Tesco Risk Management Assignment: Analysis and Examples

Task 1

1.1 Identifying and evaluating the different business environments and the likely risks of those environments

The business environment comprises all internal and external factors which impact the company’s functioning. The businesses like as Tesco, this operates within the dynamic and complex environment which influenced via the different internal and external factors. The different environments involve the environmental, social, technological, legal, political and economic settings. Evaluating and understanding the different environments are significant for the risk management and efficient strategic planning.

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Political environment: The political environment involves the trade tariffs, tax regulations, policies and government stability. The Tesco is one of the multinational retailer, this effectively operates within the different countries (TESCO, 2024). The organisation is mainly affected by the UK’s Post Brexit and government policies, changes within the export/ import regulations, foreign policy and trade agreements (Ahmed and Huma, 2021). The major risk is changes in policy of environmental regulations and food standards. Developing tariffs and protectionism might boost the imports prices. The instability political within the different regions, in this the Tesco has major global operations.

Economic environment: The economic environment effectively covers the GDP, levels of employment and interest, inflation rates. The Tesco is majorly economic fluctuations sensitive, mainly within the customer spending. At the time of recession, the consumers mainly price conscious and also affecting the revenue of Tesco. The risks are related to the inflation, this might increase the supply chain and operational costs. The major decline within the purchasing power of customer leads to decrease the major sales. The fluctuation in the currency put impact on the profitability of Tesco within markets overseas.

Social environment: The consumer lifestyle, demographics and social trends shape the behaviours of consumer. The developing demand for the online shopping, sustainable products and healthier food has compelled the organisation ti effectively to adapt the key offerings. Failure to respond related to the changes within the preferences of consumer might lead to market share loss. The social expectations misalignment around the ethics and sustainability can affect the reputation of brand.

Technological environment: The developing technological advancement effectively influences the operations of Tesco from the warehouse automation within the online platforms and digital systems of payment to boost the experience of consumer. The risk related to the cybersecurity threats like as breaches of data. The rapid obsolescence related to the platforms and systems. The rivalry advantage if the organisation face issues within the adopting the novel technology.

Legal environment: These aspects involve the legislation of data protection, completion law, health and safety regulations and employment laws (Buganová and Šimíčková, 2019). The Tesco needs to makes sure about the compliance to reduce the legal disputes and penalties. The risks are related to the non-compliance might lead to reputational damage and fines. The labor laws changes can boost the costs of operations.

Environmental factors: The sustainability requirements, environmental policies and climate change developing how the organisation operates. The risks are related to the disruption related to the climate within the supply chain of agriculture.

1.2 Providing examples of organisation’s tolerance to risk taking and evaluating how organisations can measure tolerance

Risk tolerance profile of Tesco: The overall risk tolerance is about the willingness and capacity of organisation to avoid and accept the risk within the objectives pursuits. The Tesco mainly showcases the tolerance moderate to high for the operational and strategic risks. This is mainly within the history of technological investment and international expansion.

Risk taking examples of Tesco:

International expansion: The expansion of TESCO within the international market USA via the brand of fresh & easy offered the strategic risk. On the other hand, the failed ventures because of the cultural misalignment and market research. This is mainly resulting within 1 billion exceeding losses. The failure assessed that the risk appetite of Tesco can exceeded the unfamiliar markets capacity. This led the organisation to smoothly adopt the approach cautions within the emphasising on the performance consolidating and future global investment within the existing markets.

Technological innovations: The organisation invested mainly within the delivery services of online grocery and Club card technology. It needed the major commitment long term and capital, mainly within the time when shopping of online grocery was developing. The major investment effectively paid off, mainly at the time of COVID-19, the organisation was effectively equipped to manage develop needs of online.

Measuring the organisation risk tolerance:

(RAF) Risk appetite framework: The Tesco might utilise the RAF formally to lines up strategic objectives with the risk taking (Calder and Watkins, 2019). The overall framework showcases the type and amount of risk which Tesco is mainly willing to include and accept. This involves the Quantitative thresholds (Acceptable limits of loss and revenue risk percentage) and Qualitative metrics (consumer dissatisfaction and brand impact).

Heat maps and Risk Assessment: The risk maps are mainly considered as the visual tools which are the plot risks related to the impact and likelihood. The TESCO can evaluates the exceed risks and needs to be addressed. For example, the cybersecurity can majorly ranks as the likelihood highly and impact high.

(KPIS) Key risk indicators: The KPIS majorly are signs of early warning which alert the organisation related to the developing risks. For instance, the major drop within the scores of consumer satisfaction can showcases the reputational risk and prompting the major intervention timely.

Task 2

2.1 Producing a risk profile for an organisation for an organisation

The risk profile majorly is key comprehensive assessment which identifies the risks, company can face. This develops the basic strategy of the risk management for the organisation.

Strategic risks: These include the objectives based on the long term like as:

Risks of international expansion: The Past challenges within Asia and US permits the risks of the foreign market misjudgement. The changing behaviours of consumers, the trends related to the sustainable consumption and online shopping. The high competition within the market exists from the key retailers such as online platforms, Sainsbury, Lidl and Aldi. The impacts are high and likelihood is medium.

Operational risks: The supply chain disruptions because of the Geopolitical issues, COVID-19 and Brexit. The labour shortages mainly post Brexit within the retail and logistics staff. The IT system outages and failures can lead to the stock issues and service delays as well. The impacts are high and likelihood is medium to high.

Financial risks: The Tesco particular is exposed to the present fluctuations mainly because of the international transactions. The change in interest rates putting impact on the borrowing prices (Chowdhury et al, 2023). The pressures of profit margins because of the inflation and price wars as well. The impact is medium and likelihood is mainly medium.

Legal and compliance risks: The organisation processes the big consumer data volume as well. The breaches of health and safety mainly risks within the warehouses and stores. The changes in the regulatory and tax can affect the compliance and costs obligations. The major impacts are medium to high and also likelihood is medium.

Reputational risks: The brand image might be impacted via the negative publicity related to the environmental and social practices. The poor data breaches and consumer services as well. The impacts are high and also the likelihood is also medium.

The risk profile of Tesco showcases the environment of complex operating with the key exposure to the reputational risks and operational as well. In order to reduce these, the TESCO majorly employs the controls of risks like as robust governance, cybersecurity measures and diversification of supply chain via the risk committees and Audit as well.

2.2 Reviewing and commenting risk profiles of organisations in different industries

The different industries majorly faces the risks which relying on the financial, regulatory and operational characteristics.

Retail industry: (TESCO): The risks of Tesco are highly reputational and operational as well. This includes the data protection, cybersecurity, brand image, consumer loyalty, pricing, competition pressures and issues of supply chain (TESCO, 2024). The retail companies depend on the low margin and high volume transactions are mainly sensitive to the economic conditions and customers trends.

Main risks: compliance, cybercrime and supply chain

Nature: Market driven, reactive and short to medium

Controlstrategies: Regulatory compliance, automation and diversification

Banking industry: (Barclays): The banks such as Barclays mainly operates within the financially and regulated complex environment. It mainly faces the credit risk like as defaulting on the loan borrowers. The fluctuations within the foreign exchange, stock prices and interest rates. The regulatory risks are regular developing the financial regulations.

Risk profile

Main risks: regulatory fines, cybersecurity and credit default

Nature: system based, long term and high stakes (Munawar et al, 2022)

Controlstrategies: Internal audit, compliance departments and management of risk weighted

Aviation industry (BA British airways): The risk profile of BA is developed via the operational dependencies and external shocks.

Environmental risks: The key regulations on the sustainability and emissions

Safety and technological risks: The failures of crashes and aircraft systems

Pandemics and Geopolitical tensions: This influence the major international travel

Volatility of fuel price: This puts impact on the key operating prices

Risk profile

Main risks: Global disruptions, fuel prices and safety

Nature: Event driven external, unpredictable and high impact

Controlstrategies: Units of crisis response, contingency planning and fuel hedging

Insights and comparison: The retail has the medium impact but broad risks and emphasise on the major adaptability (Rodríguez-Espíndola et al, 2022). Banking mainly faces the financial risks high consequence and high regulations, along with the compliance framework. The Aviation is mainly the considered as vulnerable to the international disruption, external and also mainly has the errors for low margins.

The companies tailor the strategies of risk management as per the environment. The Tesco mainly monitors the tech risk and customers, the different banks such as Barclays needs the models of complexity for the aviation players and financial risks within the BA. This mainly prepares for the geopolitical and safety risk.

2.3 Discussing the enterprise wide risk and the benefits and drawbacks of such an approach

(ERM) Enterprise wide risk management is major holistic approach which to manage, assess and identify the all kinds of risks within the company unlike siloed risk and traditional management (Enterprise wide risk management, 2024). The overall ERM majorly integrates the key risks within the decision making, compliance, operations and strategic planning.

Key ERM features

• Promotions of risk culture and continual monitoring
• Control and risk identification cross functional
• Business objectives strategic alignment
• The risk’s centralised governance

Enterprise Wide risk management benefits:

Developed decision making: The overall ERM offers help within the senior leadership to assess the rewards and risks within the strategic decisions. In the Tesco, the overall ERM will offer support the key decisions such as digital transformation investment and enter in novel market within the major digital transformation via the understanding risks association.

Increased risk visibility: The ERM permits the Tesco to focus on the interconnections of risk like as how the disruption of supply chain (risk operational) might lead to financial and reputations loss (Shad et al, 2019).

Regulatory compliance: The regulators developing demand related to the robust risk management evidence. The ERM makes sure that the Tesco be compliant with the codes of corporate governance, environmental standards, laws of food safety and GDPR.

Stakeholder confidence: The consumers and investors prefer the companies with the regular practices of risk management and transparency. The ERM develops the trust within the sustainability and governance of Tesco.

Agility and resilience: Within the crises like as Pandemic of COVID-19, the ERM offers the flexibility to the fast respond via the well-established processes such as framework of business continuity and scenario planning.

Enterprise Wide risk management Drawbacks:

Cost and complexity: The ERM setup needs the investment, training and time within the skilled and personnel and systems. The organisations smaller and those within the sectors of low margin can face issues with the balance of cost benefits.

Cultural change resistance: The different departments utilised to maintaining the independently risks can mainly resists the coordination of centralised risk. The shifting organisational mindset of Tesco to the culture of risk conscious can face the pushbacks internally.

Over focus on the process: The ERM might be bureaucratic and emphasising on the reporting and compliance apart from the real mitigation. It might decrease the responsiveness and dilute the effectiveness (Turner, 2019).

Security’s false sense: The ERM structured might offer the complete control illusion. On the other hand, unpredictable events “black swan” like as sudden cybersecurity and COVID-19 pandemic might catch off guards firms.

The ERM provides the strategic approach integrated to maintaining the risk within different organisational levels. For the TESCO, the risk of enterprise wide permits the developing stakeholder expectations and greater resilience. On the other hand, in order to maximise the overall efficiency, the ERM needs to be thoughtfully embedded managing the process.

Task 3

3.1 Analysing the possible risk of innovation in an organisation

Innovation is significant for the growth and organisational survival within competitive industries such as retail. The organisations like as Tesco needs to ongoing innovate to manage the competitiveness, adapt the trends of market and shifting expectations of consumers. On the other hand, the innovation provides the major rewards, this carries risks inherent. The different risks might be technological, financial and strategic within nature.

Strategic risk: The innovation mainly includes the changes within the strategy of organisation. If the change is not appropriately research then this misaligned with the expectations of customers. For instance, the entry of Tesco within the market of U.S. via the innovative concept of Fresh & Easy failed because of the operational models, location choices and misjudging preferences of American customer. The risk outcome is missteps strategic might lead to financial loss, penetration of poor market and brand dilution.

Financial risks: The overall innovation needs the key financial investment within the implementation, testing, development and research as well. No guarantee related to the ROI (Return on investment) (Ullah et al, 2021). For instance, the increasing system of automated delivery and novel technology of self service can include the costs with the periods of uncertain payback. The risk outcome is failed innovations and budget overruns might lead to strain financially.

Operational risk: The operational risks are developing when the overall innovation disrupts the consumer service, supply chains. Introducing the technologies such as checkouts cashier less and stock control powered by AI can lead to inefficacies in operations. The risk outcome is interruptions within the staff confusion and service delivery can lead to revenue loss, wait times longer and consumer dissatisfaction.

Technological risk: The innovation based on the technology is vulnerable mainly to cybersecurity threats, integration challenges, bugs and obsolescence. In the Tesco, the major innovation via consumer data analytics and mobile apps carriers the key risk of the system failure and data breaches (Wong et al, 2024). The risk outcomes is breach within the data security of customer cannot leads to only consequences legally.

Reputational risk: If the overall innovation mainly perceived negatively and fails due to public, this might damage the reputation of the organisation a well. For example, the innovative sustainability (reduction of packaging) can miscarry if the consumers feel product with the low quality. The risk outcomes, the loss in loyalty of consumer, backlash of social media and media coverage negatively.

Cultural resistance: The workers can resist the innovation because of the skills lack, routines changes and job loss fear. For instance, the AI introduction and automation can lead to redundancy fears between the workforces of Tesco. The risk outcome includes internal buy in lack, implementation disruption and high turnover as well.

3.2 Producing examples of how to manage the innovation risk so that innovation can be used to create advantage

The innovation offers the different risks, If provide the key opportunity to market changes responds, boost effectiveness and make the competitive advantage.

Phased implementation and pilot testing: Before organisational launching innovation, the Tesco might effectively conduct the pilot programs of small scale. For instance, whenever Tesco comes with the checkout system of self service, these initially trialled them within the major stores to fix problems and observe reactions of customers. The approach decreases the reputational and operational risks via understanding the issues. This permits the organisation to refine the overall innovations.

Feedback and consumer centric design: In order to avoid the different strategic risk, the organisation needs to engage the consumers within the process of innovation (Urbański et al, 2019). It involves the beta testing novel features, services, focus groups and conducting the surveys. This includes the developments to loyalty programs and app of mobile shopping. For instance, the club card app of Tesco integrates the behavioural data and user feedback to customise offers and discounts. This is making the competitive advantage via the developed experiences. This is aligning the consumer needs with the innovation makes sure to avoid the misfit of innovation and better rates of adoption.

Cross functional innovation teams: In order to makes sure the alignment within the departments and cultural resistance. The Tesco might establish the teams of cross functional including the operations, HR, marketing and IT. This develops the share goals in innovation and encourages the collaboration. This developed buy in internal, practical insights integration and better communication of business.

Scenario planning and robust risk assessment: Before new initiatives launching, Tesco needs to conduct the efficient assessment of risk via the tools like as scenario planning, PESTEL and SWOT. It was mainly evident within the cautious approach of Tesco to expanding the services of online grocery. This identifies strategies of risk mitigation and potential barriers within advance.

Investment within Data governance and cybersecurity: As the Tesco utilises and collects the consumer data of vast amounts to innovation of fuel within the logistics and personalisation (Veljkovic and Budree, 2019). This needs to makes sure cybersecurity measures of top tier. It involves the data regulations compliance (Such as GDPR), staff training, encryption and firewalls. This makes sure about the compliance and consumer trust, while permitting the innovation driven data to flourish.

Change management and skills training: In order to internal resistance combat, Tesco needs to effectively invest within the strategies of change management and staff training. This is introducing the overall innovation such as digital dashboards and automation needs to be attended via reskilling initiatives.

References

Books and journals

Ahmed, W. and Huma, S., 2021. Impact of lean and agile strategies on supply chain risk management. Total Quality Management & Business Excellence, 32(1-2), pp.33-56.

Buganová, K. and Šimíčková, J., 2019. Risk management in traditional and agile project management. Transportation Research Procedia, 40, pp.986-993.

Calder, A. and Watkins, S., 2019. Information security risk management for ISO 27001/ISO 27002. It Governance Ltd.

Chowdhury, S., Rodriguez-Espindola, O., Dey, P. and Budhwar, P., 2023. Blockchain technology adoption for managing risks in operations and supply chain management: evidence from the UK. Annals of operations research, 327(1), pp.539-574.

Munawar, H.S., Mojtahedi, M., Hammad, A.W., Kouzani, A. and Mahmud, M.P., 2022. Disruptive technologies as a solution for disaster risk management: A review. Science of the total environment, 806, p.151351.

Rodríguez-Espíndola, O., Chowdhury, S., Dey, P.K., Albores, P. and Emrouznejad, A., 2022. Analysis of the adoption of emergent technologies for risk management in the era of digital manufacturing. Technological Forecasting and Social Change, 178, p.121562.

Shad, M.K., Lai, F.W., Fatt, C.L., Klemeš, J.J. and Bokhari, A., 2019. Integrating sustainability reporting into enterprise risk management and its relationship with business performance: A conceptual framework. Journal of Cleaner production, 208, pp.415-425.

Turner, B.A., 2019. The development of a safety culture. In Risk Management (pp. 397-399). Routledge.

Ullah, F., Qayyum, S., Thaheem, M.J., Al-Turjman, F. and Sepasgozar, S.M., 2021. Risk management in sustainable smart cities governance: A TOE framework. Technological Forecasting and Social Change, 167, p.120743.

Urbański, M., Haque, A.U. and Oino, I., 2019. The moderating role of risk management in project planning and project success: Evidence from construction businesses of Pakistan and the UK. Engineering Management in Production and Services, 11(1), pp.23-35.

Veljkovic, I. and Budree, A., 2019. Development of Bring‑Your‑Own‑Device Risk Management Model: A Case Study From a South African Organisation. Electronic Journal of Information Systems Evaluation, 22(1), pp.pp1-14.

Wong, L.W., Tan, G.W.H., Ooi, K.B., Lin, B. and Dwivedi, Y.K., 2024. Artificial intelligence-driven risk management for enhancing supply chain agility: A deep-learning-based dual-stage PLS-SEM-ANN analysis. International Journal of Production Research, 62(15), pp.5535-5555.

Online

Enterprise wide risk management, 2024. Online. Available through https://www.investopedia.com/terms/e/enterprise-risk-management.asp

TESCO, 2024. Online. Available through https://www.tesco.com/?srsltid=AfmBOop2gIlpvlTjX77mhLeeqcV2vZ2LjJWy6CYyytLdYnZGdGlG_s6r