Tesco PLC: A Report on Risk Evaluation and Decision Strategies

This report analyzes risk evaluation and decision-making within a business context, focusing on Tesco PLC as a case study. It defines risk, differentiates it from uncertainty, and explores the origins and nature of risk, classifying them into compliance, hazard, control, and opportunity risks. The report also outlines a risk management plan that includes control measures, corrective actions, and record-keeping frequencies. Ultimately, it emphasizes the importance of managing identified risks for effective business functioning, highlighting legal and economic implications. Desklib provides a platform to access similar documents and study resources.

Evaluating Risk and
Decisions

CONTENTS
1.0 INTRODUCTION................................................................................................................1
1.1 Background of the company........................................................................................1
2.0 LITERATURE REVIEW................................................................................................1
2.1 Definition of Risk.............................................................................................................1
2.2 Difference between Risk and Uncertainty........................................................................2
2.3 Origins and the Nature of Risk.........................................................................................3
2.5 Classification of Risks......................................................................................................3
3.0 RISK MANAGEMENT PLAN...........................................................................................4
3.1 Control measures..............................................................................................................5
3.2 Corrective actions.............................................................................................................5
3.3 Record Keeping and Review Frequencies........................................................................6
4.0 CONCLUSION & SUMMARY..........................................................................................7
REFERENCES...........................................................................................................................8

1.0 INTRODUCTION
The main aim of the current research report is to analyse the concept, elements and
occurrence of risk within a business and a societal setting. For this purpose, Tesco has been
taken into consideration which is one of the leading supermarket retailers of UK. The report
will discuss the acknowledge economic and legal implications of risk, classification of risks
and will prepare a risk management plan which determines the potential hazards, their
sources and events.
1.1 Background of the company
Talking in relation with Tesco PLC (Tesco), it is a retail company based in UK. The
Company is being involved into the business of retailing as well as its associated activities
includes Retail and Retail banking and insurance services. The retail industry in which the
company operates is very competitive and dynamic in nature as there are different
competitors such as Morrisons, ASDA, Sainsbury etc. who are operating in the same market.
The main target customers of the company are the middle-income group along with the
young children. Nevertheless, the company is also targeting the group who more concerned
in regards with the quality (Annual Report, 2017). Tesco operates in the social environment
where large population is mainly comprised of elderly people. Further, most of the population
in UK are becoming health conscious and thus, there approach in respect with the food is
changing continuously. Moreover, because of the assortment of social changes, trends have
indicated that the clients in UK have moved towards the one stop and bulk shopping. The
language being spoken in UK mainly is English. In addition to this, the culture of the
societies in UK is being influenced by Christian religious.
2.0 LITERATURE REVIEW
Introduction
The present study will be based on risk and how it occurs in relation to legal
implications and economic context. Due to risk, the company can face many issues and
challenges which needs to be taken into consideration and must use effective tool to deal with
such risk.
2.1 Definition of Risk
In today's business world, risk implies future uncertainty about deviation from
expected results (Brillinger and et.al., 2020). As there are many types of risk associated with
business it is essential for company to know about how risk will impact the business
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operations. In business context, risk originate from various types of situations. In addition to
this, risk measures the uncertainty that an investor of the company is willing to take in order
to realize a gain from an investment. It has been said that due to risk organization can face
many challenges such as lack of performance and failure in monitoring risks and have to
focus more on identifying effective solutions for the problems says Khan and Lidofsky (2019).
So, it is essential for company to manage risk with the help of risk management tool such as
effective communication method. It will help firms to achieve success and make business
decisions for the future progress.
2.2 Difference between Risk and Uncertainty
As we all know that uncertainty and risk are not exactly the same. So, here are some
important differences between these two elements.
Risk Uncertainty
 Basically, it is an event due to which it
has an unfavourable impact on business
operations, cost and performance.
 When the risk is identified by the
company, then the manager can list out
all the possible outcomes.
 Whenever the risk arises, company can
take major steps and actions with help
of risk management.
 Risk can be properly controlled with
the help of effective measures at the
right time.
 By having risk management, the
company can assign probabilities to the
outcomes.
 Uncertainty in the business is all about
lack of certainty about a business-
related event. Businesses do not know
about the probabilities that are
associated with the potential outcomes.
 Basically, when uncertainty arises
businesses face risks that cannot be
easily measured (Khan and Lidofsky,
2019). Hence, due to this, they cannot
able to know about the impact of
outcomes.
 When the uncertainty arises or faced by
the business it may be hard for
companies to predict their performance
due to changing events on regular basis.
 On the contrary side, uncertainty
cannot prepare list of all possible
outcomes.
 While on the other side, due to
uncertainty company cannot able to
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assign probabilities to the outcomes.
 While on the other hand, uncertainty is
defined as beyond control and also it
cannot be measured.
2.3 Origins and the Nature of Risk
In today's business environment, people feel that risk expose to danger and create major
issues which create negative impact on the performance. As per pascal, when company does
not make proper decision then it creates risk.
 When the risk arises, business cannot avoid it and needs to take important decisions.
 Risk is totally depending on the nature of business and varies with the company's size
because if the company is big and operating at global level then they need to take
actions such as risk management and effective leadership.
There are various types of risks such as opportunity risks, hazard risks, compliance risks and
control risks.
 When the opportunity risk arises, it would have a positive impact on the achievement
of business-related project objectives (Basile and Girardi, 2018). With this risk, the
business can easily eliminate the uncertainty by grasping effective opportunities such
as expansion of business, creating positive environment at workplace etc. while on the
other side, compliance risk is all about threat due to firm's financial and code of
conduct.
 Hazard risks- these types of risks occur from difficult situations in the workplace such
as physical harm caused by using machinery or any equipment and caused due to high
level of noise any natural calamities.
2.5 Classification of Risks
2.5.1 Compliance Risks
In the business context, it is essential for the company like Tesco plc need to comply
with the laws related to labour and their safety (Raheem and Adrees, 2021). If the firm
management does not comply with the labour law, then they have to pay fine and some
penalty for £500 minimum and maximum of £20,000. In some of the cases, the company may
be forced to close the business. These legal implications can be seen very rarely hence
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likelihood of such an occurrence of compliance risks might be low as compared to hazard
risks.
2.5.2 Hazard Risk
As we all know that the impact of hazard risks is very high because it can burn down
the entire workplace. If Tesco plc, does not able to deal with hazard risk like fire then it can
impact its cost-effectiveness. Due to risk of fire or any natural disaster floods, earthquake or
floods the company can face high impact. It has been found that probability of covid-19
pandemic is about 2% in year which has impacted business (Sharma and et.al., 2020).
2.5.3 Control risks
Speaking in volume in relation with the control risk being faced by Tesco, it is the
chance of a material misstatement in a financial statement of the store. This is due to the fact
that the store does not have any adequate internal controls for mitigating a specific risk or the
internal controls in place is malfunctioned. Additionally, since Tesco is a grocery store, they
come across with assortment of challenges in keeping their inventory safeguarded and
accurate financial reporting (Risk Management in Tesco plc, n.d). Due to the theft of
inventory by the workers and clients leads to lost of profit for the company and higher prices
for the clients who are honest. Other than this, inaccurate financial reporting in the store also
leads in poor decision making which impacts the brand image of the firm that can further
result in loss of profit.
2.5.4 Opportunity risks
Opportunity costs related to Tesco deliberately involves the commercial or the
marketplace risks for attaining a positive return. There are different opportunity risks that the
company has taken such as they have initiated the new venture such as Family restaurants,
insurance and financial services with a probability of 30 percent failure rate. The influence of
such kind of is also quite high since the firm might lose a good amount of profit.
Conclusion
Thus, from the above evaluation it can be attributed that the company is being
exposed to different types of risks which have legal as well as economic implications. All
these identified risks, needs to be managed for effective functioning.
3.0 RISK MANAGEMENT PLAN
Introduction
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It is very important to mitigate the risks being identified through development of risk
management plan which involves different steps such as controlling, taking corrective actions
and recording and reviewing. Explanation of all these steps is being done below:
3.1 Control measures
Control measures are being refereed as an important step in the risk management plan
that helps in preventing the accident or injury in the workplace. Tesco has considered the
control measures as one of the broader parts of the health and safety plans which offers a
method to determine, control along with diminish the different types of risks which are
present in the workplace. There are different potential hazardous sources of types of risks
being identified above (Nieuwenhuyzen, Niemann and Theuns, 2018). In case of the
Hazardous risks, the employees in the supermarket are being exposed to irregular shift work,
demanding clients, lifting and moving objects, fire, sustained awkward positions and working
alone. In this regard, different health and safety policies are being established by Tesco which
needs to be adhered by each and every employee. For example, there are different provisions
in the context of safe work practices, PPE, safety rules, health and safety, emergency
preparedness, fire safety engineering and so forth in line with the rules and regulations being
established in the Occupational Safety and Health and The Health and Safety at Work etc Act
1974. Furthermore, in dealing with the fire, fire safety engineering is provided by specialists
who are graduated or a Fellow of the Institution of Fire Engineers (IFE).
On the other hand, in case of compliance risk, the possible sources include failure in
some of the equipment, non-maintenance of store, selling of prohibited items, poor employee
hygiene, food safety and consumer data risks. In this regard, the company follows all the
related laws such as The National Minimum Wage and Living Wage, The Equality Act 2010,
the Groceries Code Adjudicator Act, Sale of Goods Act and so forth. Other than this, there is
a department in Tesco that also takes compliance, health and safety into account that is
“Group People Safety Department” (Delerue and Simon, 2019). Furthermore, for the
effective management of the control risk, Tesco has a separate department of quality
management and also consider Total Quality Management (TQM) for making sure that the
quality of their products is in accordance with the standards being established. Moreover, for
dealing with the opportunity risks, Tesco has also established an efficient risk assessment
plan. They also make use of Steering Wheel tool for driving the performance and supporting
the workers in navigating their future. All these control measures are being executed by the
operational department of Tesco.
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3.2 Corrective actions
Corrective actions are being referred as the improvements or the enhancement in the
processes or system of the firm being undertaken for eliminating the causes of the conditions
which are objectionable or unwanted. The human resource department of the supermarket
review the existing labour laws such as The National Minimum Wage and Living Wage, The
Equality Act 2010, Employment Relations Act 1999, Employment Rights Act 1996 etc. on a
weekly basis for making sure adherence and compliance with the prescribed laws of UK. In
addition to this, for the purpose of making improvement in the fire escape route relevant
renovation is also being planned by the company (Hillson, 2019). In respect with enhancing
the quality of the products and services, novel technologies are being installed by the
company such as digital in-store initiatives which involves scan as you shop, self-check-out
stations, specialized cameras, electronic shelf-edge labels etc. All these technologies help the
company in making sure that the quality of their products is very efficient and are improved
with greater efficiency. Supporting to this, Tesco is also planning to leverage their
smartphone technology for digitally innovating the in-store customer experience through
equipping clients with personalization as well as knowledge in store. Other than this, for the
purpose of hedging the risk in relation with the opportunity risks, Tesco has implemented
different hedging instruments like contract for difference (CFD), options and future contracts
for reducing the limit or risk in some of the asset class such as shares, cash, commodities,
indices and forex (Chapman, 2016).
Moving further, the company has also established an effective risk management
process for determining, assessing as well as monitoring the principles risks that they are
facing in the business. As a corrective measures, they carry our robust as well as systematic
review of different types of risks being identified which seriously impact the performance of
the group, their capability of delivering against their priorities, their future prospects and
brand image. In addition to this, the review involves those risks that they believe will be
going to threaten the business model of the group, liquidity as well as solvency. Moreover,
there is also facilitation of regular meetings and discussions with the business leaders in
regards with management of risk at Tesco by group audit and advisories.
3.3 Record Keeping and Review Frequencies
Records are being considered vital for the risk management. this is because of the fact
that records can be utilized for proving the compliance, avoiding of fees and penalties and
informing the business decision. For illustration, if there is a lack of financial records and
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details in regards with the breach of labour laws than this might result into penalties as well
as fines. The human resource department of the company is responsible for keeping the
record register and all the records in relation with the implications in which the firm has
breached the labour law. It is quite important to review them in small interval of time such as
semi-annual basis. The liability claims are more easily defended when there is a proof for
supporting a case. Most of time records of any risk assessments being made along with
maintenance or other checks being performed are being utilized for showing the steps being
taken for preventing an incident (Evans, 2020). Other than this, the human resource
department of Tesco also maintains the records of quality management practice and processes
being adopted by the department and reviews the same monthly to ensure that there is not
errors and flaws.
Underpinning the discussion further, the number of times and the consequences in
which the Tesco has experienced a fire and a pandemic are being recorded by the operation
department of the supermarket effectively. They have maintained a risk register for recording
all the information pertaining to every type of risk being identified and are also being
reviewed and monitored on a semi-annually basis. Furthermore, the key risk register is being
maintained by the internal audit which is updated on a regular basis. Seeking help from the
register, the owners and the responses can be easily determined. Other than this, there is an
annual board meeting which is dedicated for reviewing the strategic risks. Moreover, audit
committee is also formed in Tesco which reviews the internal control system, quality
standards, quality practices annually. In case, the organization has breached any quality
standards then it is also recorded by the quality control department and risk register. Further,
they are being reviewed by their respective department on weekly basis (Adamchuk and
et.al., 2013). Additionally, there are separate compliance committees and financial
committees which helps in setting the treasury limits. The frequency at which the firms has
failed in capturing the potential gains of the opportunity risks are also being recorded and
embraced. Losses are recorded effectively by the senior management and are being reviewed
on the quarterly basis.
4.0 CONCLUSION & SUMMARY
Thus, from the above analysis, it can be concluded that evaluation of risk and its
management plays a very crucial role in each and every organization. it is quite crucial for the
firm to identify, assess, monitor and control the risk related to health, safety, compliance,
control and opportunity. Further, it has also been originated from the study that evaluation of
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the risk is quite crucial because it helps in empowering the organization with the essential
tools so that it can be sufficiently determined and delt with probable risks.
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REFERENCES
Books and journals
Adamchuk, N.G., Asabina, S.N., Klochenko, L.N., Sakharov, V.S., Turbina, K.E., Tsvetkova,
L.I. and Yuldashev, R.T., 2013. Theory and practice of insurance. Study guide
Basile, R. and Girardi, A., 2018. Uncertainty and business cycle: a review of the literature
and some evidence from the Spanish economy. Studies of Applied Economics. 36(1).
pp.235-250.
Brillinger, A. S. and et.al., 2020. Business model risk and uncertainty factors: Toward
building and maintaining profitable and sustainable business models. Business
Horizons. 63(1). pp.121-130.
Chapman, R.J., 2016. Simple Tools and Techniques for Enterprise Risk Management.
Chichester: Wiley.
Delerue, H. and Simon, E., 2019. National cultural values and the perceived relational risks in
biotechnology alliance relationships. International Business Review. 18(1). pp.14–25.
Evans, O., 2020. Socio-economic impacts of novel coronavirus: The policy solutions.
BizEcons Quarterly, Strides Educational Foundation. 7. pp.3–12.
Hillson, D.A., 2019. Managing Risk in Projects. Farnham: Gower.
Khan, A. and Lidofsky, B., 2019, February. Growth, uncertainty and business cycles in an
overlapping generations economy. In 2019 Meeting Papers (No. 1459). Society for
Economic Dynamics.
Nieuwenhuyzen, M., Niemann, W. and Theuns, K., 2018. Supply chain risk management
strategies: A case study in the South African grocery retail industry. 15. pp.784-822.
Sharma, P. and et.al., 2020. Managing uncertainty during a global pandemic: An international
business perspective. Journal of business research. 116. pp.188-192.
Online references
Annual Report. 2017. [Online]. Available through:
<https://www.annualreports.com/HostedData/AnnualReportArchive/t/LSE_TSCO_201
7.pdf >. [Accessed on 10thJune 2022].
Risk Management in Tesco plc. n.d. [Online]. Available through:
<https://irmforum.files.wordpress.com/2011/04/margaret-woods.pdf>. [Accessed on
10thJune 2022].
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