Contents

Background ................................................................................................................ 2 Aim ............................................................................................................................. 3 Preliminary Review of Literature ................................................................................ 3 Business Risks ........................................................................................................ 4 Risk Management ................................................................................................... 5 Research Questions ................................................................................................... 7 Research Objectives .................................................................................................. 7 Research Methodology .............................................................................................. 7 Secondary Data Collection and Analysis ................................................................. 9 Primary Data Collection and Analysis ................................................................... 10 Possible Bottlenecks ............................................................................................. 10 Research Ethics ....................................................................................................... 11 Time Frame and Resources ..................................................................................... 12 Resources ................................................................................................................ 13

ANALYISIS OF THE RISKS INVOLVED IN RETAIL BUISNESS AND MEASURES TO CURB THEM

Background
The retail industry is an ever fluctuating area where some firms are flourishing and expanding worldwide and where others are dying out completely. In the meantime there are numerous small retail stores cropping up here and there. Retailers have been in existence from the ancient times. Though initially considered to be of little or no significance, the retail industry is now recognized as one of importance in the economy as well as society (Gilbert, 2003). In the economy a retailer adds value in the form of time, place, form and possession. This basically means that the retailers provide the customers with goods at the right time, right place and right shape or form and finally allows the transfer of ownership of the goods to the customer (Sullivan and Adcock, 2002). In the society the retail business provides large employment opportunities and improves the standard of living of the people. It can be said that the retail trade plays an important role in todays world. Due to this importance and the frequent market fluctuation, the industry comes with its own inherent risks. These risks are not just isolated to retailing business. Politics, changing economic conditions, changing social scene all bring risks to the retail business like any other business. It is very important to have a clear understanding of these problems and risks and take measures to counter them. The business need to be prepared to face any adverse situation both known and unknown, and come out of such situations without being burnt. For this good planning, adoption of various counter measures and proper risk management is very essential. Only then will there be survival and growth in the highly volatile market.

There are several reasons why this particular topic has been chosen for the dissertation. For one, a world cannot be imagined without retail trade. And hence a thorough understanding of what the trade means and what kind of problems and risks they face is very important. Studying risks should also include a study of the solutions. Only then will the picture be complete. On a personal level, the retail business, its growth and what makes it tick has always been a fascinating area of study and it would be worthwhile to understand the industry well. It would also enable one to get better understanding of the world market and its risks as a whole.

Aim
The main aim of this dissertation is to understand and analyze in detail the risks business, especially the retail business, face in todays market. An attempt will also be made to study the measures the business takes to counter the risks and ensure profitable growth.

Preliminary Review of Literature

Business is a wide term that is used to depict all sorts of enterprises, trade, banking and so on. It includes retail, wholesale, corporations, partnership, sole proprietorship etc. Of late however the focus is more on international business as every company is trying to cross borders and become global. This is applicable of the retail business as well. The retail trade can be defined as the selling of any product to a person or another business for their or its private usage. Retailers sell their wares to the final consumer. The retailers are grouped in many ways based on different factors. These include target market (like mass sales, specialty sales etc), distribution methods (direct, online etc), pricing strategies (competitively or discounted or exclusively
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priced), product dealt in (general or specialty), ownership (single owner, corporate, franchisee), promotional methods used (mass advertising or direct selling) and the service levels (like self service or full service) provided (Christ, 2009). Whatever may be the type of retailing, the industry as such happen to exist in a very volatile market environment where one small event could make a huge impact on sales either in a good way or bad. Business risks are inherent to every industry. They may be common to all or specific to certain firms. Whatever they may be, a business without risks is an impossible phenomenon.

Business Risks
Understanding what a business risk is very important for an upstart as well as an established firm. Risk can be defined on a broad term as anything that affects the organization in a bad way this could be a decision from the management or an outside factor. These risks are classified by different experts in different ways. When summed up however they all add up to the same thing the negative effect on the well being of the firm. Generally, risks can be divided into two types tangible and intangible. As the name suggests tangible risks are those that can be measured and whose monetary effect on the company can be stated in clear and exact terms. They are also called direct cost risks. Examples include the loss of a contract, fines, loss of products, lag in production etc (Spedding and Rose, 2008). Intangible risks are those which are difficult to quantify in terms of monetary value. They include things like the loss to a firms reputation or credibility due to certain events, loss of brand image etc. intangible risks are at times indirect and could be caused by an event that is outside the realms of the company.

Another classification of risk comes in the form of traditional and entrepreneurial risks. Sadgrove describes traditional risks as those which are quite common to most companies like fire, fraud, pollution etc (Sadgrove, 2005). Risks that arise out of entrepreneurial decisions like the chances of incurring loss from the launching of a new product or branching out into a new line can all be classified as entrepreneurial. Every business faces these two kinds of risks in its life. An article in published in the Harvard Business Review talks about hidden risks that a company has to face. Even a most experienced and well prepared company cannot assess these to a great extend and are susceptible to them. These include risks from elections, change in political scene which brings about changes in tax policies, import policies etc and also from changes in the social attitude of the people (Harvard Business Review, 2010). Yet another classification can be financial risks and operational risks. They are interrelated. Financial risks are those which result in the attrition of a companys finances or capital whereby it is rendered incapable of meeting its obligations (Reuvid, 2005). Risk arising out of the operations of the firm can be termed as operational risk. Operational risks could cause financial losses. There are thus innumerable risks that a retail firm or any business for that matter faces in its life time. The ones mentioned above are just the tip of the iceberg. The risk management techniques that firms adopt to deal with such risks are what make some of them far more successful than others.

Risk Management
Risk management is a very important part of a firms survival. It can be defined as the process of planning and assessing risk, monitoring risk, devising strategies to handle risk as well as measuring risk (Conrow, 2003). It is very essential to have a
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well documented and planned risk management process. Risk is generally measured by firms in terms of quantity, quality, direction and aggregation (Spedding and Rose, 2008). The first step in risk management is drawing up a detailed strategy to manage risk. The plan should include an emergency plan, i.e. what to do during unforeseen circumstances. The risk management plan (RMP) can be described as the map that guides the company and its team in dealing with risk (Conrow, 2003). The next step is the assessment of the risk. This involves identifying the possible risk factors and trying to appraise the kind of damage and cost involved. Once the analysis is done steps have to be taken to handle the risk and this process has to be frequently monitored to ensure compliance and correction of deviations. Now days risk handing has become such an important part of the business that companies have taken to employing a CRO (Chief Risk Officer) to do the risk management for them. Companies also set up a risk committee to keep track of the risks and its management (Lamm, 2010). The strategies adopted to manage risk include methods to avoid risk, fight risk and come out of the damage caused by risk. For example, IBM was at risk of losing business when counterfeit with the same performance level came out in the market. This meant that IBM could no longer charge a premium price for their products as customers would go for the cheaper brands (Ireland et al, 2009). They will have to change their strategy to counter the risk. Wal-Mart, who had entered Germany through acquisitions, had to withdraw from the market with heavy losses as it was unable to cope with the risk already existent in that market in the form of discount retailers (The Times, 2006). As such different firms adopt varying strategies to deal with risk.

One thing is certain that with the current highly volatile market environment, there are always risks in one form or the other. Thus a risk management technique and methodology is very essential for survival and growth.

Research Questions
1. What are the risks existing in the business world, especially in the retail industry? 2. What are the steps adopted by firms to counter such risks including entry of new players? 3. Are there any special techniques that can be employed to avoid risk and should there be a risk management department for every firm?

Research Objectives
1. To analyze the global market and gain a clear understanding of the risks involved. 2. To understand how these risks affect businesses. 3. To gain an insight in to the how companies, especially retail firms, operate in such risky environment and the measures they take to offset the risks. 4. To find out if there is a necessity to have a separate department for managing risks and the importance of a CRO. 5. To suggest risk management techniques and strategies for survival in a volatile business environment.

Research Methodology
A research is conducted to find the answers to certain questions and discovering knowledge that lays undiscovered (Goddard and Melville, 2007). While conducting

research it is very essential to keep it factual. But this does not mean seeing only one side of the picture. A researcher needs to see and realize that there are two sides to a coin. Reality is perceived in different ways by different individuals and organizations. These different perceptions need to be understood and analyzed while conducting research. According to Jonker and Pennink conducting research is defined as goal-oriented acting (Jonker and Pennink, 2010). The steps involved in a research can be broadly stated as below: 1. Defining a Problem There need to be problem or a problem statement that need to be studied and researched up on for the research to take off. The problem is the actual topic on which the research will be done. This problem can be put in the form of a question that needs to be answered. 2. Demarcation and Scope of Research It is very essential to demarcate the variables that need to be studied and set boundaries for the research. It is also essential to have a clear picture of the depth of study that will be conducted and the extent of generalization (Goddard and Melville, 2007). This also involves a clear understanding of the practical difficulties of conducting the research. 3. Research Methods It is very essential to decide on the methods of research to be used. There are two broad methods available. One is applied research and the other pure research. Applied research basically aims at applying existing methods to get answers to questions specific to the topic. Generally research refers to applied research. Applied research uses both primary as well as secondary data. Pure research on the other hand refers to the use of completely new methods of research to get answers. It is more experimental in nature and ends in the finding of completely new data that can be later

used for applied research. Data collection is a very important part of the research and needs to be done with the research objectives in mind. This dissertation aims to use the above mentioned steps and applied research to answer the questions in the most plausible manner. Secondary data will be used extensively to understand the inherent risks in the business community, especially the retail sector. Secondary data used to get a picture of the current trends in the world to deal with risk. Primary data will be used to list out what some companies consider as top risks in the retail industry. By quantitative and qualitative analysis of the secondary and primary data the paper aims to bring to light the major risks companies face in todays fluctuating markets and the steps undertaken to deal with the situation on national as well as international level.

Secondary Data Collection and Analysis

This constitutes the main source of data for the paper. Secondary data basically means information that has been collected by others and published somewhere. This could be both qualitative and quantitative in nature. Using secondary data is easier than primary data in a few respects. The collection of data is easier from a secondary source and, if there already is data regarding the topic of research there is no need to collect new data (Crowther and Lancaster, 2005). The main source of such data will be books, research papers, official websites, company reports, leading business journals and newspapers. Since the main area is business risk, especially in the retail sector, the company websites and records of certain prime retail firms will be analyzed and the information available will be used to gain insight into the companies as well as their risk management policies and global positions. The books, especially publications pertaining to the subject, will be used to understand the theory behind the topic. Newspapers and journals will be able to shed light on
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what is happening in the real world. They would also give solid examples of risks and coping strategies. The data so collected will be subject to both qualitative and quantitative analysis. Charts, tables and statistical tools will be used to quantify and make sense of the data and bring it into perspective. Qualitative analysis will be used to critically examine the theories and practices.

Primary Data Collection and Analysis

Primary research pertains to the collection of fresh data for the purpose of the paper. Primary data collection can include methods like observation, survey, experimental etc (Crowther and Lancaster, 2005). Survey method is the best method that can be used to get a clear picture of peoples knowledge and opinions on matters (Kotler, 2009). A total of 50 retail firms will be selected and questionnaires will be distributed to them which contain various questions pertaining to the risks they face. The questionnaires will be consisting of closed end questions which can be answered easily and which would give clear data regarding what factors are considered as risks in those organizations. From the data so collected, a detailed table and diagram will be prepared using statistical tools.

Possible Bottlenecks
No research is without its problems. The main limitation or bottleneck that could arise is the inability to get quantifiable data for statistical analysis. There is every possibility of finding more descriptive data, in terms of secondary data, than numerical data. As such there may be a requirement to deduce the numerical data from the various publications. This may turn out to be tiresome and cumbersome process. The methods used to counterman risk are often a closed subject which many companies are not willing to reveal. This could be another bottleneck. There

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may be thus the limitation of finding not enough data regarding the risk handling methodologies used in real time.

Research Ethics
Ethics is a very important part of any research and paper being written. It is very essential to have complete disclosure of matters while writing the paper. Since a lot of secondary data will be used, it is crucial to give clear citations and acknowledgements of the sources. Using secondary research does not in any way justify plagiarism. Plagiarism refers to the copying of already published material with little or no alteration. This is a complete taboo when it comes to research ethics and will be avoided at all costs. Complete disclosure is also important during primary data collection. It is important to collect the data with the consent of the individuals and this should be fully informed voluntary consent (Gregory, 2003). The participants for the collection of data should be given full information regarding what the data will be used for and there should be no deviation from that. A participation consent form with relevant information can be used to clarify the matter of informed voluntary consent if necessary. It is also important to maintain confidentiality. Many people/companies taking part in the data collection may not want their name to appear anywhere. This should be respected and confidentiality maintained, if so requested by the participants. Finally, the CU ethical approval process will be followed to get the approval on the paper.

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Time Frame and Resources

The date wise schedule for the completion of the project is given below:
Date Wise Schedule of Project April 11 21 1616 26 5 10 20 30 15 25

Date (5 days gap) Topic Topic Selection Detailed Search Data Compilation Decision regarding Research Methods Meeting Instructor Submission of Proposal Primary Data Collection Secondary Data Collection Data Compilation Data Analysis Preparing Draft Dissertation Meeting Instructor Report Review Preparation of Final Document Dissertation Submission

1-5

610

May 11 16 15 20

21 25

26 30

The resources used for conducting the research will be books, journals, newspapers, company records and publications, official websites and case studies for obtaining secondary data. The primary data will be obtained from doing a survey with the top officials of 50 retail companies. The data thus collected will be compiled, analyzed, quantified and presented in the form of the project.

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Resources
1. Christ Paul (2009), Know This Marketing Basics, Know This LLC. 2. Conrow Edmund H. (2003), Effective Risk Management Some Keys to Success, American Institute of Aeronautics and Astronautics Inc. 3. Crowther David and Lancaster Geoffrey (2005), Research Methods, Elsevier ButterworthHeinemann. 4. Gilbert David (2003), Retail Marketing Management, Pearson Education Ltd. 5. Goddard Wayne and Melville Stuart (2007), Research Methodology An Introduction (Second Edition), Juta and Co Ltd. 6. Gregory Ian (2003), Ethics in Research, Continuum. 7. Hall Allan (2006), Wall-Mart Pulls out of Germany, The Times, 29 July 2006, Available at http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article694345.ece 8. Henisz Witold J. and Zelner Bennet A. (2010), The Hidden Risks in Emerging Markets, Harvard Business Review, April 2010, Available at http://hbr.org/2010/04/the-hidden-risks-inemerging-markets/ar/1 9. Ireland Duane R., Hoskisson Robert E., Hitt Michael A. (2009), Understanding Business Strategy Concepts and Cases, South Western Cengage Learning. 10. Jonker Jan and Pennink Bartjan (2010), The Essence of Research Methodology A Concise Guide for Master and PhD Students in Management Science, Springer. 11. Kotler Philip (2009), Marketing Management (Thirteenth Edition), Pearson Education. 12. Lamm Jacob (2010), Governance Across the Enterprise, CA Inc. 13. Reuvid Jonathan (2005), Managing Business Risk: A Practical Guide to Protecting your Business, Kogan page Ltd. 14. Sadgrove Kit (2005), Business Risk Management, Gower Publishing Ltd. 15. Spedding Linda S. and Rose Adam (2008), Business Risk Management Handbook A Sustainable Approach, Elsevier Ltd. 16. Sullivan Malcolm and Adcock Dennis (2002), Retail Marketing, Thomson Learing.
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