Financial Reporting for Management: Risk Management in Tesco plc

This report discusses the risk management strategy of Tesco plc and its benefits and outcomes. It also includes a critical appraisal of the current business environment in relation to the topic of choice. The report is for the course BMP6015 Financial Reporting for Management for BSc (Hons) Business Management (Finance) students.

BSc (Hons) Business Management (Finance)
BMP6015
Financial Reporting for Management
Assessment 1
Individual Report (Article review)

Contents
INTRODUCTION................................................................................................................................3
PART 1..............................................................................................................................................3
Review of real-world (and published) example, relating to text-book techniques and
academic models considering aspects and the motivation behind the adoption and reported
benefits and outcomes................................................................................................................3
PART 2..............................................................................................................................................6
A critical appraisal of the current business environment in relation to the topic of choice.......6
CONCLUSION...................................................................................................................................7
REFERENCES.....................................................................................................................................8

INTRODUCTION
Financial reporting is more than just using financial records and accounting records to
present data. Non-monetary as well as monetary information is included in financial reporting. If
accounting information comprises critical information, the rationale for its existence is expressed
through timetables and explanatory comments, provided data is accurate and understandable.
The primary goal of reporting data is to guarantee that everyone who uses it (internally or
externally) may make an educated choice tailored to the needs (Sander and et.al, 2020). To
prepare this report selected topic is “Risk Management”. Every organisation applied this term as
per their requirement and select different risk management strategy to effectively run their
business in a proper manner. Along with selecting a real world example and compare in current
business environment in present economy.
PART 1
Review of real-world (and published) example, relating to text-book techniques and academic
models considering aspects and the motivation behind the adoption and reported benefits
and outcomes.
Creating a risk management team may obstruct risk control because workers are more
vulnerable to the risk than with the customer, therefore we're just focused with the customer and
what might go incorrect. One of the reasons of successful organizations is risk assessment;
employees utilize it without recognizing it since it is part of their duties. They must take
responsibility for their acts.
The primary goal of risk management is to ensure about strategy goals after that apply
appropriate strategy. Enterprise Risk Management (ERM) a wide ranging approaches to
managing risk, and the balanced scorecard, a frequently used strategy implementation
mechanism. Tesco plc, one of the UK's large stores, has been used as a example study to
demonstrate how ERM may be integrated into an organization's strategic management system
(Sun, Bi and Yin, 2020).

Risk management is a process that encompasses a wide range of considerations and
issues, and it must be treated even so. Its methodology suggests that firms must also aim to avoid
bad things from happening, but then also predict them, estimate prospective damages, design risk
mitigation methods, and eliminate the hazards in a systematic way. A corporate disaster is an
example of when the financial planning toolkit could be useful. First from perspective of risk
management transformation, it is possible to review what a company did well and badly in
addition to minimizing dangers. Throughout this case, risk is estimated as a combination of
chance and harm (Abioye and et.al, 2020).
There have been more sophisticated elements and components to the Tesco accounting
issue than simple fraud, i.e. managers misrepresenting. First of all and importantly, the
company's atmosphere suggested anything was wrong, because there was a series of extremely

quiet resignations since the scandal broke in September 2014. As is now obvious, many Tesco
workers chose to resign because they felt forced by the grossly misrepresenting processes and
were willing to leave the firm rather than participate in what they thought to be illegal behavior.
Very importantly, the approaching disaster was anticipated not just by failures, but also from the
telecoms firm's responses (Ullah and et.al, 2021).
Benefits to adoption Risk management in Tesco plc
Organisation should alter the risk management plan after implementing the change rules
or a dynamic system for risk governance decisions (or both). Firms should first establish a
toolbox to enable the management of risks that businesses require their people to assess, and then
guarantee that management can use particular approaches to map and categories potential
hazards, according to the corporate governance framework. Furthermore, there is a connection
between risk assessment and monitoring. Therefore, investing big quantities of cash on risk
mitigation and losses prevention should not be advocated as a way to improve the approach.
Instead, Tesco's risk management approach could be improved by strengthening the corporate
processing model and emphasizing the chances of fraud. Internal hazards can result in major
reputational damage consequences, but the business' financial risk management strategy focuses

more on mitigating external threats. Updating the processes that recognize and report unlawful
internal practices should improve the risk management plan (Naseem and et.al, 2020).
Motivation to apply risk management in Tesco
 Customers will receive dependable assistance from a renowned organisation that
manages risk well.
 Whenever risks are visible and the risk management process is properly explained and
disclosed, the interest rate demanded by shareholders will be lower.
 Whenever methods, permissions, restrictions, desired returns, and incentive criteria are
properly established and articulated, employee motivation improves.
 The trust of regulatory authority in the person's decision to regulate the risks connected
with its operations strengthens collaboration with the government even more.
Outcomes
It is vital to outline the major features of Tesco's risk management strategy after
commenting on each component of the risk assessment cycle. First of all and foremost, cost and
benefit assessment is a critical characteristic of effective risk management. This study is made up
of a series of interrelated measurements and activities, such as avoidance, division, integration,
and transference, to name a few. To minimize risk, an organisation should compute the overall
possible liability and then implement the practices necessary to not only prevent bad situations or
considerations that are probable to occur in bad results, but also to disseminate positions,
features, and assets in such a way that the probability of loss is reduced. Tesco has implemented
a variety of regulation initiatives to limit the spread of fraud. Nevertheless, in the example at
hand, the instruments were found to be insufficiently accurate, and fraudulent activities had been
established in the organisation for a long time until they were discovered.
PART 2
A critical appraisal of the current business environment in relation to the topic of choice.
Internally and externally types of hazards might both exist. Vulnerabilities are those that
the administration does not have direct control over. Political difficulties, currency values, and
borrowing costs are just a few examples. Internal risks, on the other extreme, encompass things
like non-compliance and data infiltration. Absent risk management, a company's future goals will

be impossible to establish. If a corporation sets goals without considering the dangers, it's likely
that they'll lose focus if one of these hazards manifests itself. Many businesses have introduced
risk management divisions to their workforce in recent times (Ramanpong and et.al, 2020).
It is the responsibility of this committee to manage hazards, design strategies to minimize
such uncertainties, execute out the few strategies, and motivate all business personnel to join in
all of these measures. While large companies face more hazards, their approaches should be
more complicated. Furthermore, the risk management team is responsible for assessing all risks
and determining whether ones are critical to the firm's earnings. The main threats were those that
had the ability to harm the company, so they should be prioritized. The ultimate objective of the
risk is to guarantee that the organization must take only certain risks that will enable it achieve
its major objectives while keeping most of the other risks in check. (Atanga, 2020).
Companies will come to grasp those risks needed to be controlled after they obtained a
fresh perspective on what hazards may imply to their activities in terms of damages. While it is
evident that all of our activities carry some level of risk, it is also apparent that risk cannot be
managed in the same manner for all occurrences. Problems can't be dealt with only on the basis
of logic, disregarding the diverse risks of loss associated with different environments. The
unpredictability of current state of the economy has had a huge influence over how firms operate
presently. Businesses which used to function smoothly based on projections and forecasts are
increasingly refusing to make strong corporate choices. Risk management has become a major
concern for businesses. Risk is the key complicated issue in any organization. As a consequence,
companies are constantly concentrating on recognizing and mitigating the risks until they have a
detrimental influence on their business. Companies will be able to execute more confident
lengthy financial choices if they have the risk appetite. Their awareness of the challenges they
face will give them with a number of options for coping with unforeseen challenges (Wakefield,
2020).
Modern enterprises are exposed to a wide range of hazards and threats. Historically,
organizations managed their key risks by having each department manage its own company.
Indeed, many multinational corporations have coped with expansion by delegating increasing
amounts of authority to heads of various divisions, leaving the CEO and other senior executives
out of the day-to-day activities. This method, however, can lead to an error and risk
magnification or misrecognition when firms develop and take on additional divisions or

economic sectors. Every department of a company is it's own "silo" in this instance. They can't
observe other units' risk exposures, how their risk exposures connect with those other
organizations, or how varied exposure times between components connect overall. As a result,
whereas a line manager may perceive possible risk, he or she may not understand (or be capable
of understanding) the implications of that danger to other elements of the organisation.
CONCLUSION
As per the above report it has been concluded that Tesco seems to have failed to detect
fraudulent transactions while also identifying and assessing their risks; at the same time, the
scandal broke so before the accounting hole reached 0.5 percent of annual sales, demonstrating
that risk management procedures were in place. Whereas if damages caused by the hazard had
been effectively investigated and managed, the business would have responded to symptoms of
dishonesty even before dark matter emerged. In addition, feedback would have improved
company procedures, judgments and examination plans. The company's main issue is that it
didn't respond adequately to the looming pensions. In the future, greater compensatory
mechanisms would need to be built and deployed.

REFERENCES
Books and Journal
Abioye, T. E. and et.al, 2020. Toward ontology‐based risk management framework for software
projects: An empirical study. Journal of Software: Evolution and Process. 32(12).
p.e2269.
Atanga, R. A., 2020. The role of local community leaders in flood disaster risk management
strategy making in Accra. International journal of disaster risk reduction. 43. p.101358.
Naseem, T. and et.al, 2020. Corporate social responsibility engagement and firm performance in
Asia Pacific: The role of enterprise risk management. Corporate Social Responsibility
and Environmental Management. 27(2). pp.501-513.
Ramanpong, J. and et.al, 2020. Risk management in suburban forest recreation areas: A
retrospective analysis of illness cases. Urban Forestry & Urban Greening. 53. p.126710.
Sander, L. and et.al, 2020. Suicide risk management in research on internet-based interventions
for depression: A synthesis of the current state and recommendations for future
research. Journal of affective disorders. 263. pp.676-683.
Sun, Y., Bi, K. and Yin, S., 2020. Measuring and integrating risk management into green
innovation practices for green manufacturing under the global value
chain. Sustainability. 12(2). p.545.
Wakefield, S., 2020. Making nature into infrastructure: the construction of oysters as a risk
management solution in New York City. Environment and Planning E: Nature and
Space. 3(3). pp.761-785.
Ullah, F. and et.al, 2021. Risk management in sustainable smart cities governance: A TOE
framework. Technological Forecasting and Social Change. 167. p.120743.
Online
Risk management at Tesco Plc, 2008. [Online]. Available through;<
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1358776>
Woods, Margaret, Linking Risk Management to Strategic Controls: A Case Study of Tesco Plc
(February 1, 2008). International Journal of Risk Assessment and Management, Vol. 7,
No. 8, pp. 1074-1088, 2008, Available at SSRN: https://ssrn.com/abstract=1358776
Accounting Scandal in Tesco Plc, 2017. [Online]. Available through; <
https://ivypanda.com/essays/tesco-accounting-scandal-risk-management/>