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Top business continuity risks for retailers

Top business continuity risks for retailers

Retail, by its very nature, is fast-moving: competition is intense and customers are increasingly demanding. In this cutthroat environment, the inability to do business can quickly damage a retailer - and making up lost ground is often extremely difficult, if it's possible at all.

"All businesses need to have business continuity plans in place to avoid risks and minimise disaster, but retailers operate in a particularly competitive environment," says Grant Minnaar, Business Continuity management advisor at ContinuitySA. "Retailers need to understand their risk profiles and make sure they have strategies in place to ensure they can stay trading, or they risk losing customers and damaging their brands."

Based on its experience as Africa's largest and leading provider of business continuity management services, ContinuitySA has identified some of the top business continuity risks faced by retailers.

Socio-political risks. All businesses face these, from political instability to strikes, but it's worth noting that retailers are particularly vulnerable. They have large, highly unionised workforces, and their outlets are often the first targets if civil unrest breaks out.

Supply chain disruption. Retailers sit at the end of a complex network of supply chains, some of which are very long. All of this exposes them to a wide variety of risk. Minnaar says that diversifying the supplier base is one strategy for risk mitigation, while some retailers maintain stockpiles of goods to provide a buffer in case of supply chain disruption.

Another important risk factor is that the retailer's suppliers are themselves at the mercy of their supply chains. A business stoppage in a subsidiary supply chain can have a dramatic knock-on effect for a retailer.

"It's imperative to understand all the dependencies of your primary supply chain, and the effect that the inability of a supplier's supplier to meet its commitments would have," he points out. "Business continuity planning has to encompass the whole supply chain."

Reputational risk in the era of social media. Increasingly, people are connecting to the internet via their mobile phones, which means that they can go online to express dissatisfaction about a retail experience almost in real time. Social media firestorms can quickly get out of hand, so a robust crisis communications plan needs to be in place to deal rapidly with adverse comments on social media sites. It's a good idea, adds Minnaar, for the spokesperson to be relatively senior - the temptation to give the social media role to a young and possibly inexperienced person can backfire dramatically.

Product recalls. Retailers constantly face the risk of contaminated or otherwise faulty products landing up on their shelves. Aside from the reputational risk involved - remember the contaminated baby food scandal a while back? - dealing with product returns or even a full-scale recall can be costly in both financial and manpower terms.

ICT failure. Retail is already hugely dependent on its information and communications technology (ICT) systems, from tills right through to the back office. In addition, retailers rely on ICT to collaborate with members of their supply chain and manage complex logistics. It's therefore vital that a proper disaster recovery plan forms part of the business continuity plan - no ICT system, no business.

An additional (and growing) risk is the fact that most retailers have an online presence, which consumers use either for assessment or actual purchase. ICT failure can literally turn out the lights of online stores.

Buildings, including warehouses. As noted, natural disasters can compromise a retailer's outlets or warehouses, and so imperil the business. But the risks are broader, and should include fire, particularly at warehouses, which can be somewhat neglected in comparison to the customer-facing outlets.

Employee injury. With large staff complements, retailers need to be extra certain that they are compliant with all the applicable occupational health and safety regulations. Again, warehousing operations operating to tight deadlines, and where heavy equipment like forklifts is used, are a particular vulnerability.

"This is by no means an exhaustive list, but it's a useful starting point for retailers to begin a thorough evaluation of their specific risks - and then to put a comprehensive business continuity management programme in place," Minnaar concludes.

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