which are expected to be free and fair.
Famous Brands is working with franchise partners to ensure they have access to alternative power solutions during load shedding. This includes providing advice on optimal solutions and providing energy relief breaks for use of these alternative power solutions. By year-end, 95% of Leading Brands franchise partners had alternative power solutions.
Completing the three-year IT security plan
In 2024, we completed the final year of our three-year IT security plan to improve our overall organisational security maturity. This included improvements in the following areas:
- Application security.
- Data security.
- Endpoint and mobile security.
- Security operation.
- Human security.
- Infrastructure protection.
- Network security.
- Threat management.
- Identity and access management.
Over the past three years, we have successfully enhanced our IT cyber security posture by effectively implementing a variety of tools and processes. Additionally, we have worked diligently to foster a stronger security culture among our users, vendors, subsidiaries, and management teams.
This effort ensures that we consistently prioritise cyber security risks when choosing and implementing new technologies within our organisation.
We completed an independent external assessment to deliver a revised cyber security control maturity dashboard for Famous Brands. The dashboard portrays the evolution of our cyber security maturity posture since the initial assessment. Given the ever-evolving nature of our technology ecosystem and the security threat landscape, this dashboard is expected to continue evolving.
Focus areas for 2025
Famous Brands continues to improve its risk management capabilities with the following focus areas for 2025:
- Scenario planning and building business resilience for possible business interruption events such as grid failure, collapsing water infrastructure, general elections and climate change.
- Embed tools to drive risk management automation and analytical capability.
- Implement the 2025 cyber security plan.
- Continue to build capacity and strategic partnerships with insurers through the cell captive insurance vehicle.
- Enhance ESG risk management capability and reporting.
Key risks
The Group’s top 10 key risks are defined below, along with their potential impact, our mitigating actions, and the potential upside they offer. We have identified both internal and external risks. We indicated impact categories based on the tolerance levels across the four areas: finance, reputation, consumer and employee. The likelihood is based on the probability of occurrence.
Inherent risk heatmap
Key risk themes movements in 2024
1. Sustainable revenue growth at risk due to the macro-economic environment 
Related key strategic matters 
Potential root causes
- Consumers face unprecedented pressure due to inflation instability and interest rates staying higher for longer, leading to reprioritisation of spend.
- Low economic growth in the short to medium term.
- Increasing frequency of local and global political instability, including the war in Sudan, which led to the closure of our restaurants.
- Increased competition for convenience.
- Signature Brands portfolio growth not in line with expectation.
Potential impact on value
- Operating margin pressure.
- Impact on shareholder returns.
- Market share decline.
Residual risk mitigation actions
- We are accelerating our strategic plan to deliver on different brand formats and new business pipeline.
- The AME division was restructured and resourced to drive scale in key AME markets (read more).
- We have aligned the brand pricing strategies and value propositions with the consumer’s growing demand for value.
- We are rolling out the delivery hub concept in identified markets (read more).
- Company-owned restaurants defence strategy is in place to protect key sites and overall market share.
- Cash generation and preservation remain critical.
Opportunities
- Growing our presence in selected AME markets.
- Potential growth through agile trading formats, including rollout in the drive thru format.
- Leverage own home delivery capability through the delivery hub concept.
- Leverage business intelligence and customer relationship management (CRM) technology.
- Menus and basket innovation.
- Increase Retail product portfolio offering.
2. Information security breach through cyber and internal attacks 
Related key strategic matters 
Potential root causes
- Failure to keep abreast of new cyber crime developments.
- Failure to adequately address identified IT security and general control vulnerabilities.
Potential impact on value
- Loss of intellectual property.
- Regulatory contraventions.
- Systems downtime.
- Reputational damage.
Residual risk mitigation actions
- Famous Brands implemented a robust three-year security plan across the Group. The plan is supported by a combined assurance process.
- A new IT security plan for 2025 was developed to maintain and enhance the Group’s IT security.
Opportunities
- Benefits from enhanced technology.
3. Onerous capital requirements on consumer-facing technology to maintain competitive edge
Related key strategic matters 
Potential root causes
- Competitors are investing ahead of the curve in response to current and future consumer trends.
- There is an accelerated consumer shift to convenience through technology.
- Third party service providers dependency.
- Cost to maintain the appropriate technology is high.
Potential impact on value
- Cashflow pressure.
- Loss of first mover advantage.
- Ongoing cost inflation for technology investments and maintenance.
Residual risk mitigation actions
- Group-wide enterprise architecture and structure strategy is in place to cover operating system architecture and consumer-facing technology.
- We are executing key consumer-facing technology projects.
- Acquisition of a strategic shareholding in Munch Software to digitalise our POS ecosystem.
Opportunities
- Market share gains.
- Operational efficiencies achieved.
- Enhanced consumer experience across multiple touchpoints.
4. Unreliable electricity supply negatively impacting the Supply Chain and restaurants
Related key strategic matters 
Potential root causes
- Dependency on an unreliable Eskom with significant impact on Quick Service Restaurant brands.
- Poor local distribution infrastructure resulting in electricity failures.
- Generator backup solutions are not designed to serve as the primary electricity supply.
Potential impact on value
- Lost revenue during load shedding
- Operational inefficiencies.
- Margin erosion.
- Reduced day stock cover to meet sales demand.
Residual risk mitigation actions
- All key operational sites have alternative power solutions to be resilient to extended load shedding without disruptions.
- We continue to invest in more efficient generators and solar power.
- 95% of Leading Brands restaurants in South Africa have access to alternative power solutions.
- We provide energy royalty relief to franchise partners for sales generated during load shedding.
- Famous Brands is finalising its contingency plan for a total blackout scenario.
- We are selecting less energy-intensive kitchen equipment and gas options in our restaurant designs.
Opportunities
- Alternative energy sources with reduced carbon emission impact on the environment.
5. Uncertainty over franchise partners sustainability and profitability
Related key strategic matters 
Potential root causes
- Franchise partners face an increasing cost of doing business, including onerous lease obligations, higher and volatile input costs, energy insecurity and costs related to alternative power solutions.
- Consumers are reducing their spend on eating out and take aways.
- Increasing competition from third-party delivery aggregators and grocery retailers’ delivery services.
- Labour challenges related to uncertainty about the employment of foreign labour and the increase in minimum wage effective March 2024.
Potential impact on value
- It is difficult for franchise partners to reinvest in their businesses.
- Increased risk of franchise partners business failure.
- Margin pressure.
- Negative impact on net store growth.
Residual risk mitigation actions
- We are providing energy royalty relief to franchise partners for sales generated during load shedding (read more).
- We are identifying restaurants that require funding to purchase alternative power solutions.
- We continue to support franchise partners with lease renegotiations with landlords.
- We offer franchise partners highly competitive prices through our Supply Chain.
Opportunities
- Favourable rental terms.
- Menus and basket innovation.
- New thinking on how to save costs and improve sustainability.
- Our vertically integrated business model offers our franchise partners an increased competitive advantage.
6. Supply chain disruptions
Related key strategic matters 
Potential root causes
- Geopolitical and security instability leads to volatility in vessel lead times and higher shipping costs.
- Poor maintenance of South African port infrastructure leads to delayed product deliveries.
- Climate change leads to poor weather patterns and crop yields.
- Increased incidence of animal disease outbreaks.
- Instability in the local transport industry with recurring foreign driver-related protests.
- Union fabric is deteriorating with an increased trend towards disruptive wage disputes.
- Water security with increasing evidence of local infrastructure deterioration.
Potential impact on value
- Margin erosion.
- Pressure on working capital.
- Negative impact on service levels.
Residual risk mitigation actions
- Our vertically integrated business model of Supply Chain and franchised operations allows the Group to plan, control stock, and manage gross margins.
- We ensure supply chain resilience through diversifying our supplier base for key products.
- The redeveloped and expanded Midrand Campus will further derisk our Supply Chain by adding additional space for storing products and commodities in the medium term.
- There are business continuity and disruption plans in place across our Manufacturing and Logistics operations.
Opportunities
- Product innovation and operational efficiencies.
- Our vertically integrated business model offers our franchise partners an increased competitive advantage.
7. Inability to respond appropriately to business disruption
Related key strategic matters 
Potential root causes
- Current business climate requires ongoing scenario-based risk contingency planning.
- South African labour laws limit speed and agility in a disruptive environment.
- Potential protests and unrest related to the 2024 South African general elections.
- Possible future unstable coalition politics post-election in South Africa.
Potential impact on value
- Extended period to recover operations resulting in revenue loss and increased operating costs.
- Interruption of services to the franchise network.
Residual risk mitigation actions
- Supply Chain business continuity and disruptions plans in place per operational site.
- Insurance risk management plan in place.
- The redevelopment and expansion of the Midrand Campus will provide more capacity and flexibility.
- Based on ongoing developments, we have an election scenario contingency plan.
Opportunities
- Shareholder value protection and enhancement.
- Business rationalisation and optimisation.
- Operational efficiencies.
8. Increasing regulatory environment
Related key strategic matters 
Potential root causes
- Increased need for a robust Group regulatory framework and dedicated focus.
- Increasing trend towards demanding regulatory requirements.
- Difficulty in fully complying with new regulations as they get gazetted.
Potential impact on value
- Regulatory fines and penalties.
- Litigation and reputational damage.
- Excessive use of executive time to implement and meet compliance requirements.
- Increasing cost of doing business.
Residual risk mitigation actions
- We have developed a regulatory and compliance framework and will operationalise this in 2025, supported by our integrated GRC tool (read more).
- Resources allocated to comply with regulations.
- We are executing plans to strengthen in-country governance and regulatory compliance across AME.
Opportunities
- To be proactive in responding to new regulations.
9. Inefficient financial systems and processes 
Related key strategic matters 
Potential root causes
- Disparate financial systems.
- Limited automated financial solutions.
Potential impact on value
- Period close inefficiencies.
- Human errors.
Residual risk mitigation actions
- Improved reporting processes have been embedded within the Group’s broader finance team and we are implementing a project plan to strengthen this in the future.
- The Group’s financial consolidation tool has been embedded.
- We continue to roll out our core ERP system across the Group.
Opportunities
- Continue unlocking operational efficiencies through standardisation and automation.
10. Loss of reputation and severe brand damage
Related key strategic matters 
Potential root causes
- Unethical behaviour by a key stakeholder locally or abroad.
- Non-adherence to set Group procedures and escalation framework.
Potential impact on value
- Loss of trust.
- Loss of confidence in management.
- Loss of market share.
Residual risk mitigation actions
- Continued promotion of ethical practices among our key stakeholders based on our ethics framework.
- We ensure that all business policies are regularly updated and communicated.
- We continue to implement the ethics strategy and management plan to further accelerate the ethics programme.
Opportunities
- Enhanced stakeholder value and strong ethical culture.
Emerging risks
Our risk management process considers emerging risks and their potential impact on the Group. In 2024, we considered the potential impact of the following emerging risks:
Economic
- Low growth forecast for South Africa
- The possibility that South Africa remains on the Financial Action Task Force’s (FATF) grey list.
- Fiscal outlook deteriorating.
- Foreign capital outflows from emerging markets, including South Africa.
- Interest rates remaining higher for longer, placing continued pressure on consumers.
- Higher global demand for fossil fuels could drive elevated energy pricing and inflation.
Political
- South Africa’s current position in the United States African Growth and Opportunity Act (AGOA) remains precarious due to its perceived support of Russia’s invasion of Ukraine. The United States is South Africa’s second-largest trading partner, and our removal from AGOA will have severe economic consequences.
- Unrest and disruption related to the South African 2024 general elections and unstable coalition-run municipalities may impact service delivery.
- Rising geopolitical tensions with the possibility of increased armed conflict and security confrontations.
Climate
- The reemergence of El Niño weather conditions increases the possibility of drought in South Africa, which will jeopardise the expected food price disinflation.
- Natural disasters and extreme weather events.
People
- Retention of key human resources.
- Employees coping with increased financial stress and mental health issues.
- Uncertainty around the employment of foreign nationals in South Africa.
Infrastructure
- The possibility of a total grid failure in South Africa.
- General collapse of local water infrastructure.
- Deterioration of South African port infrastructure leading to increased logistics costs and delays.
Other
- The potential for increased crime and a breakdown in the rule of law.
- Animal disease outbreaks, including foot and mouth and avian flu.
- Hardening insurance market.