Managing risk and reward: New challenges for retail leadership

Deloitte, in conjunction with Stores Magazine, are pleased to present the ninth annual Global Powers of Retailing (712KB, PDF). This report identifies the 250 largest retailers around the world based on publicly available data for the companies’ fiscal year 2004 (July 1, 2004 – June 30, 2005). It also provides an outlook for the global economy and an analysis of retail stock price performance. New this year is a discussion of the major risks facing today’s retailers.

The global economy has continued to perform reasonably well, lifting retail sales and profitability. However, heightened concern about the growing risks facing retailers is changing the management agenda from one of managing for profitable growth to one of managing and mitigating risk. A whole portfolio of risks is making global sourcing and operations not only much more complex, but also much more precarious. As a result, there is growing awareness among senior management and corporate directors in the retail industry – whose risk management agendas have heretofore been focused primarily on financial integrity issues – of the non-financial risks confronting their organisations.

As retailers raise their exposure in global markets, they must contend with the many inherent and well-known problems of doing business in international markets, including currency fluctuations, reporting and tax rules, poor infrastructure, potential for sudden political change, and uneven economic growth. Long-distance sales and distribution processes become more difficult to manage. Local consumer preferences need to be considered. Barriers to entry need to be overcome.

However, retailers also face increasing risks in other areas that are less well-recognised or understood. The nature of global commerce now requires retailers to take into consideration a number of serious issues that did not exist, at least not on the same scale, only a few years ago. Being a good global citizen – minimising a company’s impact on the environment and maximising benefits to the communities in which it operates – is becoming an increasingly important topic on the corporate risk management agenda.

To succeed in this intensely competitive and increasingly consolidated marketplace, the world’s leading retailers will need powerful brands, compelling consumer value propositions, sophisticated customer management systems, and flexible and efficient supply chains that will allow them to take advantage of global expansion opportunities. Equally, if not more important, they will need strong risk management skills to navigate the minefields as globalisation adds ever greater complexity to the retail business model.

For more information, download our Global Powers of Retailing publication (712KB, PDF)