Aon recently released a report that outlined the top three risks identified by the retail industry. The report found that these top three risks were also in the list of top ten risks that the retail industry was the least prepared to face.
These risks are of concern to the retail industry because of three characteristics; their complexity, their difficulty to control, and their enterprise-wise affect and scope.
What are the top three risks?
1. The Current Economic Slowdown
We’ve dealt with the recession in a number of blog posts including “Battening Down the Hatches: Risk Management in the Economic Storm” and “Weathering the Economic Downturn“. Our coverage of this risk has centered on assessing how the economy will affect business and on implementing risk mitigation techniques to match the risk. While it is planning ahead and preparedness that poses the most significant risk to the retail industry, it is never too late to manage risk. At any stage of the economic downturn, it is possible to work to strengthen relationships, improve the quality of your product or service offering, and better your operations as a whole. These are actions that can indirectly help you to better manage the risks associated to an economic slowdown. For the most part, the reaction needed when faced with a downturn is not one that is entirely new. More times than not, it includes risk management activities that you’re already doing, but just haven’t formalized. It is the structure and formalization placed around risk management that helps achieve preparedness. If you’re too late to plan ahead, learn from your current situation, strengthen for the upturn, and plan for the next recession.
2. Damage to Reputation
Often not treated as a risk integral to an organization’s success, reputation risk presents issues both short term and long. In “What is your Company’s Reputation Worth?” we explored the importance of reputation, managing the risks associated to reputation online, and how to respond to what is said about your organization on a public level. The maintenance and protection of your organization’s reputation can be a goal communicated to all employees as part of the company’s culture. Managing what is said about your organization should include making sure that all comments are dealt with properly, learning from all complaints and comments, setting structure around your reputation risk management efforts, and understanding when and how to respond.
3. Disruption or Supply Chain Failure
Risks associated with supply chain management are understandably of concern to the retail industry. With the interconnectedness and flow that has to come to make the chain work well, even the smallest of disruptions can throw an organization off course. Aon’s report shows that 53-percent of survey respondents were prepared to face a supply chain failure. One of our recent entries explored supply chain risk management and related issues. Managing this risk is a balance between flexibility and vulnerability. It largely involves knowing the risks, prioritizing them, creating a plan to strategically manage the risks, implementing the plan as necessary, and monitoring the plan’s implementation for evaluation and improvement purposes.
It is understandable why these three risks would be of the greatest concern to the retail industry. But why is it that the most important risks identified by the retail industry are also the ones that they are the least prepared to face?