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Material issues, risks and opportunities
MATERIAL ISSUES
Material issues are the factors that are likely to have the most material impact on the Group's revenue, profitability and sustainability, and therefore influence its ability to create and sustain value, or limit value erosion, for stakeholders.
MANAGING MATERIAL ISSUES
The material issues are reviewed annually by executive management by applying the following process:
IDENTIFY
factors that could have a material impact on the Group
- Operating context, macroeconomic and trading environment (Retail trading environment)
- Needs, expectations and concerns of primary stakeholders (Managing stakeholder relationships)
- Major risks identified on the Group's risk register (Major group risks)
- Material themes
- Financial, manufactured, intellectual, human, social and relationship, and natural capital resources
- Legislative and regulatory framework
DETERMINE
material issues
- Based on the outcome of the identification process, determine the issues that are likely to have the most material impact on performance in the year ahead, as well as in the longer term
- Strategic and tactical plans to address these issues are developed by executive management, and presented to and endorsed by the board
- The material issues are aligned with the Group's Business Philosophy, strategic objectives, plans and projects
- Measurable deliverables from the implementation of strategic plans and projects are incorporated into the performance targets for executives
INTEGRATE
material issues
- Short and medium-term operational plans are developed annually for managing each material issue
- Key performance indicators are determined to monitor the progress in managing the material issues
- Risks and mitigation plans are outlined for each material issue
- Medium-term opportunities are identified that highlight the potential to create value over a two to four-year time horizon
REPORT
on material issues
- Report to shareholders and other stakeholders on the material issues in the Integrated Report, at bi-annual results presentations and in the Environmental, Social and Sustainability Governance report
- Report to the board and board committees on material issues at quarterly meetings
- Outline progress in delivering on the operational plans, performance against targets, and challenges impacting the material issues
MATERIAL ISSUES FOR 2025
Following the review of the material issues in applying the process outlined alongside, the material issues for Truworths and Office are unchanged for the 2025 financial year.
The material issues are as follows:
TRUWORTHS
OFFICE
Aspirational fashion
Supply chain
Retail presence
Human capital
MATERIAL THEMES
Material themes have been included in the Integrated Report to give shareholders insight into the major factors currently influencing management's decision making. While the five material issues detailed in this report are aligned with the Group's business and operating model, the material themes are more dynamic and reflect current retail trends and major macroeconomic factors impacting the business and strategic focus areas internally.
The material themes have been determined with reference to the main risks on the Truworths and Office risk registers, along with a detailed analysis of the macroeconomic environment and the main topics frequently addressed by investors with the Group's investor relations panel.
Ultimately, the material themes are management's view of the most pertinent factors affecting the Group in the reporting period, and are expected to be the most relevant themes in managing the business in the 2025 period.
1
Trading in the challenging macroeconomic environment
6
Managing disruption in the supply chain
2
Growing revenue, profit and shareholder returns
7
Attracting and retaining critical skills and managing succession
3
Managing the risk of fashion
8
Optimising retail presence
4
Managing inventory levels
9
Seeking and developing opportunities in a highly competitive retail landscape
5
Managing in-house credit risk
10
Managing data privacy and cybersecurity
1
Trading in the challenging macroeconomic environment
2
Growing revenue, profit and shareholder returns
3
Managing the risk of fashion
4
Managing inventory levels
5
Managing in-house credit risk
6
Managing disruption in the supply chain
7
Attracting and retaining critical skills and managing succession
8
Optimising retail presence
9
Seeking and developing opportunities in a highly competitive retail landscape
10
Managing data privacy and cybersecurity
MAJOR GROUP RISKS
The risk heat map is based on residual risk and focuses on 'moderate' to 'high' risks impacting the Group's operations. Accordingly, identified risks with a residual risk rating of 'low' are not included in the heat map.


RESIDUAL RISK | REPORT REFERENCE | RESIDUAL RISK | REPORT REFERENCE | |||
Competition from global Asian online value-clothing retailers selling directly to consumers in South Africa | Retail trading environment; Chief Executive Officer's report; Chief Financial Officer's report |
1
|
7
|
Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy |
Truworths
Material Issue: Office Material Issue: |
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Managing the impact of the volatile Rand/US dollar exchange rate on retail selling prices of imported merchandise | Truworths Material Issue: Aspirational fashion |
2
|
8
|
Electricity load shedding in South Africa impacting the ability to trade | Truworths
Material Issue: Retail presence |
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Scarcity of specialist skills | Truworths and Office Material Issue: Human capital |
3
|
9
|
Disruption in the local and international supply chain |
Truworths Material Issue: Office Material Issue: |
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Succession for key executives and senior employees | Truworths and Office
Material Issue: Human capital |
4
|
10
|
Increasing competition from online and traditional retailers could impact the sustainability of margins |
Truworths Material Issue: Office
Material Issue: |
|
Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period |
Truworths Material Issue: Office Material Issue: |
5
|
11
|
Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage |
Truworths Material Issue: Office Material Issue: |
|
Management of credit risk in Truworths | Truworths
Material Issue: Account management |
6
|
12
|
Non-compliance with legislation and regulation could result in financial penalties, trading sanctions and reputational damage | Governance creating value |
Truworths

ASPIRATIONAL FASHION

SUPPLY CHAIN

ACCOUNT MANAGEMENT

RETAIL PRESENCE
TRUWORTHS: ASPIRATIONAL FASHION
MATERIAL THEMES
- Trading in the challenging macroeconomic environment
- Growing revenue, profit and shareholder returns
- Managing the risk of fashion
- Managing inventory levels
- Seeking and developing opportunities in a highly competitive retail landscape

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Continue to drive sales growth in product areas where we are confident of growing market share, including in key under-represented categories |
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Renew focus on creating differentiated and elevated product across all brands, with their own DNA |
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Expand the presence of Fuel and continue testing Sync |
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Add product extensions to ensure all appropriate fashion lifestyles are covered |
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Continuous website and e‑commerce improvement in the areas of user experience, personalisation, product offering, payments, account management and order fulfilment |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Aspirational fashion in the Truworths Operational review for more detail.
2025
Plans for the year ahead
- Continue to expand the presence of Sync and Fuel and introduce Fuel product into additional Truworths Man stores to further expand the reach of the brand.
- Grow accessories and other brand-enhancing lifestyle products.
- Implement changes to the buying process to focus on creativity and unique product development by brand.
- Leverage the close working relationship between the buying teams and the internal design centre that has been enabled by housing the Truworths Africa Design Division in the head office.
- Experiment with artificial intelligence (AI) applications across the merchandise development process.
- Ongoing improvements on the e‑commerce platform, covering on-site functionality and customer delivery experience.
MEDIUM-TERM
Opportunities
- Maximise replenishments and volume product opportunities to utilise the benefit of the integrated supply chain and new distribution centre.
- Enhance quick response reactivity to rapidly increase volumes of fast-selling product lines and replace slower-selling lines.
- Improve product mix and the level of 'fashion right' product through process, selection and system changes.
- Integrate AI into the merchandise process, both in creative product development and enhancing analytical merchandise planning capabilities.
RISKS AND MITIGATION STRATEGIES
Managing the impact of the volatile Rand/US dollar exchange rate on retail selling prices of imported merchandise.
- Forward exchange contracts (FECs) are used to cover merchandise imports to lessen the impact of exchange rate volatility. FECs are reviewed and adjusted during the course of normal business processes.
- Continue to seek opportunities to increase the local supply base and diversify the source of supply internationally.
- Improved fabric and product procurement processes, including capitalising on economies of scale through the in-house design centre.
Competition from global Asian online value clothing retailers selling directly to consumers in South Africa and increasing competition from online and traditional retailers could impact the sustainability of margins.
- Continue to invest in fashion intelligence capability through the in-house fashion studio to identify relevant fashion trends.
- Continue to differentiate and elevate product.
- Ensure high levels of customer experience through excellent, high-quality standards and consistent fits and sizing.
- Continue to invest in own brands.
- Leverage credit to facilitate sales to the target market.
- Utilise local design capability and local supply base to manufacture quick response fashion.
- Manage inventory levels to achieve terminal stockholding at the change of each season.
- Balance local and international supply base to achieve optimal product mix.
- Launch new retail store concepts and continue to enhance the online offering to create a seamless omni-channel experience.
- Focus on merchandise categories where Truworths is under-represented to grow market share.
TRUWORTHS: SUPPLY CHAIN
MATERIAL THEMES
- Growing revenue, profit and shareholder returns
- Managing inventory levels
- Managing disruption in the supply chain
- Seeking and developing opportunities in a highly competitive retail landscape

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Continue to integrate design departments and standardise systems and processes to extract synergies and efficiencies across the Truworths Africa Design Division to increase speed to market |
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Complete the construction of the new distribution centre (DC) by November 2023 |
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Commence the installation of the materials handling equipment in the new DC for completion by October 2024 |
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Continue to support selected strategic cut-make-trim (CMT) partners |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Supply chain in the Truworths Operational review for more detail.
2025
Plans for the year ahead
- Complete the new DC to enable greater volumes of replenishment and part allocation of merchandise to stores, with testing commencing in November 2024 and the facility to be fully operational by March 2025.
- Review merchandise volume opportunities to leverage the efficiencies of the new DC and optimise allocation of stock to best-performing stores.
- Implement improved allocation techniques to best utilise the capabilities of the new DC.
- Leverage internal design capability to improve ability to respond quickly to trading patterns through local manufacture.
MEDIUM-TERM
Opportunities
- Increase efficiency of the combined warehousing and distribution operations.
- Reduce distribution costs through road freight network optimisation.
- Refine the part-allocation approach by product category.
- Increase sales through the accurate and speedy replenishment by store.
- Maximise the flexibility of the new DC to achieve the optimal balance of allocation types and picking methods available.
- Relocate the raw materials from the separate warehouse to the larger and more efficient facility currently occupied by the main finished goods distribution operation in Epping.
- Realise cost savings from the integration of the current separate DCs into a consolidated facility.
- Enhance the disaster recovery capability of the DC.
RISKS AND MITIGATION STRATEGIES
Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period.
- All DC assets are adequately insured.
- Fire and flood protection installed at all DCs.
- Disaster recovery plans in place, with the current main distribution facility being retained as a backup to the new DC.
Disruption in the local and international supply chain.
- Review supplier base to ensure the business has a well-balanced and sustainable range of suppliers across the wide range of product types.
- Identify alternative sources of supply and diversify countries of origin where necessary to manage supply chain risk.
- Continue to seek opportunities to increase local merchandise procurement to reduce reliance on imports.
Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage.
- Truworths' code of conduct included in all supplier agreements and compliance with the code is monitored through an internal audit process.
- Manufacturers are required to comply with ethical standards, labour, health and safety, and environmental legislation.
- Legislative compliance audits are conducted as part of the new supplier enrolment process in South Africa.
TRUWORTHS: ACCOUNT MANAGEMENT
MATERIAL THEMES
- Trading in the challenging macroeconomic environment
- Growing revenue, profit and shareholder returns
- Managing in-house credit risk
- Seeking and developing opportunities in a highly competitive retail landscape
- Managing data privacy and cybersecurity

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Improve the predictive power of credit scorecards through the use of additional data sources and new model-building techniques |
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Optimise customer acquisition process across channels |
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Refine credit limit management decision service to balance short-term customer needs with customer life-time value potential |
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Implement further strategies to improve customer payments, including new payment channels, timing of communication, and updated collections performance criteria |
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Refine alternative new account product |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Account management in the Truworths Operational review for more detail.
2025
Plans for the year ahead
- Enhance new account acquisition by focusing on the cost per opened account, leverage the loyalty base and extend the use of the alternative new account product.
- Ensure consistent collections communications to customers in the appropriate channels.
- Focus on customer value management to balance short-term sales with the long-term profitability of account customers.
MEDIUM-TERM
Opportunities
- Optimise the customer acquisition process across channels to increase conversion rate and customer life-time value.
- Significantly reduce the cost to service customers by integrating artificial intelligence (AI) assistants into all channels across customer and account engagement.
- Manage the credit risk of the account portfolio to historical norms by balancing the trade-off between sales on the one hand, and bad debt and provisioning on the other, to increase profitability.
- Focus on account rehabilitation for those customers in arrears but with a higher probability of payment.
RISKS AND MITIGATION STRATEGIES
Management of credit risk in Truworths.
- Apply account risk criteria and processes consistently using advanced analytics, AI, machine learning, scorecards and models.
- Review account management, collections and acquisition strategies regularly and refine these to leverage new data and predictive models.
- Implement and maintain best-of-breed account management tools that accurately execute policies, processes and strategies.
Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy.
- Ongoing improvement and delivery of cybersecurity prevention technologies and strategies.
- Data privacy and cybersecurity training is mandatory for all employees and is supported by regular awareness campaigns.
- Policy introduced to ensure information and data security through responsible use of AI to protect against business risks.
- Cyber insurance cover arranged.

TRUWORTHS: RETAIL PRESENCE
MATERIAL THEMES
- Trading in the challenging macroeconomic environment
- Growing revenue, profit and shareholder returns
- Optimising retail presence
- Seeking and developing opportunities in a highly competitive retail landscape

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Trading space to be expanded by approximately 2% |
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R286 million committed to storedevelopment, including furtherbackup power solutions |
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Ongoing rationalisation and consolidation of space to improve trading densities, and close underperforming stores |
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Implement the Emporium Re-imagined store concept to large-format Truworths stores in selected locations |
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Continue to grow online sales contribution while enhancing fulfilment processes to reduce cost and delivery lead times |
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Improve the functionality of the online offering to match the services received in-store |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Retail presence in the Truworths Operational review for more detail.
2025
Plans for the year ahead
- Trading space projected to be expanded by approximately 1%.
- R243 million committed to store development.
- Implement the Emporium Re-imagined store concept in further large-format Truworths stores.
- Ongoing rationalisation and consolidation of space to improve trading densities, and close underperforming stores.
- Continue to grow online sales contribution while further reducing fulfilment costs and shortening delivery lead times.
MEDIUM-TERM
Opportunities
- Ongoing expansion and remodelling of trading space.
- Further roll-out of the Emporium Re-imagined concept.
- Continued expansion of new store concepts and formats such as the Identity Megastore, Kids Emporium, Context, Sync and Fuel as opportunities arise.
- Grow online presence to complement the physical store network and enhance the omni-channel experience.
RISKS AND MITIGATION STRATEGIES
Electricity load shedding in South Africa remains a risk to trading.
- At period-end, 92% of South African store sales were covered by alternative power sources either installed by the business or provided by landlords; remaining stores are either not impacted by load shedding or have adequate lighting to continue trading offline.
- R28 million spent in current period on backup power solutions.
- Distribution centres equipped with generators.
- Ongoing engagement with shopping centre owners to connect malls to central generators or solar installations.
- Invested in generators for some local suppliers and manufacturers.

Office

ASPIRATIONAL FASHION

SUPPLY CHAIN

RETAIL PRESENCE
OFFICE: ASPIRATIONAL FASHION
MATERIAL THEMES
- Trading in the challenging macroeconomic environment
- Growing revenue, profit and shareholder returns
- Managing the risk of fashion
- Managing inventory levels
- Seeking and developing opportunities in a highly competitive retail landscape

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Continue to diversify the brand mix |
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Ensure Office is at the forefront of fashion trends and is efficiently stocked to meet customer demand |
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Grow the made-to-order (MTO) offering across ladies', men's and kids' ranges |
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Focus on casual footwear and seasonality in the MTO offering |
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Substantial progress in the design and development of a new merchandise management system for implementation in 2025 |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Aspirational fashion in the Office Operational review for more detail.
2025
Plans for the year ahead
- Continue to adapt the brand mix to align with the fashion cycle of the consumer.
- Grow MTO sales and margin by continuing to improve product, quality and sourcing.
- Further expand new brands and Earthaddict range across ladies and men's MTO ranges.
- Continue development of the new merchandise management system for implementation in the 2026 financial period.
MEDIUM-TERM
Opportunities
- Introduce new MTO product categories.
- Grow men's sports and branded ranges.
- Continue to source new footwear partners to expand the range on offer.
RISKS AND MITIGATION STRATEGIES
Increasing competition from online and traditional retailers could impact the sustainability of margins.
- Continued engagement with brand partners to maintain and enhance brand relationships.
- Continued focus on Office's core customer to strengthen point of differentiation and secure brand support and product allocation.
- Continued focus on expanding MTO product ranges, including collaboration with Truworths' trend forecasting and buying teams.
- Grow the store footprint in strategically important locations, supplemented by a best-in-class online offering to deliver a seamless omni-channel customer experience.
- Implement improved online functionality and marketing communication.

OFFICE: SUPPLY CHAIN
MATERIAL THEMES
- Growing revenue, profit and shareholder returns
- Managing inventory levels
- Managing disruption in the supply chain
- Seeking and developing opportunities in a highly competitive retail landscape

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Extend lease on Kilmarnock warehouse and remodel facility to improve distribution efficiencies and lower costs |
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Implement express 'click & collect' service |
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Tender process to be undertaken for UK e‑commerce courier contract |
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Tender process to be undertaken for UK store distribution contract |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Supply chain in the Office Operational review for more detail.
2025
Plans for the year ahead
- Continue with remodelling of the Kilmarnock facility to increase capacity and improve efficiencies.
- Restructure operational processes to align with planned implementation of the new merchandise management and warehouse management systems.
MEDIUM-TERM
Opportunities
- Initiate a project to implement a new order management solution to decrease costs and increase ability to offer alternative payment and delivery options to e‑commerce customers.
- Implement outbound automation to reduce costs and increase capacity for handling e‑commerce customer orders.
- Evaluate new courier management software integration to expand e‑commerce customer delivery choices to ensure lowest cost deliveries while meeting service expectations of customers.
- Reinitiate the merchandise returns platform project.
RISKS AND MITIGATION STRATEGIES
Business interruption due to natural disaster resulting in loss of or damage to main business sites for an extended period.
- Warehouse assets are adequately insured.
- Fire and flood protection installed at warehouse.
- Disaster recovery plans in place.
- Improve systems and processes to increase inventory turn.
Disruption in the local and international supply chain.
- Regularly review the supplier base to ensure Office has a well-balanced and sustainable range of suppliers across the MTO range.
- Identify alternative sources of supply to manage supply chain risk.
Suppliers not operating to contracted standards of ethical behaviour could result in interruption of supply and reputational damage.
- Apply and monitor adherence to anti-corruption and bribery policy.
- Suppliers required to accept working practices in the Office Code of Ethics and Good Business Practice.
- Ensure adherence by suppliers to Modern Slavery Act statement (available on Office website).
- Implemented controls to attempt to safeguard against tax avoidance in the supply chain in line with legislation.
OFFICE: RETAIL PRESENCE
MATERIAL THEMES
- Trading in the challenging macroeconomic environment
- Growing revenue, profit and shareholder returns
- Optimising retail presence
- Seeking and developing opportunities in a highly competitive retail landscape
- Managing data privacy and cybersecurity

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Maximise the store portfolio by securing tenure in the best locations at affordable occupancy costs |
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Trading space planned to increase by approximately 10% and capital expenditure of £3.8 million committed to store development |
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Capitalise on new store opportunities, with the planned opening of three new stores (including a new flagship Offspring store in King's Cross, London) and three store relocations |
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Apply the new store design in modernising up to 10 stores |
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Identify opportunities to increase trading space in existing stores |
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Complete the implementation of the new customer relationship management (CRM) system |
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CHALLENGES ENCOUNTERED IN 2024 | |||
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Refer to Retail presence in the Office Operational review for more detail.
2025
Plans for the year ahead
- Maximise the store portfolio by securing tenure in the best locations at affordable occupancy costs.
- Trading space planned to increase by approximately 11% (new stores and optimising existing store space).
- Capital expenditure of £7.3 million committed to store development.
- Capitalise on new store opportunities with the planned opening of four new stores, relocation of three stores and the closure of one store.
- Apply the new store design in modernising up to 12 stores.
- Upgrade existing Office mobile app to enable personalised communication with targeted customers.
- Develop a new mobile app for Offspring with similar functionality to the Office mobile app.
- Develop next phase of chatbot and integrate with digital carrier.
MEDIUM-TERM
Opportunities
- Maintain the profitability of the store portfolio through efficient lease management and taking advantage of new opportunities for additional stores and the redevelopment of existing space.
- Improve customer retention through personalised and relevant communication and offer key customers priority notifications of new products and promotions.
- Implement an optimisation champion-challenger framework to improve marketing efficiencies and profitability.
RISKS AND MITIGATION STRATEGIES
Breach of cybersecurity could result in the loss of sensitive information and compromise customer privacy.
- Ongoing improvement in delivery of cybersecurity strategies.
- Compulsory General Data Protection Regulation (GDPR) and Payment Card Industry Data Security Standard (PCIDSS) training provided to all employees.
- Adherence to GDPR and PCIDSS in line with legislation.
- Amended contracts with third-party suppliers who process data on behalf of Office to incorporate GDPR adherence.
- Data privacy and cybersecurity training is mandatory for all employees and is supported by regular awareness campaigns.
- Policy introduced to ensure information and data security through responsible use of AI to protect against business risks.
- Regular penetration testing to identify and rectify vulnerabilities.


HUMAN CAPITAL
HUMAN CAPITAL
MATERIAL THEMES
- Growing revenue, profit and shareholder returns
- Attracting and retaining critical skills and managing succession
- Seeking and developing opportunities in a highly competitive retail landscape

PERFORMANCE AGAINST PLANS
PLANS FOR 2024 | PERFORMANCE IN 2024 | ||
Progress the phased succession plan for top management and senior executives |
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Monitor reward structures and retention mechanisms for scarce and critical skills in Truworths and Office |
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Extend performance reward strategies for top talent in Office and extend training programmes for critical skills in Office |
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Increase focus on diversity, equity and inclusion, aligned with the Value of 'embracing the power of inclusive teams' |
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Focus on transformation and create opportunities for black and female employees to feel empowered to succeed, and for females to feel supported by the business |
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Ongoing focus on aligning the human resources processes of Office with those of Truworths |
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CHALLENGES ENCOUNTERED IN 2024 | |||
Truworths
Office
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Refer to Truworths Human capital and Office Human capital for more detail.
2025
Plans for the year ahead
- Phased progression of succession plan for top management and senior executives.
- Continued focus on diversity, equity and inclusion.
- Continued focus on transformation and create opportunities for black and female employees to feel empowered to succeed, and for females to feel supported by the business.
- Ongoing focus on aligning the human resources processes of Office with those of Truworths.
- Implementation of a cloud-based workforce management system in Office.
MEDIUM-TERM
Opportunities
- Implementation of a cloud-based workforce management system in Truworths.
RISKS AND MITIGATION STRATEGIES
Scarcity of specialist skills and succession for key executives and senior employees.
- The Group executive leadership team is supported by seven directors and 10 divisional directors in Truworths and one director and four divisional directors in Office, with an average length of service of 20.6 years.
