Analysis of Enterprise Risk Management at Marks and Spencer

This report provides a comprehensive analysis of Enterprise Risk Management (ERM) at Marks and Spencer. It begins with an introduction to the company, its aims, and its risk management practices. The report explores the identification of risks, including government regulations, financial supply, exch...Read More

ENTERPRISE RISK MANAGEMENT

Table of Contents
INTRODUCTION....................................................................................................................3
Introduction to the organization...............................................................................................................................................................................3
Aim of the organization............................................................................................................................................................................................4
Risk management practices that can be adopted by Marks and Spencer.................................................................................................................4
Threats and opportunities available to organization.................................................................................................................................................6
Risk thresholds and register.....................................................................................................................................................................................7
Opportunity............................................................................................................................................................................................................14
CONCLUSION.......................................................................................................................14
REFERENCES.......................................................................................................................16

INTRODUCTION
Measurement of risk is an important aspect that is to be judged by each and every company so that mitigation strategy can be decided by
the management accordingly. In order to measure the risk, the most important step involved in it is assessment of risk that can be faced by the
organization during its functioning. Marks and Spencer, being one of the prominent retailing brand in UK can also face various challenges that
are required to be mitigated with the help of mitigation strategies to be adopted by the organization in order to combat the assessed risk. The
report makes rigorous discussion regarding risk register and various ranking that is to be used in order to reach to the matrix.
Introduction to the organization
Marks and Spencer is one of the major British multinational retailer which is headquartered in City of Westminster, London. The
company have been able to list itself on London Stock Exchange and is a core constituent of FTSE index. The entity specialises in selling home
products, clothes and other luxury food products to its customers. Marks and Spencer have been able to set up around 979 stores across UK
inclusive of around 615 stores exclusively meant for selling food products. The organization has been able to make its reputation in the early 20 th
century (Brindley, 2017). It has been able to build its policy where it is only selling British produced goods. To fulfil the requirements, it has
also entered into long term relationship with British manufacturers and has been able to sell these clothes under the brand name “St Michael”,
which was introduced by M&S in 1928.
Marks and Spencer have also been able to expand itself worldwide by introducing its stores in various countries, inclusive of Canada,
India, America etc. The company is committed to make every movement special for their customers by extended quality products to its
customers. The food business of the organization is responsible to generate 60% of the total revenue which the organization is able to generate
through all the departments (Franks and et.al., 2014). It has always been able to present uniquely and creatively on all occasions which takes
place round the year.

The company sells its clothing specific range all around the stores in the world through 343 full line stores. The stores are across Europe,
Asia and Middle east countries. It is also putting its footsteps through its online presence as well (Aven, 2012). It has also been able to launch
environmental friendly products as to grab the eye balls of customers at a large extent.
Aim of the organization
The main aim of Marks and Spencer is to provide unique, special and quality products to its customers. Moreover, another aim is to
expand its customers to the countries where the company does not hold its presence currently. It is involved in strategic review of its
international presence the based on the positive and negative review received, it decides whether to indulge in joint venture or franchise. M&S
plans its agenda every year and try to achieve the same at the end of the year.
The main aim of the organization to ladder towards financial success and stability in the market to which it belongs. In that case the
managers are appointed to perform this function so the expected budget matched with the actual one. The company have been able to launch its
online platform in February 2014 which acts as 24 / 7 window for its customers by offering products and clothing range. Since, the customer’s
habit for shopping has been evolving with time. Hence, in this case, the strategies are changed and renewed to fulfil the requirements of the
customers.
By following its strategies and strong mission and vision to present something new, it has been able to generate £ 10622 million in 2017
which was £10555.4 in 2016. The aim of the company is to give special moments to its customers through high quality of products and services
through its 1433 stores worldwide and online. It has helped the organization to become biggest clothing retailer by value in UK (Covello and
Merkhoher, 2013). It mainly focuses upon contemporary styles and wardrobe essentials which has made the organization a market leader for
women’s wear and men’s wear. Marks and Spencer work solely on the mission statement, which is:
“Aspirational quality accessible to all”
Risk management practices that can be adopted by Marks and Spencer
Risk management practices is one of the important aspect that is to be adopted by the organization It helps in ascertaining the risk before
hand and help in deciding and ascertaining mitigation strategies that can be adopted by the organization. In other words, risk management

practices involve ranking and prioritizing risks along with practicing and deciding mitigation strategies as well. Risk management strategies
plays an important role in decision making process of the organization. It also assists in addressing uncertainty and assumptions that can be faced
by the organization during its living tenure. There are various types of risk that can be involved in the functioning of the organization. It
includes, uncertainty in financial market, threat of project failure, credit risk, accidental and natural calamity risk etc (Vinnem, 2013).
Researchers have stated that it is important to develop proactive and responsive strategies that helps the organization to fulfil its mission,
vision and objectives. The negative impact of the risk bring threat to the organization which requires strategies to be build and developed in such
a manner that can help in bringing the expectations to reality. Since, Marks and Spencer belong to retail industry, there are diverse constituents
that is to be established before opting for any strategy that may or may not affect the reputation of organization in the market (Vilko, and
Hallikas, 2012).
Marks and Spencer, being a market leader of retail industry in UK, has been able to bring the best team of risk management to the
workplace so that all the risks can be understood and ascertained beforehand and based on which further strategies for the organization can be
prepared for implementation. One of the main objective that is the goal of every retail company is to fulfil the needs and requirements of its
stakeholders.
The common steps that are used by Marks and Spencer in handling risks are:
Level 1: Identification of risk: This is the first step of risk management where, all the risk which can come into exposure for the company is
identified. It is one of the most important step as all the risk that are identified at this level are then taken to the next one for preparation of
mitigation strategies for the same.
Level 2: Identification of causes of risk: The risk, which are identified at level 1, are then analysed so that its risk to the organization can be
ascertained. It also helps in addressing the risks to the next level according to the rank and intensity been decided at this level ( Angell, and
Kraemer, International Business Machines Corp, 2014).
Level 3: Identification of controls: These are the controls and activities that aims at reducing the likelihood of risk that are identified in level

1 and level 2 of the risk assessment process.
Level 4: Establishing likelihood and description of consequences: The likelihood of risk is ascertained depending upon the analysis being
made. It is then classified that whether the determined risk can lead to financial loss or not. Its impact of working process and staff is also an
important aspect which is determined at this level.
Level 5: Establishing description of risk rating: The consequences are ascertained based on which risks are ranked. It is then divided based
upon low, moderate, high and extreme level of risk based upon which action are determined.
Level 6: Add other controls for risks: After dividing risks at various levels, the risks that are at high and extreme level require more
controlling factors that can help in reducing its likelihood. Since, these are the risks that can have high impact over the functions of Marks and
Spencer.
Level 7: Making specific decision: Once the above process is complete, the decision is made for the risks in high and extreme category. The
activities and decision taken at this stage helps in deciding mitigation strategies.
Level 8: Monitoring and reviewing risk: When any activity is implemented as some mitigation strategies to cope up with the risk, it becomes
important to monitor and regularly review the essentials so that corrective actions can be taken appropriately.
Threats and opportunities available to organization
Risk can be segregated in two parts, first is positives which can act as an opportunity for the organization and the other is negative which
acts as a threat for it. Basically, it becomes important to take actions for both types. Positive risks help in grabbing the opportunities that are
available in the market. It helps in making right use of the opportunity that can help the organization to becomes market leader or enhance its
market share in the industry in which its products are dealing.
Marks and Spencer, being market leader have to make strategies for both type of risks. However, it is quite crucial to identify negative
risks that can affect the overall offering and reputation of the organization. Hence, in order to ease down the process, following five risks have
been identified that can affect the overall functioning of Marks and Spencer:

 Rules, policies and procedures being introduced by the government of UK Lack of financial supply from the market Fluctuations in exchange rates
 Changes in the market trends
Risk thresholds and register
Risk register
Risk register is the risk log which is created at the early stages of the project. It is considered to be an important park while the manager
is indulged in preparing risk management plans for a particular project. It helps in tracking the issues at the right time so that mitigation
strategies can be drawn accordingly (Mutton, 2012).
Risk register acts as a tool that can be used by Marks and Spencer in the management of the projects. Moreover, it becomes easy for the
company to handle the risks that may act as a hurdle for the project. Implementing strategies to handle the risk at the correct time is also
important as it prevent the project from its failing. Hence, risk register is an important tool to be adopted by the managers of Marks and Spencer
that can ultimately help in fulfilling aims and objectives of the project (Lahelma and et.al., 2012).
A specific scale of score is used in risk register to ascertain that what is the magnitude of the risk involved in the project.
Rating Likelihood Magnitude of impact
1 Very Unlikely Negligible
2 Unlikely Minor
3 Possible Moderate
4 Likely Severe
5 Very Likely Catastrophic

Each rank of risk based upon its impact is multiplied by its rank through likelihood. It is commonly known as a risk matrix approach.
Hence, the mitigation strategy is prepared based upon the final score of risk attained by the identified risks in the following manner:
Risk Rating Action Colour
0-10 No action required
11-14 Monitor for change
15-25 Action to be taken immediately
Risk thresholds
Ris
k
Nu
mb
er
Description of the risk Existing controls Likeli
hood
(1 - 5)
Impa
ct (1 -
5)
Rating
of the
risk
(Likeli
hood *
Impac
t)
Mitigation actions required for the
risk
1 Rules, policies and procedures being
introduced by the government of UK
Marks and Spencer have been able to enjoy
its global presence where all the regulations
being issued by different countries are to be
identified and acted upon. There can be
certain countries in which restrictions to
entry can be higher (Lavastre, Gunasekaran
In order to cope up with the
existing challenges of rules,
policies and procedures, it
becomes important to solely study
each and every aspect of the law
for each country (Pritchard and
PMP, 2014). A team has been
appointed for the same by Marks
5 5 25 One of the important research
that is to be performed by the
company before opting for
expansion is that whether the
products and services that are
offered by marks and Spencer
are allowed to be sold in the
chosen country for expansion or

and Spalanzani, 2012). Not following these
rules and regulations can lead the
organization to financial penalties. Brexit
have been another important aspect that is to
be studied by the managers for better
functioning in the environment. Hence, in
that case, preparation of proper mitigation
strategies can help the organization in
solving out this issue to the core.
UK is currently facing Brexit issues
where, Britain is planning to take exist
from European Union. It has brought
quite a vast change in rules, regulations,
policies and procedures of the retail
industry of UK. It has added to the risk of
marks and Spencer as it becomes
important to change the internal policies
and procedures of the organization as
well. It adds up to the overall cost and
time of the company as well. It can lead
to decline in sales and slim down profits
of the organization. Another important
and Spencer, commonly known
as legal advisory team for proper
following of rules and
regulations. Currently UK have
been going through Brexit.
Hence, adequate changes in the
law of UK can be brought.
Therefore, changing the existing
strategy of Marks and Spencer is
required to be altered according
to it (Calkin and et.al., 2014).
not (Brindley, 2017). Moreover,
deeply analysing and valuation
of trade act being followed by
the country is also important.
Moreover, based upon the new
Brexit rules is also important
for the organization (Colicchia
and Strozzi, 2012). Marks and
Spencer must also be
redesigning the rules and
policies with respect to external
and internal changes that takes
place in the environment and
within the company.

aspect is that, currently UK is under
following European Union law and hence
major changes in the future law of
Britain are expected to take place. Hence
in that case, changes can also affect the
overall function of marks and Spencer as
well. It can also bring adequate amount
of changes where less customer will then
tend to approach companies for shopping
due to significant decrease in personal
disposable income of the consumers.
Hence, it will generate the need for
marks and Spencer to ascertain the
current requirements and then bring
changes in the policies and procedures
accordingly. Hence, rules, policies and
procedures introduced by the government
in UK can act as a risk for the
functioning of Marks and Spencer.
2 Lack of financial supply from the market:
Due to Brexit, Foreign Direct Investment of
the country has reduced to minimum. A
Apart from Foreign Direct
Investment, there are various
methods based on which finances
3 4 12 Since, there are higher chances
that the conditions regarding
finances may worsen in the

strong impact of the same has also been
noticed on availability of finances for the
organization (Ghadge, Dani and Kalawsky,
2012). In that case, arrangement for the
same, in order to meet the requirements of
working capital, it is required to take actions.
It is important for the company to redesign
its policies and procedures for better output
and ascertain any change that needs to be
brought so that company can enhance its
profitability. Moreover, expectations of
clarity in the rules and regulations is present
after adequate alterations in laws to be
followed in Britain (Zhao and et.al., 2013).
Due to major changes in the current
economic conditions of Britain, a greater
impact has been found association to amount
of Foreign Direct Investment (FDI) received
by the country. It has significantly reduced
the financial supply to the market affecting
various businesses functioning within it.
Retail sector have been negatively influenced
can be arranged by the
organization. Hence, Marks and
Spencer is involved in arranging
finances, in the form of loan,
shares, creditors etc (Sodhi and
Tang, 2012). Moreover,
appropriately analysing each and
every aspect of the same helps the
organization to choose effective
and most appropriate method for
the company in terms of finances
upcoming years (Vilko and
Hallikas, 2012). Hence, it is
advised to Marks and Spencer
that it must focus upon
preserving retained earning that
can further be invested back in
the organization (Sodhi and
Tang, 2012). It will help in
fulfilling the requirements of
the company at the time of
crisis. Further, it can also opt
for finances which are best
suitable for the company by
analysing the opportunities and
threats involved in each
financing method.

through lack of supply. It has become
difficult for Marks and Spencer to serve the
requirements of its customers due to lack of
availability of working capital with the
company.
3 Fluctuations in exchange rates:
Since, the company is involved in serving the
customers situated all over the world, it
becomes important to track down the record
of ongoing exchange rates in different
countries. It can increase the exports and
import charges of the company which can
ultimately affect the revenue aspect as well.
Hence, in that case, it becomes important to
work upon this type of risk as well.
Any fluctuations being noticed in the
exchange rates can constantly influence the
revenue of the company to a great extent. A
lesser demand of the currency can state that
its value is going to decrease. Export and
import of material become costlier where
Marks and Spencer may find UK exports
In order to cope up with the risk
of fluctuating exchange rates, the
company has been able to keep
the prices of the products a
slightly higher when it is
exporting or importing the same.
In that case, the company is easily
able to cover the working capital
that is being involved in it. It also
helps in ensuring that adequate
amount of revenue is generated
by the organization
4 2 8 Since, the score being received
by this risk comes within the
periphery of no negligible risk.
Hence, in that case, currently no
actions are required to be taken
by the management in order to
cope up with the risk of
fluctuations in exchange rates
(Mutton, 2012).

cheaper and imports become expensive. It
can have a negative impact on overall
revenue of the company (Dunović,
Radujković and Vukomanović, 2013).
4 Changes in the market trends:
While expanding in some other market, it
becomes important for the company to assess
the taste of people residing there. Any
changes that takes place in the market can
significantly affect the ongoing condition of
Marks and Spencer (Fenton and Neil, 2012).
There are greater chances that if any major
changes take place in market can leave the
stock unsold in the warehouses. Hence, it
becomes important for the organization to
keep a track over current changes that are
taking place in the market with respect to
trend so that products and services can be
extended to the customers based upon their
current taste and preferences (Dyer, 2012).
Market trends acts as the main activity that is
to be taken care of by Marks and Spencer.
In order to cope up with the ever
changing and dynamic market
trends, the company is involved
in forming a team which is solely
responsible for tracking these
changes. It helps in producing
only a significant number of
products that can easily be sold in
a specific duration (Curti and
et.al., 2015). Marks and Spencer
also try to keep its stock updated
as per the current taste and
preferences of the customers so
that no stock is left unsold within
the specific time limit.
5 4 20 In order to stay updated with
the current market trend of a
particular destination it become
important to organize never
ending market research so that
any changes that may arise in
near future can be ascertained
beforehand by the management.
It helps in reducing the losses
which can be used in generating
higher profits for the company
(Diabat, Govindan and
Panicker, 2012). Another step
as mitigation strategy that can
be adopted by Marks and
Spencer is that it can make the
products and services available
in different manner as per the

Hence, any change in the trends can affect
the revenue of the company as the
underlying stock in the warehouses will be of
no use by then. Hence in that case, the
chances of risk in this scenario for loosing
revenue is higher.
taste and preferences of the
customers belonging to
different area (Leidner and
et.al., Thomson Reuters Global
Resources ULC, 2016).
Opportunity
Managing risk act as an opportunity where the company is able to make better choices and avoid the risk to minimum possible level. In
such cases, enterprise risk management acts as an opportunity where company can focus upon rather core aspect of the business rather than
spending time on managing the uncertainties that crop up in the business.
CONCLUSION
Based on the above report, it can be concluded that, risk is an important aspect that is to be judged by the organization before involving
in any type of new business. Moreover, its assessment is also necessary in making the organization a successful one. Marks and Spencer being a
big retailing brand has been able to expand itself at a global platform. However, there are various risks that have been identified that can be faced
by the organization while performing its function. These risks are, Rules, policies and procedures being introduced by the government of UK,
Lack of financial supply from the market, Fluctuations in exchange rates and Changes in the market trend. Appropriate risk mitiogation
strategies can help in reducing the impact of risk to the minimum.

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