Today’s risk management landscape for any industry is complex and vast. New regulatory measures come into effect each year, new products hit the market, and new distribution channels are developed.
In an industry such as retail, risk managers have the added complexity of risks related to the consumer. This adds yet another dimension to an organization’s risk portfolio, making it difficult to present only ten tips for retailers to mitigate risk. But as any risk manager would prioritize their organization's risks, here is a prioritized list of procedures to try:
Top 10 Retail Risk Management Tips
1. Risk ownership
In order to effectively mitigate risk in retail, someone has to be held accountable. It’s a simple notion, but one that is so often overlooked.
This risk owner might be a department head, or a property or store manager; as long as there is someone on the ground who can ensure that risks are actively identified and control tools are in place. This way, mitigation strategies will be carried out in a timely manner.
2. Document everything
More and more third-party liability claims are going to court, and as the old saying goes, the best offence is a good defence.
Documenting all of your routine procedures and policies is critical in proving you have done your due diligence when it comes to customer safety. If you perform hourly walkthroughs to ensure there are no tripping hazards, ensure this is noted in an inspection log. If it is your company policy that a server must walk ahead of clients, have it written down as a formal policy and include this detail in any incident reports.
3. Track incidents
The best predictor of claims is incidents. If you are properly documenting and tracking your incidents, you can address an issue before it ever becomes a claim.
It can also allow you to perform trend analysis, identify problem areas, and fix them, reducing repetitive losses. Documentation of incidents should include witness testimonies, contact information, photos, and any other details which may be useful in determining the cause or demonstrating due diligence.
4. Break down the silos
True enterprise risk management means breaking down the barriers that often exist in an organization and approaching risk from all sides. If a risk management team attempts to tackle the top three risks from each department, it can quickly find itself spread too thin.
By emphasizing the importance of risk management and bringing all the risks and those invested together, the organization can better set priorities and gain efficiencies.
5. Claims automation
Managing claims can become a burdensome, time-consuming task when using manual collection methods such as Excel spreadsheets. This is particularly true for industries with a high incidence of claims, such as retail.
In addition, it leaves a lot of room for human error: a study has shown that 88% of spreadsheets have errors. By automating this process with software, you will save time, reduce error, and find it easier to organize data as needed to create relevant, actionable reports.
6. Rank your risks
There are only so many resources available and it's impossible to tackle all risks at once. That's why it's necessary to rank your risks by frequency and severity to identify those that pose the greatest threat.
Determine which are most likely to happen or would have the most severe impact on the organization; these are the risks that the team should dedicate the most time and resources to. By ranking risks, you allow your team to hone in on the few that represent the greatest threat to the organization as a whole.
7. Protect your brand
Social media adoption is a double-edged sword for retailers. It provides a fantastic opportunity to communicate directly with consumers, but it also gives consumers the power to voice their opinions and experiences with your organization to the general public.
To properly protect your brand and reputation, a social media policy is a must. This should be an organization-wide policy which all employees are aware of, and that addresses not only the standards for communicating with customers but what to say in the case of negative feedback or complaints.
It is important that any messaging a customer receives is consistent across the organization.
8. Safeguard the supply chain
The most critical aspect is the reliability of supply and maintaining minimum stock levels, especially for companies with high-volume products.
Second, optimize the supply chain to remove any bottlenecks of people, processes, and technology.
Finally, organizations need real-time visibility into their own operations as well as into areas that lie outside of their own controls. This will identify issues before they become large-scale problems.
9. Use cloud-based software
Cloud-based software is becoming more prevalent in all industries. However, it is especially beneficial for retailers. Margins can be very small in the retail sector, and this can make risk management budgets even smaller.
Cloud-based software is generally sold using a user-based pricing model, which lowers capital expenditures. There are also very few IT requirements which ease the burden on internal IT teams.
For more information on the many benefits of cloud-computing, read our blog post on the subject: Six Reasons All Organization Should Embrace the Cloud.
10. Manage claims in-house
Having ownership of your claims data means you can incorporate your self-insured claims and incidents into your overall analysis. This gives you a more accurate and complete picture of where your risks lie. It can also help you get more favourable insurance premiums as you can provide a clear, accurate track record of claims history.
ClearRisk's Claims, Incident, and Risk Management software can help retailers with documentation, tracking, automation, and more. Our online data submission web portal takes all manual work out of data collection, and the system can build custom reports on any piece of information in the system. Our system is cloud-based and built on the #1 cloud-computing platform, SalesForce. Interested? Learn more below.
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Editor's Note: This post was originally published in June 2013 by Laura Fudge and has been updated for comprehensiveness and accuracy.