final summative group assignment - erm

Risk Management Report - Primark

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Table of Contents1. Assumptions:................................................................................................................................................................................................... 6

2. Risk Identification:........................................................................................................................................................................................... 7

3. Risk Quantification:..........................................................................................................................................................................................9

4. Risk Responses:............................................................................................................................................................................................ 11

1. Not adopting new technology such as RFID in supply chain of Primark:...................................................................................................11

Risk Identification:......................................................................................................................................................................................... 11

Existing Control:............................................................................................................................................................................................ 12

Response – Mitigation:.................................................................................................................................................................................. 13

Risk Owner:................................................................................................................................................................................................... 13

2. Damage to Brand image (low quality imported apparel & poor workings conditions)................................................................................13



Risk Response - Mitigation:........................................................................................................................................................................... 14

Risk Owner:................................................................................................................................................................................................... 14

3. Failure to comply with government employee legislation...........................................................................................................................14

Risk Identification.......................................................................................................................................................................................... 14


Risk Mitigation:.............................................................................................................................................................................................. 15

Risk Owner:................................................................................................................................................................................................... 15

4. Loss of Customers due to lack of e-commerce facilities............................................................................................................................ 16



Risk Response - Mitigation:........................................................................................................................................................................... 16

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Risk Owner:................................................................................................................................................................................................... 17

5. Inability to eliminate restricted chemicals from using in supplies factory....................................................................................................18


Exiting control:............................................................................................................................................................................................... 18

Risk Response – Mitigation:.......................................................................................................................................................................... 18

Risk Owners:................................................................................................................................................................................................. 19

6. Difficulty in detection of defected apparels or products..............................................................................................................................19




Risk Owners:................................................................................................................................................................................................. 20

7. Delayed by apparel suppliers for political or environmental disruption as supplier are most from third world countries............................20

Risk Identification.......................................................................................................................................................................................... 20



Risk Owners:................................................................................................................................................................................................. 21

8. Risk of Fire Safety within Primark’s Premises............................................................................................................................................22


Existing control:............................................................................................................................................................................................. 22


Risk Owner:................................................................................................................................................................................................... 23

5. Monitoring & Communication Strategy:......................................................................................................................................................... 24

6. Conclusion:.................................................................................................................................................................................................... 25

7. References:................................................................................................................................................................................................... 263

8. Appendix....................................................................................................................................................................................................... 29

Risk Registration:.............................................................................................................................................................................................. 29

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1. Assumptions:To identify the risks for Primark, several assumptions have been made as follows:

- Primark is a slow reactor towards the pressure from technological advancement

- Primark is interested more to invest on high street shop than expanding in e-business

- Primark have strategy to minimise the cost and not care about quality

- Supplier’s country of Primark are more volatile (i.e. political, Economic instability)

- Primark’s expansion only depends on high street shop

Furthermore, the risk matrix is based on following assumptions:

In this report, some of the most important residual risks are being identified & studied and appropriate mitigation practices are explained. Further, in the risk register, the probability and impact of each identified risk is ranked from 1-5, from the low to extreme. The total risk score is calculated by multiplying their likelihood by the impact that helped in ranking them on the matrix. The risks are categorised as follows:

- Risks with score above 15 are considered as Extreme

- Risks with score below 15 and above 9 are considered as High

- Risks with score below 10 and above 6 are considered as Medium

- Risks with score below 7 and above 1 are considered as low

- And finally risks with score 1 are considered as very low

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2. Risk Identification:In this report, to identify the risks for the Primark Risk Management Plan, tools such as PESTLE, SWOT and Porters value chain analysis

has been used to identify internal and external factors that are important for the Primark in achieving its goals along with analysis of macro

environment trends that may affect Primark. Based on these academic frameworks, 30 risks have been identified that company should

consider in the Risk Management Plan and are presented as follows:

1. Not adopting new technology such as RFID in supply chain of Primark

2. Damage to Brand image (low quality imported apparel & poor condition for workers)

3. Failure to comply with government employee legislation

4. Loss of market share due to lack of e-commerce facilities.

5. Inability to eliminate restricted chemicals from using in the suppliers factory.

6. Difficulty in detection of defected apparels or products

7. Delayed by apparel suppliers for political or environmental disruption as supplier are most from third world countries

8. Risk of fire safety within Primark’s premises

9. Running out of cash (liquidity issues)

10.uncertainty of material cost, transport cost and supplier's capacity

11. Increase customs duties for importing apparels

12.Poor relation with employees and management

13.Loss supplier due to ethical Issues

14.Not to comply with new fashion trend of clothing as fashion has limited self-life.

15.Loss of profit due to internal control failure and foreign exchange risk.

16.Absence of optimal waste management system

17.Paying least attention to its marketing strategies

18.Failure to keep enough inventory in Primark's fast moving retail store

19. Inability to maximise in-store shelve availability and reduce out of stock

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20. Inefficiency of risk management to identify the future potential risk

21. Increase production cost for setting high working standard

22.Higher rate of increasing cost (minimum wages, inflation) than efficiency gain in suppliers country

23.Risk on unethical practice of supply chain

24. Inefficiency of supplying electricity in supplier’s country as most of the country are not produce enough electricity.

25.opening a new store in low growth consumer market

26. Not adopting fare trade policy

27. inability to penetrate emerging market of Primark

28.Lack of corporate social responsibility

29.Lack of diversity in employee recruiting

30.Rising people's ability with changing consumer's buying behaviour

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3. Risk Quantification:This report has used the framework of Committee of Sponsoring Organisations of the Treadway Commission (COSO) to evaluate the

recognised risks. The risks are categorised in the following risk matrix on the basis of their impact and probability:

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4. Risk Responses:After evaluating the risks, the first eight risks are chosen and presented which can have a major effect to the company on the basis of their

likelihood and impact as follows:

1. Not adopting new technology such as RFID in supply chain of Primark:

Risk Identification:Primark is a cheap apparel retail business entity, which is the part of Associated British Food (ABF). Apparel is a significant sector in retail

industry with large contribution of $833.7 billion in 2004 at worldwide market (Datamonitor, 2005 & Uhrich et al, 2008). Retail industry are

struggling and facing various challenges for three most predominant issues – buyer’s high power, hyper competition and new technology,

(Chu and Morrison, 2003, cited in Uhrich et al, 2008). Therefore, Primark business is not excluded from facing those challenges. In retail

business, efficient and accurate use of inventory is one of the keys to keep business survive, make profitable and lead the sector. To save

huge loss of inventory and to provide efficient and accurate use of inventory in the supply chain, new technology of Radio Frequency

Identification (RFID) has introduced in the marketplace. The benefits of RFID technology are greatly valued by the renowned apparel retailing

companies in the world such as Prada, Gap, Benetton, Levis and Gardeur (Roberti, 2006, cited in Ta-chun et al, 2010). However, the benefits

of RFID has depicted as follows to address the risk of the company:

According to Avery Dennison (2014), Benefits of RFID:

Inventory:

99.9% Inventory accuracy

60% to 80% Reduction in out of stock

75% to 92% Faster counts

Sales improvement

Enhanced replenishment

Reduction cost

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Loss prevention:

Improved visibility

Increased internal control

Logistics benefits:

Accuracy of delivery

Authenticity checking

Reduced inspection cost

Improved loss prevention

Speed of processing

Customer-facing Application:

Improved returns processes

Interactive communication

Electronic payment & receipts

In the above mentioned benefits of RFID implies that if company adopt this new technology then entity will enjoy competitive benefits over

competitors that will settle their strong market position within huge competition and will increase market share of the company. However, if

company do not adopt then entity will forbid from competition for not getting accuracy and efficiency in inventory as competitors are getting

inventory accuracy and efficiency by adopting this technology. So, they will get those advantages over Primark and also Primark will lose huge

inventories for theft that might cause huge cost for the entity.

Existing Control:Primark does not have strategy to adopt new technology but it is assumed that they are very slow reactor towards technology only if it’s cost

within entity’s budget limit.

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Response – Mitigation:Primark must have to maintain or adopt new technology as customers view and way of business is changing everyday by the technological

advancement. But, to adopt RFID technology in Primark is expensive as company is cheap product retailer. So, company can adopt this

technology as a pilot project in specific division and for specific store. If the project is successful in the company then company can go for final

project to adopt this technology or they can search to adopt other technology that might be produce almost same benefits but economical. For

an example, American Apparel implemented pilot test in their Manhattan branch to adopt RFID (Gaudin, 2008).

Risk Owner:Strategic division, Technological division and Operational division.

2. Damage to Brand image (low quality imported apparel & poor workings conditions)

Risk Identification:The history of poor conditions and low wages of employment is common among fashion industry. Though the research found that the fashion

industry offering working conditions that leave the clothing staff lonely, individualised and struggling to survive (Boggis, 2003). This is why

Primark has the responsibility to trade ethically and a duty of care for all its employees throughout its supply chain. ‘Primark is an international

brand which is sourcing products globally through its supply chain from Europe and Asia (ABF annual report, 2003).

The documentary declared by BBC in 2008, exposed the poor working conditions in Indian factories supplying Primark which also exposed

child labour that is considered unethical practices. These events had negative effect on Primark reputation. It sprung various problems among

consumers and later led to a protest (Lee, 2011). The charity reports another Primark’s unethical trading conducts in December, 2008. Their

report states that terms and conditions had not been improved in Bangladesh factories after visited two years ago which are not in labour law

conditions (Lee, 2011).

The responses from newspaper readers over the shocking information appeared on the internet (Tyagi. et al., 2013). Vasiljeviene (2002)

states that there were complaint of not recruiting qualified staff in due time that will guarantee a good job and social security.

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Existing Control:Primark has been controlling the risk by the head office policies and regulations. Which all the divisions have to comply with and give respect

to their employees by offering equal job opportunity. They are required to respect and protect human right by preventing and remedying the

impact of abuse. There are some regulatory bodies that regulate that employee are treated fairly with good working conditions: Ethical Trading

Initiative (ETI), India Labour law.

Primark has been working in partnership with suppliers, ETI, Unions and NGOs to improve working conditions via training, focus on employee

safety and safe working conditions and Primark has built an intensive programme of ethical audits in all Primark’s supply chain ( Associated

British Food, 2013).

Risk Response - Mitigation:In order to manage the risk, Primark has to put emphasis on acting responsibly and ethically on its new vision (Lee, 2011). They are also to

comply with international labour organisation codes (ILO), Ethical Trading Initiative code of conducts (ETI). Thus forced labour and child

labour abuse is strictly prohibited in all of its suppliers (Associated British Food, 2013).

Primark should also control these risks as follows:

Maintain programme of supplier audits where appropriate.

Running extensive audit programme for labour standards of suppliers.

Primark has to introduced a supplier code of conduct which is being implemented across all it business, tailored to their requirements.

Risk Owner:Health and Safety department, and Compliance department.

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3. Failure to comply with government employee legislation

Risk IdentificationUK government legislation is a policies and rules established by the government demonstrates that it recognises the importance of avoiding

undue burdens on industry based on an open dialogue between policy makers and industry representatives to ensure that the government is

aware of specific problems which could flow from a particular regulatory proposal. In that respect, the UK’s textile and clothing industry

Primark for instance is legally obliged to comply with the growing array of domestic European rules covering terms of employment, pay,

working condition and environmental protection because any failure of complying with any of these terms restrictions will impact directly or

indirectly on other aspects such as, the economic and political system of UK.

Actually Primark has a bad reputation of breaking UK legislation in more than one place in terms of employment legislation and wages.

Primark used to hire an illegal workers from Pakistan, Afghanistan and India being paid £3 an hour - just over half the minimum wage of

£5.73 - for 12-hour days, seven days a week, breaking the National Minimum Wages of UK, Which could lead to fines of up to £10,000 for

each illegal worker and potential prosecution for tax evasion and employment law abuses .In addition to working conditions inside both TNS

and Fashion Waves were also exposed as cramped and cold, in breach of health and safety regulations (McDougall, 2009, White, 2009).

Existing Control:Primark has implemented an Ethical Trade Director, who will conduct audits on new and current suppliers and train them to maintain a

corporate social responsibility. Ethical Trade Directors will be in charge of teaching suppliers the ethical issues and create awareness to avoid

problems. The company established what is called the Code of Conduct states issues like ; living wages, working hours and conditions; will

be strictly enforced, especially abiding by the International Labour Organization’s (ILO) code as well( Agency of the UN). All of these new

measures will entail in extra costs, however Primark states that all are necessary for being ethically responsible and believes that it will lead to

a cleaner reputation as well as better management (ABF, 2013).

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Risk Mitigation: In order to fully comply with all government and regulatory bodies legislations, Primark can make strong compliance team that will plan optimal

strategy to strongly enforce code of conduct.

Risk Owner:Compliance department, Human resource department and Finance department.

4. Loss of Customers due to lack of e-commerce facilities

Risk Identification:The facility of e-commerce is a contribution of technological advancement. Kang and Johnson (2013) cited Pookulangara and Koester’s

(2011) view that “Consumers today are increasingly utilising technology as a tool to improve their shopping experiences”. To support the e-

commerce in apparel sector, Kim and Park (2008) depicted that “Particularly increasing number of consumers are purchasing clothing online,

which represents a significant growth of online sales”. Therefore, implementing e-commerce facilities by apparel retailers, it increases more

sales. In this situation, if Primark do not add e-commerce services in their business operation then their sales might be stuck in one position or

might be decrease because customers buying behaviour might change more to e-shopping as it is more easy, quick and cheap; despite of

physical feel-and-touch apparel shopping. New Media age (2004) reported that in the UK online clothing, sales touched a high of

approximately £100 million in March 2004 indicate that online retail is a faster growing sector in the UK. In the apparel sector, where

competitors are adding new facilities such as purchasing cloths on the Internet via smartphones and adding virtual fitting room to find

customer’s fit, Primark is only developed website. If customer wants to buy any cloths then there is no facility to buy it online that might

increase loosing potential customers of Primark and their competitors will gain them.

Existing Control:Currently, Primark has website which only represent their presence on virtual site but there is no e-commerce facilities which will add value to

the company. Chief executive of parent company Associated British Food revealed that Primark would not develop e-commerce facilities for at

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least the next year (Neilan, 2013). Basically, there is no internal existing control of Primark for loosing potential customers due to e-commerce

facilities.

Risk Response - Mitigation: Primark has the potential and capability to introduce e-commerce in their business. Company needs to develop strategic plan and link with

their potential and capabilities to transform and shape their business model. However, traditional retail is restricted to particular location where

online retail business will improve the -boundless location (Shahedul and Rashedul, 2008). Therefore, by developing e-commerce, company

will drive their business into remote area where entity did not have physical appearance.

Risk Owner:Strategic department and Technological department.

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5. Inability to eliminate restricted chemicals from using in supplies factory

Risk Identification:Primark totally relying on outsourcing form Eastern countries i.e. Bangladesh, Pakistan, Sri Lanka & India. Whereas the cost of production and

wages is very low compared to UK, what makes Primark able to keep on its position in market as a budget fashion stores. But there is a

problem associated with outsourcing from third world countries, which is the chemicals used in apparel manufacturing offering certain

benefits, for example, make the manufacturing processes easier and endow the final products with a specific function or a particular desirable

appearance, and The product safety legislation which is supposed to control on that chemicals usage., Unfortunately Primark ability to

eliminate restricted chemicals from the supplies factories is very limited because these countries have no clear restrictions in this

regard ,which in turn affect the extent of compliance to that rules and policies, and that lead to using a cheap harmful chemicals in

manufacturing, cause a serious harms to people like allergy as an examples, the matter that can destroy the reputation and the brand image

of Primark on the one hand and financial loss in form of compensations to harmed people and the risk of Primark business shutdown as a

result of breaking UK safety legislation on the other hand.

Exiting control:Primark signed a Greenpeace’s Detox commitment as part of its commitment, Primark agreed to eliminate all hazardous chemicals in all its

products and across its production processes by 2020. Primark will also ensure supply chain transparency by requiring manufacturing facilities

to upload data on hazardous chemical discharges via a publicly accessible platform [3]. This will give the public and people living near these

facilities in manufacturing centres like China the right to know what is being discharged into their environment.

Risk Response – Mitigation:Primark will face a problem to eliminate the restricted chemicals from supplier factories in eastern countries because they are not under its

observation, besides that Primark dealing with a lot of suppliers around the world ,but what Primark can do is:

Offering un-harmful chemical substitutes perform the same function.

Improving the code of conduct to include the chemical restrictions.

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Penalties for suppliers who still use the restricted chemicals.

Risk Owners:Health and safety department and general management.

6. Difficulty in detection of defected apparels or products

Risk Identification:As any business grows, managing it becomes more and more difficult to manage and if failed to do so, this will leads to discrepancies in

running the business. Jones (2005) of financial times wrote in his article that research has shown that companies with poor supply chain

management are in danger of reputational damage. Therefore, for retailers it is very crucial to maintain quality of the product range for

customer satisfaction and trust. However, retailers such as Primark do not have direct influence on the quality of product as most of their

products are manufactured in third world countries (Varley, 2001). Nevertheless, reaching faulty apparels or inferior quality products to

consumers can be damaging for Primark in many ways.

According to Primark (2014) “We offer a diverse range of products, stocking everything from baby and kids, to women’s, men’s, home ware,

accessories, beauty products and confectionery”. All these ranges comes from several hundred different suppliers or sold under the roof of

Primark as sub brands. Dealing with such a range of products can be very troublesome especially when most of the stores are very huge

spreading over many floors as well as the mega warehouses they have. In addition to that they also run concessions in many luxurious malls

such as Selfridges. Referring back to the company background of Primark, such a large business requires an efficient and robust procedures

to maintain Quality control and Quality assurance. According to Varley (2001) the former idea deals with improving the production system and

focuses on process and target the whole organisation while later aims to inspect the defected products or apparel in supply chain and

emphasis on required company standards to meet. Failure to comply with such measure could have adverse consequences from large stock

outs to customers ending with faulty products in store that will result in higher complaints and higher returned merchandise.

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Existing Control:The risk is being mitigated by Primark by adapting a holistic approach towards the supply chain management. This includes an extensive

supplier code of conduct which has introduced all across the businesses. However, there is not specific mechanism for the defected products

as Primark do not have any control over suppliers because most of the products are manufactured through outsourcing and even in some

cases their existing suppliers outsource further to complete the order for both reasons of cost reduction or meeting demand of the retailer.

Risk Response – Mitigation:In order to alleviate this risk, Primark may further act upon the given suggestions.

Getting things right first time: Primark can set up a scheme where if a supplier is not registered with Quality Assurance Standard such as

ISO 9000, no orders will be made. That will help Primark in reduction of the low quality or defected products reaching the distribution

centre in first place.

Additionally, apparels or products can be randomly inspected upon reaching the warehouses.

In-store garment or product checking policy can be introduced where goods will be inspected in the stock room before delivering it to the

shop floor.

Zero tolerance for defect policy can be introduced with in the supply chain as it will be really useful as Primark deals with Mass orders

where inspection of each product can be virtually impossible to inspect in the distribution centre as it could be really time consuming and

costly the same time.

Introduction of Quality audits at manufacturing site.

Knowing and working closely with the suppliers as Adrian Chamberlain cited in Jones (2005) stated that “Companies are still leaving

themselves wide open to [supply chain risks] because they do not know who their suppliers’ suppliers are”.

Continuous Improvement – Kaizan way.

Risk Owners:Supply chain management, Operations department and Quality control department.

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7. Delayed by apparel suppliers for political or environmental disruption as supplier are most from third world countries

Risk IdentificationAccording to Gereffi (2003) Fashion Company played a chief role in East Asia. The relation ease of setting up fashion industries and

pervasiveness of developed country protectionism in this industry, has caused unmatched diversity of clothing exporter in the third world

countries (Gereffi, 2003). The result of changing methods of resource conversion may increase or reduce environmental impact and new

technology may be comparatively environmental destructive in the third world countries (Srivastav, 1990).

The collapsed of Rana Plaza building in Bangladesh that killed more than 1,100 people, has caused delayed in supplying Primark from its

suppliers who occupied the second floor of the building ( Associated British Food, 2013). This also affected Primark reputation, operations and

increases their financial costs. It could be debated that the incidence is unforeseen situation and environmental issues.

Existing Control:In order to mitigate the risk, Primark mapping second tier suppliers and assigned responsibility to all managers in all divisions and employed

expertise and work in partnership with suppliers. They comply with regulatory and standards in country of operations. Primark measures and

reporting it greenhouse gas emissions for group in year 2014 and measuring the CO e-emissions of it transport. They are investing

substantially in improving environmental risk management that can caused delayed in supplying Primark (Associated British Food, 2013).

Primark control the risk by responses quickly to meet the immediate needs of the sufferers at Bangladesh and planed long term payment.

They also committed to compensate victims who worked for its suppliers and their dependent (Associated British Food, 2013).

Risk Response – Mitigation:In order to mitigate the risks, Primark requires:-

To continue work in partnership with suppliers and look for alternative supplier in a stable environment and political to mitigate

delay.

Continue working with NGOs and WTO standards in order to mitigate the risks.

Have better forecasting and planning management in place.

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The requirements of safety stock is more appropriate when there is an environment problem in supplying (Fuller, 1996).

Select suppliers that have system of environmental control in place, educating suppliers the requirements of environmental,

and observing compliance of suppliers with requirements of the environmental( Vachon and Klassen, 2006a)

Also working in partnership with suppliers to form and accomplish environmental objectives that reduce the impact of

environmental in supplier chain (Vachon and Klassen, 2006a)

Risk Owners:Operational department, General management

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8. Risk of Fire Safety within Primark’s Premises

Risk Identification:In present times, the fire safety issue remains one of the most challenging risk for the businesses to deal with, especially in garment industry

(Venkatesan, 2013). Failure to comply with fire safety legislations and not adapting latest fire safety measures not only endangers people’s life

but also a huge failure of fire risk management. Therefore, it is ultimate responsibility for Primark’s to provide safety process that not only

protects its warehouses and stores but also its people.

In retail industry, the fire safety process has become progressively vital. This is mainly because of recent severe tragedies in garment sector

i.e. collapse of Rana Plaza building, Tazreen Fashions fire (Venkatesan, 2013). On the other side Primark’s own biggest distribution centre

was destroyed because of fire blaze which proved to be the costliest fire accident in recent times, costing more than £50 million of Primark’s

stock (BBC, 2005). At the time, spokesperson of Primark confirmed that it is one of the top ten risk in their risk list (Goodburn, 2005). However,

as Cringely (2010) affirms that “Accident happens to the best of the companies. It is how those companies respond to big industrial accidents

– how they learn and change as a result of those lessons – that shoes the quality of an organisation”. Over the last few years, Primark’s has

developed robust and extensive safety culture after the Leicestershire warehouse incident.

Existing control:After the series of fire accidents in the past years around the world within the garment industry, retailers and the industry as a whole have

become concerned about the issue and investing more resources and time to improve the conditions (Primark Ethical Trading, 2014).

Primark’s is no different in this regard and has introduced an extensive code of conduct and procedures which span on different phases are

mentioned below (ABF Annual Report, 2013).

In 2010, Primark has originated a programme with in their supply chain that looks for the roots causes of poor fire safety structures and

also spread awareness of these potential risks.

Zero tolerance policy on fire safety concerns.

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Annual auditing in factories and warehouses reviewing the fire safety risk management – Both through using internal and external auditors

Another agenda launched in 2012, primary focus was on to introduce latest tool kits to address the fire safety needs.

Regularly reviewing disaster recovery plans.

Risk Response – Mitigation:Although Primark’s response to deal and improve the fire safety risk management within their businesses has been one of the top priorities

and is working hard to make it even better. According to Primark, the initiative they took resulted in 47% improvement on fire safety

management (ABF, 2013).

Nevertheless, the risk can be further mitigated by series of suggestions given below.

Introduction of emergency firefighting operations, having fire department in the warehouses can be beneficial as the size of Primark’s

warehouses is enormous expanding over few hundred thousand sq. ft.

Ensuring the firm wide training for the fire disaster and relevant fire drills.

Robinson and Baker cited in TheFPA (2006) found that in case of the Primark’s national warehouse that there was major leaks in the main

water supply and water didn’t reach to the sprinkler system which was a failure. Therefore, the need of secondary supply if the main supply

breaks down and making sure that buildings fire point detectors and overhead sprinklers are fitted in most appropriate way.

Qualified trainers and hiring experts for the development and implementation of the fire drills.

Increasing the fire service resources.

Finally, working closely with the fire authorities such as UK Fire Services, and strictly following the detailed risk assessment will further

eradicate the risk and improve the fire safety management.

Risk Owner:Risk management, Operations department, General management.

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5. Monitoring & Communication Strategy:The control and monitoring process for the Primark’s risk management plan is given below:

Activities Risk Owner Communication (Reporting)

Risk control: Each division within the Primark will

have their own risk managers i.e. Supply chain,

Finance, Human resource, legal & compliance and

technological.

Risk Manager (RM) in

each department. A. Written communication (i.e. by e-mail), Workshop, or information input in computer database system so that everyone can act according to it.

B. Board of Directors, Head of each Division, Regional and District Managers (Stores & Distribution Centres), Internal Risk Management Auditor

C. External Risk Auditors

Monitoring: All the risk owners are responsible for

monitoring their own division and working effectively on

the risk management plan that includes all the potential

risks.

RM’s.

New risk identification: RM’s should be actively

involved in any future potential risks and reporting

timely towards the management in order to eradicate

the chances of potential damages caused by the future

risks.

Risk Department and all

divisional RM’s.

Audit: All the divisional RM’s are responsible for risk

auditing report every month and sending to the risk

management department so that risk rescue plans or

current procedure could be update accordingly.

RM’s.

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D. Constant Feedback - Regular Workshops & Awareness programs.

Reporting: Reporting will be done by updating the risk

registers with all the potential risks and present risks.

Additionally quarterly risks reports will be prepared

including all the details such as impacts and likelihood

and will be send to risk management department as

well as head of the each division.

RM’s

Annual Auditing: As complying with company’s

annual auditing policies; an evaluation of the Risk

Management Plan along with new identified risks and

mitigation plans will be proposed with the review of the

previous year plan.

Top management

(BOD’s) and Head of

Risk Management

6. Conclusion:In this report, the most critical risks have been identified with the help of different analysis models. Further using COSO framework, all the

risks have been ranked from most severe to the least ones. Risks that scored more than 15 considered to be more important risks for

Primark. Later on in the report, eight risk are chosen that scored the highest in the risk matrix and then further investigated in depth. Primark’s

existing control for each of the risk has been studied and recommendations has been made to improve the existing control and to mitigate the

risks. In case of already well-planned existing control, it has been suggested that the existing process should continue to manage the risks

effectively.

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7. References:1. ABF plc - Investors - Annual Report (2013) - Corporate responsibility. 2013. [Online] Abf.co.uk. Available at :<

http://www.abf.co.uk/investorrelations/annual_report_2013/corporate_responsibility1> [Accessed 21 Apr. 2014].

2. ABF plc - Responsibility - Corporate Responsibility Report 2013 - Retail. 2014. [Online] Abf.co.uk. Available at:

<http://www.abf.co.uk/responsibility/retail/people> [Accessed 21 Apr. 2014].

3. Associated British Food PLC Annual Report and Account (ABF) (2013)’; [Online Materials]. Available at:

http://www.abf.co.uk/documents/pdfs/2013/2013_abf_annual_report_and_accounts.pdf (Accessed: 15 April 2014)

4. Avery Dennison (2014) Available at: http://rbis.averydennison.com/en/home/rfid.html (Accessed: 04 April 2014).

5. BBC NEWS | UK | England | Leicestershire | Primark stock destroyed in fire. 2005. [Online] News.bbc.co.uk. Available at:

<http://news.bbc.co.uk/1/hi/england/leicestershire/4398514.stm> [Accessed 21 Apr. 2014].

6. Boggis, J., J. (2003) “On the shopfloor” with clothing workers in the 1990s”, Employee Relations, vol. 25, number 2, pp. 168-181.

7. Cringely, R., 2010. Doing the Right Thing - I, Cringely. [online] I, Cringely. Available at: <http://www.cringely.com/2010/06/17/doing-the-

right-thing/> [Accessed 21 Apr. 2014].

8. Fuller, N. W. (1996) ‘The benefits and Costs of JIT Sourcing A case study of Scottish suppliers’. International Journal of Physical

Distribution and Logistics Management, Vol.26, issue number 4, pp. 35-50.

9. Gaudin, S. (2008) “Retailer looks to RFID to Boost Sales”, Computer World, 42 (17), p.12.

10.Goodburn, M 2005, 'Primark risk strategy reduces Impact of fire', Finance Week (Centaur Communications), p. 2, Business Source

Complete, EBSCOhost, viewed 21 April 2014.

11.Jones, C., 2013. [online] Available at: <http://www.ft.com/cms/s/0/fc9ab29c-afee-11e2-8d07-00144feabdc0.html?

siteedition=uk#axzz2zTglxljt> [Accessed 21 Apr. 2014].

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Network Storefronts”, Journal of Customer Behaviour, 12 (1), pp.53-72.

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http://www.abf.co.uk/documents/pdfs/2013/2013_abf_annual_report_and_accounts.pdf

13.Kim, E., and Park, E., (2008) “Does e-Service Quality Lead to Website Patronage for apparel Online Purchases?” Society for Marketing

Advances Proceedings, pp. 20-21.

14.Lee, M. M. H. (2011) ‘reacting to bad publicity over sweet shop issues: The case of Primark’. Journal of international management. [Online

Material]. Available at: http://journalofinternationalmanagement.wordpress.com/2011/05/16/reacting-to-bad-publicity-over-sweat-shop-

issue-the-case-of-primark/ (Accessed: 13 April 2014).

15.McDougall, D. (2009). Primark in storm over conditions at UK supplier. [Online] the Guardian. Available at:

http://www.theguardian.com/business/2009/jan/11/primark-ethical-business-living [Accessed 22 Apr. 2014].

16.Neilan, C. (2013) Primark to remain offline for ‘at least the next year’. Available at: http://www.drapersonline.com/news/primark-to-remain-

offline-for-at-least-the-next-year/5054609.article#.U1Rww9xN3wI (Accessed: 10 April 2014).

17.New Media Age (2004) “Clothing is faster growing e-tail sector”. [Online] Business source Complete, EBSCOhost. Available at:

http://web.b.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=7&sid=429f289f-6092-4aca-a582-d7148e1919c7%40sessionmgr110&hid=113

(Accessed: 10 April 2014).

18.Primark: Company History. Available at: (http://www.primark.co.uk/page.aspx?pointerid=eb44df4565934edca627dac6ec12145a/

(Accessed: 15 April 2014)

19.Primark Ethical Trading - Fire Safety Management Systems. 2014. [Online] Primark-ethicaltrading.co.uk. Available at: <http://www.primark-

ethicaltrading.co.uk/how_we_work/partnerships_and_programmes/fire_safety_management_systems> [Accessed 21 Apr. 2014].

20.Shahedul, Q., and Rashedul, Q., (2008) “The Utilization of E-Commerce by Traditional Supermarkets in the UK through Strategic Alliances

with Internet Based Companies”, Journal of Services Research, 8 (1), pp. 177-211.

21.TheFPA, (2006), [online] Available at: <https://www.thefpa.co.uk/mainwebsite/resources/document/feb%2006lo.pdf

22.The Observer: Primark in storm over condition at UK. Available at: http://www.guardian.co.uk/business/2009/jan/11/primark-ethical-

business-living/ (Accessed: 15 April 2014)

23.Tyagi, R. K., Vasiljeviene, N. and Lithuania, V. (2013) ‘The case of CSR and irresponsible management practices’. Competitiveness

Review: An International Business Journal, Vol. 23 No. 4/5, pp. 372-383.

26

http://www.guardian.co.uk/business/2009/jan/11/primark-ethical-business-living/

http://www.guardian.co.uk/business/2009/jan/11/primark-ethical-business-living/

https://www.thefpa.co.uk/mainwebsite/resources/document/feb%2006lo.pdf

http://www.primark.co.uk/page.aspx?pointerid=eb44df4565934edca627dac6ec12145a/

http://www.drapersonline.com/news/primark-to-remain-offline-for-at-least-the-next-year/5054609.article#.U1Rww9xN3wI

http://www.drapersonline.com/news/primark-to-remain-offline-for-at-least-the-next-year/5054609.article#.U1Rww9xN3wI

http://journalofinternationalmanagement.wordpress.com/2011/05/16/reacting-to-bad-publicity-over-sweat-shop-issue-the-case-of-primark/

http://journalofinternationalmanagement.wordpress.com/2011/05/16/reacting-to-bad-publicity-over-sweat-shop-issue-the-case-of-primark/

24.The Times 100: Case Study: Primark – Providing consumers with ethically sourced garments. available at:

http://www.thetimes100.co.uk/case-study–providing-consumers-with-ethically-sourced-garments–158-412-1.php/ (Accessed: 13 April

2014)

25.Uhrich, F., Sandner, U., Resatsch, F., Leimeister, J., and Krcmar, H. (2008) “RFID in Retailing and Customer Relationship Management”,

Communications of the Association for Information Systems, 23, pp. 219-234.

26.Vachon, S. and Klassen, R.D. (2006a), “Extending green practices across the supply chain: the impact of upstream and downstream

integration”, International Journal of Operations & Production Management, Vol. 26 No. 7, pp. 795-821.

27.Varley, R., 2001. Retail product management. 1st ed. London: Routledge.

28.Vasiljeviene˙, N. (2002), “On the origin of unethical clothes”, Business Ethics from Theory to Practice, Vilnius University, Vilnus, pp. 359-

391.

29.Venkatesan, R., 2013. Clothing Garment Workers in Safety: The Case of Bangladesh. Economic and Political Weekly. [online] Available at:

<http://www.epw.in/web-exclusives/clothing-garment-workers-safety-case-bangladesh.html> [Accessed 21 Apr. 2014].

30.War on Want: Fashion Victims II – How UK clothing retailers are keeping workers in poverty. Available at:

http://www.waronwant.org/campaigns/supermarkets/fashion-victims/inform/16360-fashion-victims-ii/ (Accessed: 15 April 2014)

31.Wen, T., Chang, Y., and Chang, K. (2010), “Cost-Benefit Analysis of RFID Application Apparel Retailing for SME: A case from Taiwan”,

Transportation Journal, 49 (3), pp. 57-66.

32.White, G. (2009). Primark faces inquiry over use of illegal labour - Telegraph. [online] Telegraph.co.uk. Available at:

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/4218384/Primark-faces-inquiry-over-use-of-illegal-labour.html

[Accessed 22 Apr. 2014].

27

http://www.waronwant.org/campaigns/supermarkets/fashion-victims/inform/16360-fashion-victims-ii/

http://www.thetimes100.co.uk/case-study%E2%80%93providing-consumers-with-ethically-sourced-garments%E2%80%93158-412-1.php/

8. AppendixRisk Registration:

Risk Identification Qualitative and Quantitative Rating Risk Response

Risk Serial:

Risks of Primark

Risk Category

Who/What might be harmed

Probability Risk ImpactRisk

Score (Matrix)

Risk Ranking

Risk Response

Risk Trigger

1 Not

adopting

new

technolog

y such as

RFID in

supply

chain of

Primark

Strategic,

Technological

, operational

As technology

changes very

rapidly, so not

adopting new

technology will

decrease the

competitive

advantages of

the company

and will

increase delay

in supply chain

or product lost

that cause

huge damage

5 4 20 Extreme a. Keep

update of

the market

about new

trend of

technology

b. Strong

analyse of

technologic

al new

trend for

adaptation

as it might

be

expensive

a. Competitive

pressure

b. Loss

products and

time in whole

supply chain

28

of shareholders

wealth

to wrong

adoption

2 Damage

to Brand

image,

caused of

low safety

standard

of

imported

appear

from

supplier

(e.g. poor

condition

for

workers)

Reputation,

health and

safety,

Regulatory

and

compliance

Lack of

employees,

customer,

victor safety

can expose

them to

hazardous

chemical and

cause serious

sickness to

them

4 5 20 Extreme a.

Adequate

training for

employees

on health

and safety

procedures

, to reduce

chemical

pollution to

minimal in

order for

the

environme

ntal

friendly,

training

employees

in risk

manageme

nt and

a. Lack of

safety

procedures

training,

b. Poor

management,

c. human error,

d. Incompetent

risk

management

29

reporting

procedures

. Obtained

certificate

from CQC

and health

and safety

regulation.

3

Failure to

comply

with

governme

nt

employee

legislation

Financial,

regulatory,

compliance,

Legal and

political

Shareholders

will affect

mostly as

failure can

result in

closure of the

company and

also employee

will lose the job

4 5 20 Extreme

a. Strong

compliance

team with

monitoring

a. Media

Coverage

b. NGO

reaction

c. Strict

regulatory

monitoring

d. Political

pressure

4 Loss of

market

share due

to lack of

e-

commerc

Operational,

Technological

Financial

Shareholder

will lose the

return on

investment and

employs might

lose their job

5 4 20 Extreme a. Build e-

commerce

facility

using

company

a. Increased

customers

behaviour to

buy fashion

products online

30

e

facilities.

due to

employee cut

down

website

5 Inability

to

eliminate

restricted

chemicals

from

using in

the

suppliers

factory.

Social,

environment,

compliance,

health and

safety

Chemicals are

used in

manufacturing

Primark

products and

can cause

serious harm to

customers,

employees and

contaminate

environment

i.e. natural

resource,

community

4 4 16 Extreme a.

Adequate

training for

employees

on health

and safety

procedures

, to reduce

chemical

pollution to

minimal in

order for

the

environme

ntal

friendly,

b. new

developme

nt of how

to reduce

a. Lack of

standard

regulation and

environmental

law in

overseas

country,

b. Inadequate

training,

c. Lack of

supervision,

d. Lack of

precaution in

manufacturing,

e. Human error

and machinery

maintenance.

31

or remove

hazardous

chemicals

or shift

suppliers.

6

Difficulty

in

detection

of

defected

apparels

and

products

Operational,

technological,

financial,

This is likely to

affect the

shareholders

retunes and

company itself

4 4 16 Extreme

a. good

quality

control to

detect

faulty

product,

b. use

advance

technology

A. human

error,

b. lack of

production

control,

c. lack of

training

employees.

7 Delayed

by

apparel

suppliers

for

political

or

environm

ental

Environmenta

l, Operational,

Financial,

As Company

does not give

several orders

for the same

product to

different

suppliers so if

environmental

or political

4 4 16 Extreme A. move to

stable

environme

nt,

b.

alternative

suppliers

which may

have new

a. Natural

disaster

(Earthquake,

Flood) in

suppliers

country

b. political

violence in

suppliers

32

disruption

as

supplier

are most

from third

world

countries

disruption

occurs in

supplier's

country then

company face

huge financial

damage that

badly impact to

shareholders

profit

ways of

supplying.country

8 Risk of

Fire

Safety

within

Primark’s

Premises

Social,

Operational,

Strategically

Company will

lose

competitive

advantages

over

competitors

(halt in

operations)

All

stakeholders

can be affected

cause of fire

incident

4 4 16 Extreme Robust first

aid training

and

implement

ations

Effective

fire escape

plan

Fire

extinguishe

rs in

working

a. Lack of

Knowledge

b. Lack of

attention

c. Lack of

training

d. Lack of user

manual

33

conditions

Disasters

manageme

nt plan

9

Running

out of

Cash

(liquidity

issues)

Financial,

Operational

company will

not able to pay

immediate

interest

payment, loan

payment or

current payable

amount that

might cause

serious

damage of

reputation of

the company

and will

decrease

shareholders

wealth

4 4 16 Extreme

a. proper

maintain of

cash

manageme

nt, b.

Try to keep

inventories

low

a. Over trading

b. Increase

inventory level

c. conditions to

pay suppliers

quickly.

34

10 uncertaint

y of

material

cost,

transport

cost and

supplier's

capacity

Operational

strategy,

For predicting

wrong costs

which result in

charging high

price or low

price due to

uncertainty

production

costs.

Therefore

shareholder,

employee and

supplier will be

affected

4 4 16 Extreme a. ensure

that the

accurate

cost

forecast

maintain

and

understand

ing the

company

situation,

costs

monitoring

approach

are

designed,

Ensure

market

research

on new

suppliers

are

accurate

and

a. Employees

inexperience in

organisation

that will make

inaccurate

forecast,

b. unexpected

price changes

of materials in

the market

c. changing

environment

and economic

situation.

35

educating

employees

on costing

manageme

nt.

11

Increase

customs

duties for

importing

apparels

Political,

Legal

Product cost

will increase

that will

decreased

shareholders

profit

4 4 16 Extreme

a.

Negotiation

with

governmen

t by

business

society

b. Keep

minimum

product

cost

a. View of

political parties

12 Poor

relation

with

employee

s and

managem

ent

Strategic,

Social,

Operational

the conflict

between

employees and

management

will decrease

the efficiency

of company's

3 4 12 High a. provide

empowerm

ent b.

keep good

working

environme

a. strategic

failure within

company

b. sub-cultural

group within

management

36

overall

performance

and decrease

the market

share of the

company

nt and staffs.

13

Loss

supplier

due to

ethical

Issues

Legal,

Operational,

Due to ethical

issues,

company might

lose cheap

suppliers that

cause product

price increase

of the company

and it will

decrease the

competitive

advantage of

the company

3 4 12 High

a. keep

good

relation

and help to

follow

ethics

a. to reduce

the production

cost suppliers

employ

underage

workforce or

they do not

follow proper

business policy

given by

government.

14 Not to

comply

with new

fashion

Strategic,

Operational,

Technological

As the trend of

fashion is

changed very

frequent and

3 4 12 High a.

Company

should

maintain

a. Customers

buying

behaviour

b. Increased

37

trend of

clothing

as

fashion

has

limited

self-life.

fast, so

company will

lose market

share despite

of low price

and

shareholders

wealth will be

decrease

the new

trend of

fashion in

their

operation

by stocking

latest

fashion

wear within

cheap

price

competition

c. Fashion

getting old very

quick

15

Loss of

profit due

to internal

control

failure

and

foreign

exchange

risk.

Commercial,

Strategic,

Financial

The changes in

exchange rate

and internal

control of the

management

increases the

chance of

decreasing

Company's

shareholders

profit.

4 3 12 High

a.

Company

can hedge

against the

risk

b. Increase

and update

the internal

control

system

a. Supplier's

country

monetary

policy

b. Ignorance of

high concern

of internal

control

16 opening a Operational, Due to 2 5 10 High a. Ensure a a. Intense

38

new store

in low

growth

consumer

market

political,

financial and

strategy

aggressive

market and

expansion,

Primark is

likely to open

new shop in a

low grow

market and as

a result their

profit will go

down. This will

affect

shareholders

mostly as

return

Proper

market

research

are in

place and

investment

appraisal

are done

with due

diligent

measurem

ent.

competition

which cause

moving to

another low

completion,

17 Absence

of optimal

waste

managem

ent

system

environmental

, , health and

safety, legal,

strategy and

financial

Affect

commodity as

waste can

course

unfriendly

environment

3 3 9 Medium a. To

improve

waste

manageme

nt action,

reduce

uses of

dangerous

a. New

environmental

law, new

government

regulations

39

chemical

18 Paying

least

attention

to its

marketing

strategies

Strategy,

Marketing,

financial,

Operational

Although

Primark are still

have highest

market share

and growing

steadying but

failure to pay

attention to its

market strategy

may have

effect the

organisation in

future as most

of rivalry spent

more on

marketing and

still charge low

price. This will

affect

shareholders

and company

losing market

3 3 9 Medium a.

Excellent

market

strategy in

place: e

marketing

and e-

commerce.

Training

and

coaching

marketing

managers

on market

developme

nt.

a. Competition

Technology

and new

marking

environments,

40

gradually.

19

Failure to

keep

enough

inventory

in

Primark's

fast

moving

retail

store

Operational

strategy,

technology

This will affect

the

organisation,

shareholders,

customer and

suppliers as

the profit will

low, customers

will move to

another market

since Primark

would not be

able cope will

fast moving

fashion.

3 3 9 Medium

a. Address

the issue of

new

technology

on supply

chain

manageme

nt. Improve

on Just in

time

inventory

manageme

nt

a. New fashion

quickly

produces to

replace old

one, b. New

technology

and social

20 Inability

to

maximise

in-store

shelve

availabilit

y and

Operational,

Strategy,

technological

This will reduce

the sales and

minimise

company's

profit

3 3 9 Medium a. adopt

new

technology

b. Employ

efficient

employees

a. absence of

technology

b. Ignorance of

employees

41

reduce

out of

stock

21

Inefficien

cy of risk

managem

ent to

identify

the future

potential

risk

strategy,

financial,

compliance

Seriously affect

shareholders

and other stake

holders

3 3 9 Medium

a. Strong

risk

manageme

nt to

identify

potential

risk, strong

analyst

a. inadequate

risk

management

training, lack of

risk

management

22

Increase

productio

n cost for

setting

high

working

standard

Strategy,

reputation,

compliance

exposure of

company to

high fixed cost

which result

charging high

production

price

3 3 9 Medium

a. Costs

manageme

nt strategy

and quality

marketing

manageme

nt

a. Completion

environments,

23 Higher

rate of

increasin

g cost

financial,

strategy,

regulatory

and

Due to financial

or regulatory

authority, if the

cost of wages

3 3 9 Medium a. transfer

to other

country

where

a. Ruling new

political party

b. Economic

condition of the

42

(minimum

wages,

inflation)

than

efficiency

gain in

suppliers

country

compliance

or inflation

increase than

the suppliers

efficiency of

production then

it decrease the

company's

profit level

company

will found

cheap

supplier

and

minimum

inflation

rate

country

24

Risk on

unethical

practice

of supply

chain

Legal,

Operational,

Supply chain

Damage of

reputation, loss

of company

profit

3 3 9 Medium

a. Increase

strict

monitoring

b. Use of

updated

technology

a. Monitoring

Gap

25 Inefficien

cy of

supplying

electricity

in

supplier’s

country,

as most

of the

Operational,

Financial,

Technological

Company will

not get on time

deliver that will

decrease the

sales and

market share

of the company

3 3 9 Medium a. Assist

suppliers to

ensure

power

supply

a. Political

conflict

b. Weak

infrastructure

in suppliers

country

43

countries

are not

producing

enough

electricity.

26

Not

adopting

fare trade

policy

Compliance,

legal,

reputation,

and financial

Shareholders

will be mostly

affected as

their returns

will reduce and

possibility to

close business

if

noncompliance

issues

3 3 9 Medium

a.

Adequate

compliance

procedures

and

training

and

coaching

employees

a. aggressive

competition,

b. change

environment

27 inability to

penetrate

emerging

market of

Primark

Strategy and

commercial

This will affect

shareholders

retune and

Primark long

term strategy

as

management

could not meet

2 3 6 Low a.

Establish a

good

experience

market

team who

can

approach

a. fast change

in technology

and market

strategy

development,

b. new market

detect,

c. aggressive

44

the strategy in

emerging

market

market

situation,

technology

and

innovation

implement

ation

strategy in

the new

fashion

market

development

28

Lack of

corporate

social

responsib

ility

Social

In absence of

activities to the

Society will

decrease the

reputation of

the company

2 3 6 Low

a. Launch

some

developme

nt activities

for the

society

a. poor

strategy by the

top

management

29 Lack of

diversity

in

employee

recruiting

Strategy, operational,

Social

Lack of diversity in employees recruiting

decrease the efficiency of

the workforce that will

decrease the

3 2 6 Low a. Proper

guideline

for

recruiting

employees

a. Not

following the

proper

guideline

b. poor

strategic plan

45

overall company's

performance in recruiting

30

Rising

people's

ability

with

changing

consumer

's

physiolog

y to buy

expensiv

e cloths

Social,

strategy

This will affect

organisation to

loose market

though Primark

is still compete

with low price

and non-

expense

product. But

the change in

customers

preference

may affect

Primark

shareholders

and customer

2 2 4 Low

a. Ensure

good

quality

manageme

nt in place

without

increasing

cost so as

to

compete,

b. Improve

on

innovation

process to

create best

service and

products

a. Lack of

market

strategy,

b. fast change

in technology

and consumer

trends

46

final summative group assignment - erm

Documents