Tuesday 9 July 2013

Debenhams’ Risk review (latest Annual Report 2012, P39-45)

(Download a copy of the Annual Report here)
A virtual primer on risk management, their latest Annual Report devotes six pages to defining and spelling out Debenhams’ position on risk, in terms of chance-of-occurrence and impact-on-the-business. Any NAMs wanting to optimise their trading partnerships with the retailer will need to demonstrate how their policies and process are compatible and complementary in terms of the supplier-type risks covered in the Debenhams’ report, or risk being ignored….

Know your own risk-profile
In practice, this means that the supplier needs to be clear in terms of relative risk profiles of the two organisations, knowing whether as a supplier in their category they are risk-seeking, risk-neutral or risk-averse, and pretty clear on how Debenhams views itself on the same measures, in that same category.

Incidentally, the category-specific criterion is important, given the difference between fashion-clothing and, say Health & Beauty business models. 

Risk-match with the customer
In terms of being complementary, a supplier can either have the same appetite for risk (i.e. both are risk-neutral, or be more adventurous [risk-seeking] based on knowledge of the category, where the retailer is more conservative [risk-neutral] in the same category.

Either way, framing your presentations as ways of helping the retailer to manage their perceived risks has to be a way of differentiating your offering from competitors that make a pitch in the traditional manner…

Debenhams’ Risk priorities and mitigation
See the risks identified by Debenhams on p42 to 45 that could impact/involve suppliers:

- Consistent fall in customer spending
- Competitive pressures in existing markets
- Factors influencing the sustainability of the supply chain
- Inability to predict or fulfil customer demands or preferences
- Disruptions or other adverse events affecting relationships with or the performance of major suppliers
- Ineffective brand awareness and marketing programmes

Debenhams are clearly building risk-management into their culture at all levels. They are listing both the risk and the mitigating action in each case. Ignoring the risk-content of the Annual Report could prove to be a major ‘miss-trick’ for NAMs…, whereas seeing an opportunity to jointly manage relative risk with Debenhams, has to be a no-brainer for pro-active NAMs…

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