Evaluating Tesco's Risk Management Strategy

Introduction

Risk is an inherent element to every business organisation. However, the businesses need to have a plan to identify the potential risks with effective measurement to minimise their adverse impacts. Tesco, one of the leading retail companies in UK, operates many countries in the world; and the company currently has 28.4% of the share in grocery retail market in UK (Woods, 2012). The purpose of the report is to critically evaluate existing risk management plan of Tesco Plc, and to recommend improvements. The next part of the report high lights the objectives of Tesco. The report also sheds light on defining risks threshold, identifying the opportunities and threats, existing control used by Tesco and mitigation control.

Business objectives of Tesco Plc

The aim of Tesco is to sustain the current market position and then expand, to become the leading retail organisation with the provisioning of utmost quality products and excellent services to the customers at the minimum costs. This could serve the organisation to provide the competitive advantage with providing cheaper products and services and could enable Tesco to outperform the market competitors.

According to Ismail (2017), the objectives of Tesco are the following:

1: Sales maximisation in tandem with the increment in profits. One specific method is the curtailing of prices through revised store deals and through the expansion of the existing stores so that greater quantity of stock could be held and could be delivered to the customers at cheaper prices.

2: The provisioning of products at comparatively cheaper prices through offering the customers suitable bargains such as getting one product free for purchasing certain number of products and through provisioning of products at certain percentage less than the original price.

3: Introduction of the greater healthy products in the entire range of the supplies of groceries. This is oriented towards the attraction of greater number of customers who could be interested to avail healthy eating services and products. This could assist Tesco in establishment of product differentiation services. Examples of Tesco undertakings regarding such products include organic turkey to ready meals for healthy living.

4: The development of an extensive online shopping service network to provide the products such as electronics, groceries and clothing and other services. The purpose here is again to attract the most number of customers.

These objectives have prompted Tesco to formulate a particular operational approach through the utilisation of the entirety of organisational visions to outline whatever is necessitated to be performed for the purpose of qualitative and sustainable growth maintenance. In this context, according to Kukreja and Gupta (2016), the vision of Tesco could be analysed to be oriented towards involvement and achievement of the following strategic undertakings:

Risk Register

According to Hoffmann, Kiedrowicz and Stanik (2016), the risk register, alternatively identified as a log of risks, is utilised by concerned business organisations for the purpose of categorisation and organisation of the information related to risk management. This involves factors such as the type of risks, prioritisation process of such risks, which could be based on the impact of such risk factors on the entire business organisation of Tesco and finally, mitigation criteria of such risks. The purpose of the risk register is to provide the most clarified situational report concerning the risks which could afflict an organisation such as Tesco. Furthermore, the risk register is also indicative of the impact of such risk propensities on the management structure and the most important stakeholders of the grocery retail giant. As per the opinions of Hopkin (2018), it is always necessary to conduct an assessment of different risk propensities as well as their impacts so as to determine the most suitable risk types for ranking of the risks within the risk register. This is necessary since not all of the risks could be categorised in terms of the seriousness and frequency of impact on the stakeholders. This is also oriented towards assisting the company management to determine the necessary measure of actions and concentration of attention towards individual risk mitigation procedures. In this context, the utilisation of the scoring method is deemed important to outline the risk frequency and the threshold of risk management through provisioning of adequate scores to each of the realised risk sources. According to Ittner and Keusch (2017), the risk scoring method is utilised through the application of a specific ordinal scale. The range of such a scale is comprised by the units from 1 to 5 as well as the sale of rating including the high, medium and low measure of scores. This contributes in the standardisation of the approach of risk propensity analysis and in multiplication of the likelihoods of such risks with special emphasis on the impact of the same.

For the purpose of risk assessment of the Tesco Plc, the utilisation of risk matrix based approach has been determined so as to rate each of the risks through the multiplication of the possibility of occurrence and through the evaluation of the impact score based magnitudes. After performing such actions, the development of mitigation possibilities could be developed through the utilisation of such scores from the risk register. The risk prioritisation process is demonstrated in the subsequent table:

Conclusion

To control the risks of reduction of sales due to changes in customer preference, Tesco should keep tracking with swipe cards and differentiating products according to changing needs. Though it relates with financial investment, the retention of customers will increase sales.

To minimise the risks relate with regulations and compliance, the employees' continuous and refreshment training is recommended. It will keep up-to-date with compliance issue though the managers need to spend time.

To minimise the risks relate with data privacy, the company should have mechanism to prevent unsupported software and strict confidentiality mechanism. Though it relates with financial investment, it will protect private data of valuable customers

The company should also utilise liquidity acquisition prospect with continuous review of funds.

Tesco has taken different effective measures in managing risks to minimise their adversities. However, the company should focus on improving its risk management initiatives to keep pace with the changes in the risks. Though the recommended mitigation plan involves financial costs and managerial time management difficulties, their implementation can help the company to reduce the risks associated with their business.

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