Risk Management Strategies In Tesco PLC

TESCO PLC Overview

Innovation and implementation of latest technology within the existing system of an organization are the crucial factor for the enhancement in the performance of the organization. Tesco is one of the leading companies in UK, which has spread the business among different countries. This report aims at the risk management strategies those could be delivered within the Tesco PLC (Wu & Olson, 2015). CAS framework has been recommended as the proper framework that could be deployed within the existing corporate strategy of the Tesco. This report put emphasis on the various frameworks of the risk management those could be helpful in the development of the project with minimum risk. These strategies can be helpful in delivering the objectives and operational activities of the organization in an efficient and effective way. It can be stated that each framework revolves around four objectives: evaluation, recording, executing and monitoring the risk management strategies implemented for the execution of the activities.

Tesco is a global general merchandising retailer and grocery stores that is operating more than 6,809 across the world and among these in the UK, it has 3400 stores those are being operated by 310,000 staffs (Tesco plc, 2017). Tesco is strengthening the business in UK through accelerating the services of cheap prices, enhanced quality of the products, and better services for the consumers. There are two different organizational structures for the PLC as a whole and at general stores as depicted in the following figure.

                       

                                                       Figure 1: Tesco PLC Organizational Structure

                                                                    (Source: Created by Author)

                   

                                       Figure 2: Tesco PLC Organizational Structure for the Stores

                                                             (Source: Created by Author)

Market shares for the Tesco are continuously increasing with the passage and expansion of the Tesco that lead to the raise of many competitors in the industry such as Wal-mart and others. Competition increases with the introduction of information technology in the market and so enhances the potential risks (TescoPlc, 2017). Tesco had implemented technology in 2004 however in 2010, most of it operational activities became dependent on the technology for the enhancement I the performance of the organization.

Six core processes within the existing structure of the organization can be listed as firstly, ppurchasing of the products from suppliers, secondly, supplying them to the distribution centre then eexchange of goods to the stores from the distribution centres. Thereafter, collecting the payment and banking the receipts of the sold products. However, these are the core risks for the deployment of operational activity within the organization. Internal control factors can be the vital requirement for the risk management within the Tesco’s organizational structure and according to the combined code launched by the Tesco in the annual report. Gledon (2015) stated that Enterprise Risk Management is one of the vital elements of the control systems in manner to develop the framework of the evaluation of the risk management systems. A manager should always try to take advantage of the balance between the growth and returns of the Tesco, which are considerable while taking potential risks or positive risk. Proper risk management can be helpful in encouraging the managers in manner to meet the strategic goals and objectives set by the heads of the organization (Woods, 2007). There should be a strategic risk management model in manner to eliminate the existing threat or threats those might affect the efficiency and proper functioning of the organization. Following risk management model can be a positive aspect for the Tesco in manner to compete with its competitors and eliminate the threats and risks within the existing system of the organization.

Literature Review

Corporate strategy that will be set by the heads of the organization in manner to take the respective decision-making on the expected implementation. This strategy will be followed by ‘Risk Appetite’ that will be set by the board of directors too. Risk appetite will be including the ‘risk identification’ that will be conducted by the internal auditing Line Managers (Woods, 2007). ‘Design of the risk controls’ is another major component of the model that will be conducted by line management followed by the ‘Risk monitoring’, which will be undertaken by the line manager internal auditing process and will be reported to Board of Directors Audit Committee in annual report.  

                                   

                                                              Figure 3: Risk management Model

                                                                      (Source: Created by Author)

Implementation of ERP within the existing system will be helpful in managing and minimizing the negative risk to the extent level. ERM will be helpful in providing the Tesco a framework, which is capable of delivering the objectives related to the identification of the activities and the circumstances those are relevant to the objectives of the organization related to the risks and opportunities (MCNeil, 2013). ERM implementation will ensure that the project will be delivered within the time and planned budget and minimizing the impact of the threat and risks. Lam (2014) proposed ten golden rules for the risk management that can be an efficient measure for the Tesco in manner to manage the risks and threats within the organization:

Rule 1: Risk management should be included as a part of the project

First rule put emphasis on the topic that if an individual does not make the risk management as the part of the project, then the organization will not achieve the risk management in an efficient manner. Lam (2014) explained that some of the projects do not provide importance to the risk management and ignoring risk management could lead to severe issues for the organization. Trusting blindly on the project by the project manager or on the project manager that the project is free from uncertainties could result in serious loss to the Tesco.

Rule 2: Identifying the risks at the very first stage

This is the very first active that should be executed while delivering the risk management for the organization in manner to identify the risks that might affect the proper functioning of the organization (SRA’s, 2015).

Rule 3: Communicate the risks

This rule emphasizes on the topic related to the communication about the risks identified during the previous projects and experience about the projects. Bromilev (2015) expressed that failed project are the best option for gathering the knowledge related to the risks and threats and better learning option for others and it should be communicated with other leaders.

3. a) Risk Management Model

                                   

                                                              Figure 4: Communication strategy

                                                                         (Source: Woods, 2007)

Rule 4: Considering the opportunities and the threats

Traditional risks were identified as the negative perspective only however, current risk management focuses on the positive risks that are capable of affecting the organization in a positive manner (SRA’s, 2015). The project manager should identify the finest line between the opportunity and the overload and this could lead the Tesco to eliminate or minimize the existing threat to the extent level.

Rule 5: Clarifying the ownership issues

It is an important factor for the clarification and enlisting of the risks, who is responsible for that risk, and who can eliminate that threat and take care of the identified threat carefully (Woods, 2007). This will be helpful in enhancing the responsibility of the individual who is accused of that certain threat and thus he or she will be able to execute his or her responsibility with much accuracy through keeping the risks at the minimum level.

Rule 6: Prioritising the risks

It is a beneficial aspect related to the risk management that focuses on prioritising the risks based on the severity in manner to execute respective measures either intense or soft care for the delivery of the project free from threats and risks (Lam, 2014). Higher severity risks will be eliminated at the first place and based on the severity the actions will be executed that will be helpful in keeping the Tesco excluded from certain loss.

Rule 7: Analyse Risks

For a good response, it is a crucial factor to understand the nature of the risk and execute the precautions based, followed by the steps stated above (McNeil, Frey & Embrechts, 2015). An individual should execute the risk analysis on different levels as analysis that is more detailed will be helpful in describing what effects take place after the risk occurs and based on that rest of the precautions should be executed.

Rule 8: Planning and implementing the risk responses

After the completion of above steps, the risk responses should be delivered in a planned manner in manner to touch all the risks in a proper and effective manner (Glendon, Clarke & Embrechts, 2015). There are three perspectives for the identified risks that include risk minimisation, risk avoidance, and risk acceptance. Gutteling (2015) explained avoidance of certain risk states that project has been delivered in a manner that the project will not face any threat or risk such as changing the supplier, eliminating a certain project and many others.

Rule 9: Registering the project risks

3. b) ERP (Enterprise Risk Management)

Maintaining a risk log is always a better option for the risk management and lessons learned objectives and as it will be based on the consideration of all the rules stated in the above project (Dionne, 2013). This is a helpful measure in tracking the records of the risks in manner to blame if something went wrong in the future.

Rule 10: Tracking the risks and risks, those are associated with these risks

The risk register developed in the rule 9 will be helpful in tracking the risks and the risks those might be raised because of the identified risk (Cagliano, Grimaldi & Rafele, 2015). Tracking risks is a complete different objective from tracking risk and as the organizational structure of the Tesco is a hierarchical structure, the risks at the first level will always affect the last level of the activity (Bromiley et al., 2015). Tracking them will ensure the severity and will be helpful in taking proactive measures against the risk.

Currently, there are many vital ERM frameworks and each of the frameworks is capable of analyzing, identifying, opportunities and risks monitoring, and respond to the identified risks within the external and internal environment being faced by the organization (Bessette, Campbell & Arvai, 2016). Following is the list of the options for the management in manner to respond to the risks those have been analyzed after the identification that include the following:

Reduction: execution of the actions related to the elimination or minimization of the impacts related to the identified risk in manner to cut the possible risks and decrease it to the extent level.

Avoidance: avoiding the risks or the activities those might lead to the risk considering that the project will be risk free and the execution of the project will be delivered in an efficient and effective manner (Farell & Gallagher, 2015).

Alternative actions: Consideration and taking decisions of the alternative steps those can be helpful in minimizing the existing the threats and risks within the project.

Accept: Considering cost/benefit decision, not any action will be taken or the risk probability lies under the benefit of the risk. Accepting the positive risk can be an opportunity for the organization and could enhance the performance of the organization (Amin, 2017).

Share or Insure: As mentioned in the above rules sharing information related to the execution of the project specially, in the failure case.

According to CAS, ERM is a discipline for the organization in manner to assess, control, exploit, finance, and monitor risks from the sources that could be helpful in enhancing the short and long-term value of the organization to its stakeholders (Ching & Colombo, 2014). This framework divides the risk types in two dimensions considering the risk management processes through categorizing the risk types. Following is the list of the types of risks those are considerable in this case:

• Property damage, Liability torts, Natural catastrophe
• Hazard risk, Financial risk, Operational risk
• Asset risk, Pricing risk, , Liquidity risk, Currency risk
• Product failure, Customer satisfaction, Integrity, Internal Poaching,  Reputational risk, Knowledge drain (Hammer, 2015)
• Social trend, Competition, Capital availability, Strategic risks

In this risk management framework, following processes are incorporated in manner to assess the risk and eliminate them and will be an appropriate framework for the Tesco PLC:

3. c) Ten Golden Rules

Establishing Context: This process put emphasis on the understanding related to the current condition of the organization operating on a risk management, external, and internal context (Farell & Gallaher, 2015).

Identifying Risks:This process put emphasis on the documentation of the threats and risks in relation with the project objectives and goal of the Tesco.  The representation of the sectors those the Tesco might exploit for the competitive advantage in manner to identify the risks those might affect the organization.

Quantifying/Analyzing Risks: Calibrating the identified risks or if possible creating a probability distributions of outcomes for the identified material risk is incorporated within this process (Brustbauer, 2016). This activity will be helpful in ensuring that each risk has been identified and each corner is touched.

Integrating Risks: this section will be emphasizing on the aspects related to the aggregation of portfolio effects, reflecting correlations, and risk distributions including the formulation for the key performance metrics of the organization.

Prioritizing/Assessing Risks: This section will include the contribution of each identified risk in manner to aggregate the appropriate prioritization, and risk profile (Mikes & Kalpan, 2015). This will be helpful in ensuring that the risks having maximum severity will be eliminated at the very first stage of the projects.

Exploiting/treating Risks: A proper strategy will be needed for the exploitation of the risks and corresponding measures that could be helpful in eliminating the identified risks and that those are capable of affecting the performance of the Tesco (Gordon, Loeb & Tseng, 2013).

Reviewing and Monitoring: This is the very last stage of the risk management and should be given the same importance as rest of the steps in manner to execute the continual measurement of the risks and measures applied within the organization (Kommunuri et al., 2016). Monitoring is as important as applying measures considering the performance of the risk management strategies and the benefits in manner to ensure whether the project is going in right direction or not.

Identifying the risks at the very first stage could be helpful in ensuring the mitigation strategies and keeping the risks at distant from the organization. This will ensure the enhancement of the individual and overall performance of the staffs and the organization (Baxter et al., 2013). This will reflect in the annual revenue of the Tesco and thus will be profitable in all the ways. Risk management will be helpful in executing every objective related to the project in an efficient and effective manner. Woods (2007) stated, “One of the reasons we are a successful company is because of risk management – people do it without actually knowing they are doing it, its part of their accountabilities. They are held to account. We monitor things on such a micro level.” Thus, proper and successful implementation of a feasible risk management procedure can result in enhancement in the performance of the organization in better and efficient way more than ever for the Tesco.

4. Findings and Conclusions

Planning and executing the risk management strategies are not a very easy step for the project manager in Tesco because of its wide market scope and many staffs. Challenges that might affect the implementation can be listed as Embedding and Managing Governance, Defining the business model, Execution and definition of the strategy, and Embedding and Enabling Conduct Risk Management (Grace et al., 2015). However, proper education and training program can be helpful in executing the risk management strategies in efficient and effective manner. Consideration of risks, associated risks, and future risk are another vital factor for keeping the level of the challenge at minimum level. Based on the above report it can be concluded that risk management strategies can be helpful in minimizing the risks at the extent level as uncertainties can happen anytime and consideration of these uncertainties at the beginning of the project can be a positive point for the project. Tesco can enhance the output through proper and effective implementation of the CAS framework for the deployment in manner to cooperate with the risk management and corporate strategies. Risk is a tail of the project or the organization that could never be eliminated however, it can be stated that it could be minimized to the extent level through the proper and effective implication of the risk management strategies. All the frameworks are eligible of identifying and applying measures those could possibly minimize the severity of the risks through eliminating them at the very first stage of the risk management execution.

CAS framework is being recommended considering the corporate strategy of the Tesco in manner to deploy an effective risk management strategy.

Risk management strategies proposed in the above report will also be helpful in prioritizing the identified risks that will be helpful in taking the proactive actions against the identified threats and the risks.

All the procedures and steps should be followed after the completion of earlier stage in manner to accomplish all the objectives related to the risk management.

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