Enterprise Risk Management Report: Analyzing Tesco's Practices

This report provides a comprehensive analysis of Tesco's enterprise risk management (ERM) practices. It begins with an introduction to ERM, emphasizing its role in strategic business operations and the minimization of external risks. The report then delves into Tesco's primary aim of managing risks to leverage opportunities for expansion and profitability. A significant portion of the report focuses on risk thresholds, explaining how they are used to measure and quantify the impact of risks, using the risk probability and impact matrix. The report assesses Tesco's risk register, detailing specific risks such as customer trends and competition, along with existing controls and mitigation actions. The analysis provides insights into how Tesco addresses these risks to ensure operational success in the retail market. The report concludes with an overview of the key findings and their implications for Tesco's future business strategies, emphasizing the importance of proactive risk management in a dynamic market environment.

Enterprise Risk Management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Aim of the Business Organisation...............................................................................................3
Risk Threshold.............................................................................................................................3
Risk Register................................................................................................................................6
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Enterprise risk management is the strategic business process through which a business
organisation can organise, plan, coordinate and control the various activities of the business with
the intention to decrease or minimise the effects of external risks on the productivity,
performance, efficiency and profitability of the business organisation in the consumer markets
(Sweeting, 2017). This report assesses the enterprise risk management efforts of the business
organisation Tesco, a multinational retail business that specialises in the general merchandise
and groceries. Tesco was founded in 1919, an astonishing 101 years ago, and operates from its
headquarters in Hertfordshire, England. Having operated in the retail sectors for such a long time
has presented Tesco with ample opportunities to grow and expand their business operations into
international markets. Currently, Tesco operates around 6,800 in 7 different countries across
Europe and Asia and has become the market leader in terms of its total market share in the
United Kingdoms. For conducting its operations, Tesco employs around 450,000 distinct
individuals in various positions, helping generate great employment opportunities as well.
MAIN BODY
Aim of the Business Organisation
The primary aim of Tesco is to effectively manage the risks that are present in the
external retail industries, with the intention to make use of the various opportunities that risks
present to expand and increase their operations, profitability and to decrease the negative impact
of the threats, on their operational performance, efficiency, productivity, profitability, market
share and customer base in the retail markets.
Risk Threshold
Risks to a business organisation represent the numerous uncertainties in the consumer
markets and operating industries which can have both negative and positive impact on the
operational performance, efficiency, productivity and profitability of a business organisation
such as Tesco (Florio and Leoni, 2017). One of the many attributes that can influence the risks
along with the management strategies that business organisations can take is the risk threshold.
Risk threshold is dedicated tool used by project managers and risk managers with the intention to

measuring the level of uncertainty and the degree of impact which an external risk can have on
the organisation’s and its stakeholder’s interests. Risk threshold sets a dedicated value to risks
that a business organisation such as Tesco and its stakeholder’s are willing to accept. Risk
threshold is the next step in the risk tolerance approach as it quantifies the risk tolerance
attributes of a business organisation and sets a dedicated numeric value to it giving the business a
precise figure as to the likelihood of occurrence and its operational impact on the productivity
and profitability of a business organisation such as Tesco. Acceptable risk threshold is the
amount of external risks that a business organisation along with its stakeholders are willing to
take in order to conduct their operations in the consumer markets. As the various stakeholders of
a business organisation include diverse clients who have varying interests such as consumers,
employees, management, ownership, sponsors etc., it is imperative for any business organisation
to have a set consensus on the risk threshold of the business so that it can become the target for
the business to analyse and evaluate their future risks (Beasley and et.al., 2019). For a business to
expand and grow its operations, it has to accept a minimum risk threshold within its risk
tolerance strategy so that it can avail the opportunities in the markets to gain potential additional
rewards.
To assess the risk threshold of a business organisation such as Tesco, an impact
probability matrix is created which assigns quantifiable numeric values to the probability of risk
occurrence and the degree of impact it can have on the operations and functions of a business
organisation like Tesco (Oliva, 2016). After numeric value to both these attributes are assigned
they can be multiplied to know the risk rating which tells the business’s management whether the
given risk is within their risk tolerance strategy or not. The attributes of a probability impact
matric are as follows:
Risk Likelihood: This metric represents the likelihood of a potential risk occurring in a business
environment in which a business operates in. This is quantified using qualitative terms such as
low, moderate or high and can also be quantified using numerical values such as 1-5, that denote
the likelihood of a given risk occurring in the business, with higher values denoting increased
chance for risk occurrence, and lower values on the scale denoting rare chance of risk occurrence
(Brustbauer, 2016). For a normal risk likelihood scale 5 represents that risk occurrence is
frequent, 4 represents that risk occurrence is likely to occur, 3 represents that risk occurrence is

possible, 2 represents that risk occurrence is unlikely and 1 represents that it is highly rare for the
respective risk to occur.
Risk Impact: This metric represents to extent to which a given risk can positively or negatively
impact the operations, productivity and profitability of a business organisation in the consumer
markets. Though the risk can have an impact on various operational attributes of a business
organisation like Tesco that include its finance, reputation, brand, legal regulations, employee
health, security, safety, customer retention, loyalty, environmental impact etc., generally risk
impact rating considers a combination of all of these to assign a numeric impact on the risk, with
a risk even impacting one of these attributes on a high level (5), then the entire risk impact rating
for that risk becomes 5 for the business organisation (Ewers, 2017). Same as with risk
likelihood, higher values on the risk impact scale denote increased impact of the risk on the
operations of a business organisation such as Tesco. 5 rating denotes that the risk will have
severe impact, 4 rating represents that a risk will have significant impact, 3 denotes that a given
risk will have moderate impact, 2 denotes that a given risk will have minor impact and 1 denotes
that a given risk shall have minimal impact on the operations, productivity and profitabi9lity of a
business organisation such as Tesco.
Figure 1: Risk Probability and Impact Matrix
Risk Rating: Multiplying the two numeric values of risk likelihood and impact ratings provides
risk and project managers with a dedicated risk rating as is shown in the figure above. Risk
ratings from 1-3 fall under minor and can be ignored by a business organisation such as Tesco.

Risk rating ranging from 4-9 carry moderate threat and should not be ignored by the business
organisation. Risk ratings from 10-16 are quite likely to occur and can have significant impact on
the operations, productivity and profitability of the business organisation such as Tesco and thus
have to be addressed for sustained successful operations in the consumer markets (Berry‐Stölzle
and Xu, 2018). While risk ratings ranging from 20-25 are immensely likely to occur and will
have severe impact on the profitability, productivity and operations of business organisations
such as Tesco in the consumer markets. For the sustained successful operations of Tesco in the
retail markets, risk ratings ranging from 10-25 are unacceptable and have to be addressed with
haste.
Risk Register
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Risk Description Existing Controls in Tesco L
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Mitigation Actions for Tesco
1
.
Customer trends and
insight: This is a major
risk to Tesco’s
operations as their
customers are their
primary source of
income and they
cannot hope to ignore
their needs
requirements, insights
Currently Tesco has its
own dedicated department
which looks after its
consumer’s insights, needs,
requirements and trends,
which is called Customer
Insight Management whose
sole purpose is to evaluate
the Tesco customer’s
expectations, behaviours
2 5 10 As this risk poses immense
threat to the operations,
productivity and profitability of
Tesco’s current operations and
functions, Tesco’s
administration must be
immensely vigilant in their
efforts to address it in an
effective and efficient manner,
though their current controls are

and trends. Effective
evaluation of consumer
insight, needs,
requirements and
trends will provide
Tesco with
opportunities to greatly
increase their existing
customer base, market
share, customer loyalty
and satisfaction
metrics and in the
process increase their
operational
productivity and
profitability in the
retail markets and
provide them with a
competitive edge
against their
competitors in the
retail industries
(Callahan, and Soileau,
2017). Contrastingly,
ignoring their
customer’s needs,
requirements, insights
and trends will pose a
potential threat to the
operations of Tesco as
their customer base’s
satisfaction and loyalty
metrics along with
their customer base
and experiences. This
dedicated department
effectively monitors and
tracks all the operations of
Tesco and also of their
competitors with the
intention to assess the level
of customer satisfaction
and loyalty of their
customers against that of
their competitors in the
retail industries along with
their shopping experience.
In order to effectively
service their existing
customers Tesco makes use
of the principle of
economies of scale with the
intention to drive the prices
of their products and goods
low so that they can be sold
at competitive rates, thus
increasing their total
customer base. Tesco also
places great focus and
attention on the quality of
their goods and products
sold to consumers in an
effort to increase their
customer satisfaction and
loyalty metrics (Lechner
and Gatzert, 2018). In
addition, Tesco also has its
own dedicated customer
satisfactory for this. As the
likelihood of this risk occurring
is less, but its impact on Tesco’s
productivity, profitability,
customer base and market share
is immense, Tesco’s
management and administration
needs to improve their current
measures by also taking their
customer’s feedback to gain
insights into their requirements,
needs and insights. Tesco’s
customer service department
can also aid in this by asking all
contacting customer for their
feedback, which they can record
for later analysis (Fraser and
Simkins, 2016). Then Tesco’s
management needs to
thoroughly analyse these
feedbacks so that further
insights into customer trends,
needs and requirements can be
attained by them. In addition,
Tesco can also hire external
economists and analysts to
perform market and customer
analysis for them which would
highlight the customer trends
and unmet requirements of
customers in the retail
industries. Doing this will
effectively increase Tesco’s
ability to effectively deal with

and market share
decrease which will
directly result in
reduced productivity
and profitability for
Tesco in the retail
markets.
service department which
provides sound services to
its customers with the
intention to further increase
their customer’s loyalty and
satisfaction metrics in the
market.
this major threat and help them
continue their successful
operations in the retail
industries for the foreseeable
future.
2 Competition in Retail
Industries: The intense
competition amongst
various businesses
within the retail
industries also poses as
a major risk to the
operations and
functions of Tesco.
Tesco’s management
needs to look out for
the industry trends and
competition’s
strategies in order to
continue to
successfully operate
within the retail
markets of UK. The
intense competition in
the retail industries can
be an opportunity for
Tesco to expand its
customer base and
market share if it is
able to gain a
competitive edge in the
retail markets against
Tesco has implemented
several methods in its
business strategies and
operations to ward off the
threats that the intense
competition within the
retail industries can have
on their sustained
successful operations and
functions. The method
Tesco has implemented in
its operations and functions
with the intention to try and
gain a competitive
advantage against their
competitors in the retail
industries is to make use of
the principle of economies
of scale to make use of
their large scale
manufacturing network and
operations to drive the end
costs and prices of their
goods, products low, so
that they can be sold to the
consumers at competitive
prices, providing them with
4 5 20 As the competition in the retail
industries poses such a severe
risk to the operations and
functions of Tesco in the retail
markets, its administration is
advised to manage this risk with
utmost vigilance, care and effort
so that Tesco can continue to
operate successfully in the retail
markets. Though the control
measures Tesco’s management
have implemented to gain a
competitive advantage in the
intensely fierce competition of
the retail industries is adequate,
Tesco has further room to
improve their competitive
strategies so that a bigger
competitive advantage can be
gained by them which will
result in further increase of their
productivity, profitability,
market share and customer base
in the retail markets. Though
Tesco does make use of the
principle of economies of scale
to drive low the costs and prices

its competitors which
would effectively
allow it so suck the
consumers loyal to
their competitors and
make them switch to
using Tesco as their
retail provider (Cohen,
Krishnamoorthy and
Wright, 2017). Gaining
a competitive
advantage would
increase Tesco’s
productivity,
profitability, customer
base and market share
while also decreasing
its competitor’s market
share and customer
base thus further
improving Tesco’s
position in the retail
markets of UK.
Contrastingly, if Tesco
fails to gain a
competitive advantage
which their
competitors are able to
gain through their
business strategies,
they can steal Tesco’s
customer base and
market share to
increase their own
a competitive edge against
their competitors. Using the
principle of economies of
scale allows Tesco to bulk
manufacture their products
and decrease the price
charged of each individual
product. To further gain a
competitive advantage
against their competitors in
the retail markets, Tesco
has tried to significantly
improve its marketing
operations to make use of
both traditional and digital
channels of marketing so
that a very large number of
consumers can be
advertised and promoted to
using the various marketing
tools that these channels
provide to Tesco’s
marketers (Bromiley, Rau
and McShane, 2016). Using
both channels of marketing
effectively allows Tesco to
advertise and promote their
goods and products to a
large section of the public
and also allows for Tesco
to promote and advertise to
their target consumers
through the use of social
media platforms, online
of their goods and products
available to consumers in the
retail markets, Tesco still has
ample room to incorporate
methods which will further
drive low the cost of their
products in the consumer
markets. The biggest change
Tesco can make to further
decrease their prices of their
consumer markets which will
inevitably provide it with a
competitive edge against their
competitors is to invest into
their operational manufacturing
equipment. Investment into
their manufacturing equipment
with the intention to purchasing
new equipment which function
with increase performance and
efficiency than the equipment
currently available will allow
Tesco to produce higher number
of goods with increased
efficiency in the same period of
time increasing their
productivity. New
manufacturing equipment is
also able to perform the same
functions as Tesco’s installed
equipment at considerable less
energy costs increasing their
profitability as well. Though
investment into new

productivity, market
share and profitability
in the retail markets,
effectively reducing
Tesco’s productivity,
customer base, market
share and profitability.
This is why Tesco’s
administration needs to
be extra vigilant of the
risk that intense
competition in the
retail industries
provides to their
operations and
functions.
websites etc., further
increasing the range of
Tesco’s marketing efforts
and providing Tesco with a
competitive advantage
against their competitors in
the retail markets. Further
Tesco has a dedicated
department in its structure
designed to provide their
customers with effective
service both pre and post
purchasing products from
Tesco in an attempt to
increase their customer’s
loyalty and satisfactions
metrics which can also
provide it with a
competitive edge against its
competitors in the retail
markets.
manufacturing equipment can
be costly for Tesco, it will
surely make up for the losses in
long term based on the
increased operational
performance, efficiency of the
new equipment in addition to
the considerable less energy
costs related to their operations.
In addition to this Tesco can
also make use of digital
software such as Google
Analytics and Hootsuite etc.,
which record and measure the
performance of Tesco’s
marketing endeavours for their
digital promotion efforts
(Malik, Zaman and Buckby,
2020). Analysing this data can
effectively help Tesco’s
marketers further improve their
marketing strategies and efforts
towards promoting and
advertising Tesco products to
the general public in better
ways, further increasing the
operational performance
efficiency productivity and
profitability of Tesco’s
marketing operations and
providing it with a sustainable
competitive advantage in the
retail markets against its
competitors in the industries.

Finally, as Tesco is already such
a profitable organisation in the
retail industries, it can merge or
acquire one its competitors to
directly absorb their
productivity, profitability,
customer base and market share
into their operations, providing
it with a huge competitive
advantage in the retail
industries. Implementing these
methods into the operations and
functions of Tesco will surely
allow it to gain an increased
competitive advantage against
their competitors allowing it to
increase its operational
productivity, performance,
profitability and increase their
overall market share and
customer base.
3 Internet and Data
Security: The rapid
rise in technology and
widespread adoption of
the internet also
provides Tesco with
huge risks in relation
to the competitive
advantages they offer
and the new threats
they provide to the
existing operations of
Tesco. Rise of the
To make use of the
opportunities that the
internet presents, Tesco
operates its own online
stores through which
consumers can purchase
Tesco goods and products
and have them delivered to
their preferred destinations.
This greatly increases the
productivity, customer
base, market share and
profitability of Tesco’s
4 4 16 As the risks that internet and
data security have on the brand
reputation, productivity and
profitability of Tesco are
significant, Tesco’s
administration is advised to
address them with haste.
Through the methods
implemented by Tesco in
relation to their data security
and privacy are effective, the
incremental rise in the number
of cyber-attacks in the world

internet has made all
businesses in the retail
industries start
switching their
business operations to
also be able to be
conducted online. This
also provides Tesco
with the increased
opportunities to grow
their customer base,
market share,
productivity and
profitability by
servicing client online
through their online
stores (Fletcher and
Stanton, 2019). On the
other hand, recording
operational and
consumer data which
is analysed to further
increase Tesco’s
performance
efficiency, profitability
and customer base
poses as huge threat to
Tesco’s brand image,
reputation, customer
service and loyalty
metrics because if the
data which Tesco no
collects, is breached or
leaked on to external
operations and provides
them with a competitive
advantage. While, to
control the security and
privacy of the operational
and customer data they
recorded through their
online services, from being
leaked to external sources
because of cyber-attacks on
Tesco’s systems and also
due to human errors by
Tesco’s employees, Tesco
has implemented strict
organisational policies in
relation to the operational
and consumer data in
accordance with the GDPR
legal rules implemented by
the UK government
(Lundqvist and
Vilhelmsson, 2018). In
addition, Tesco also
encrypts all their
operational and consumer
data which in the event it is
leaked to external forces,
makes it inaccessible to
them with the intention to
analysing or gaining
information from the
recorded data. To protect
themselves against data
leaks and breaches, Tesco
along with a direct increase in
the sophistication of these
cyber-attacks renders the
control methods implemented
by Tesco inadequate to be able
to repel major cyber-attacks
from external sources. To better
protect their operational and
consumer data and improve
their brand image and
reputation in the retail
industries, Tesco needs to make
use of stricter encrypting
algorithms for their encryption
purposes. Tesco is also advised
to restrict the privileges of its
employees in relation to who
can access, read and write into
their operational and consumer
data, so that their data security
and privacy measures can be
strengthened. Tesco also needs
to consistently update its
firewall with new patches so as
to be able to effectively protect
themselves against external
attacks and viruses
(Soltanizadeh and et.al., 2016).
To further make use of the
opportunities that the internet
provides, Tesco should offer
schedulable delivery options,
various payment options, gifts,
discounts and vouchers to their