RTMG Wk8

1 Running head: WALMART RISK MANAGEMENT

Walmart Risk Management

March 29, 2020

RTMG202

Professor Roger Escayg

American Military University

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2 WALMART RISK MANAGEMENT

This Walmart Superstore and its Risk Management team has the responsibility of

adopting and applying a program to ensure employees, customers, inventory, and investments are

safe and secure at all times. This office of Risk Management solicits assets and liability issues,

processes insurance claims and coverage on risk involved issues. This program is completed by

recognizing and acknowledging any risk that could potentially cause harm or loss to the

company’s employees, customers, finances, and resources. Once recognized this office will

determine the most efficient and affective way to handle the risk. This may be done by

avoidance, mitigation or deference.

Walmart created a five-step program to better assets and handle risk management

(William, 2003). This Walmart will be operating on that same five-step program. This program is

based around five specific questions. These questions are start with, what are the risk? What will

be done about the risk? How will Walmart gauge the positive or negative impact that is being

done to the risk? How will Walmart demonstrate shareholder value? Step one of this five step

process is risk identification. There is never just one single risk within the Superstore. Every

risk that is identified has to be handled in the most appropriate way. Keeping tracking of all the

risk within the Superstore is done by using a graph with an XY-axis. The X-axis of this graph

represents the probability that these risks may change from being possible to actually happening

(William, 2003). The Y-axis of this graph is for tracking the impact the risk may have on the

company. The higher the probability and the high of impact the risk could have then the more

important it is to ensure the risk is handled as soon as possible. If the risk is a lower one the XY-

axis, then it is a minimalist risk that doesn’t need immediate attention. Step two of this five-step

process is risk mitigation. Risk mitigation is the process in which this Walmart’s Risk

Management office will brainstorm ideas to less the effects of any giving risk. If there is a risk of

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3 WALMART RISK MANAGEMENT

theft within this Walmart one of the mitigations may be to have a manager out of uniform so

many hours a days to patrol the store for theft. The third step in this process is action planning.

Once a risk is identified, and then the risk is temporarily stopped by mitigations, then it is time to

figure out actions in which to stop the risk all together (William, 2003). The Risk Management

team will meet to discuss who and what will be done at what time in order to terminate the risk.

The fourth step in this process is to use the performance metrics. The performance metrics is to

show how the mitigation and/or termination of the risk is affecting the business. Is the business

being affected positively or negatively? The performance metrics is to measure the results and

not the actions taken. The metrics must also show where the risk is currently in relationship to

business performance and where the end goal is. The last thing that should be shown on the

metrics is the performance over time, not just the performance at any specific time but the

performance over any giving time. The fifth and final step is shareholder value and their return in

investment (William, 2003). The main goal of this step is to ensure that the entire process was a

success or if it was a failure. If the process was a success, then the sales and business should

have risen if it was a failure then sales and business would drop. If the process was a success,

then the shareholders’ investment will go up since business is improving. If the whole process

was a failure then the shareholders’ investment into Walmart will drop, this will mean the

shareholders are losing some of their investment.

Theft is a large issue in any retail store. It is a large risk within this Walmart. Walmart as

a whole loses almost three billion a year due to theft. That is one percent of Walmart’s overall

profit in a year (Matthews, 2015). Theft is a pure risk and can be mitigated with reduction,

transference, and catching theft in the act. To reduce the risk of theft this Walmart has a video

surveillance system that covers the entire store. These cameras do not cover places such as

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4 WALMART RISK MANAGEMENT

changing rooms and bathrooms. This system helps catch someone stealing in the act but it does

not always catch them. The employees of this Walmart always have to be vigilant and watch for

anyone stealing. Never underestimate someone capability to steal, anyone could be a theft don’t

think someone will not steal just because of how they act, personal knowledge of a person, or

age of a person. Employees could also be caught stealing if you gain knowledge or witness an

employee stealing you are responsible for reporting them immediately.

Security as a whole is a risk at this Walmart and every Walmart across the world. Theft is

not the only security concern. Security is also a pure risk that can be mitigated by guards,

cameras, employees, and even other customers. Security has more to do then dealing with wild

customers who are making a mess in the store. Security has to be done by every employee in

order to keep the customers as safe as possible. This includes from theft, active shooters,

uncontrollable customers and any threats they may be made to this Walmart. It takes all 300

employees to ensure the safety of each other and the customers. The physical building and

property must also be protected and looked after from vandalism.

High turnover rate is always a risk for retail stores. It can be a high turnover in employees

and in inventory. High turnover is a type of enterprise risk. High turnover rates in employees

can come from several different reason. One of them can be a failure to adapt to the needs and

requirement of the store. It can also come from poor management. If an employee is having a

hard time adjusting to the needs of the store there are ways to help that employee that do not

include firing them. If it is needed, then the management team can have the employee complete

additional training. This can teach the employee how to better handle and complete the job. If an

employee is not satisfied with the level of management, they are receiving then they can submit

an official complaint to receive additionally management or better management if the issue is

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5 WALMART RISK MANAGEMENT

found to be accurate and the manager is at fault. High turnover can affect the company and also

other employees. One of the largest risk in a retail store is incompetent employees. Incompetent

employees can be seen as an enterprise risk. This can be employees who do not have the

confidence, or the skill set to speak to random people every day, or employees who chose not to

learn how the store is run and how it operates. This is when managers have to be very detailed

and a good judge of work ability and attitude when hiring a new employee. The managers of this

Walmart have to check refences and ask questions during an interview to see if the induvial

applying for a job will make a good employee for the company. An incompetent employee can

hinder day to day operations and also have a negative impact on the relationship with customers.

Having a lack of communication from management to employee can hinder an employees work

ethic and make them not feel secure in their duties, it is very important management stay open

and honest with employees.

Inventory is the backbone of this Walmart; without it we would fail as a retail store.

Inventory is one of the most important aspects of this store. A lack of inventory and too much

inventory are both risk in a retail business like Walmart. Both of these risks would be considered

a non-diversifiable risk. Inventory must always be counted correctly and ordered correctly. With

too much inventory the store will lose money by having to store the leftover or dead inventory.

With too little inventory the store will miss opportunities to make a profit and that in return will

affect the profit margins for the store. Inventory has to be counted and ordered correctly this is

why Walmart uses the bar code system. Every time an item is scanned into the system by the

barcode and scanned out of the system it will reflect in the online system. This online system is

open to hacks. This is why this Walmart cannot have inadequate software. If a hacker was to

break into this Walmart’s barcode system or the wifi system it could cause major damage to the

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6 WALMART RISK MANAGEMENT

store, its employees, and its customers. Hackers are a risk to a retail store as large as this

Walmart Supercenter, hacking can be a pure risk and an enterprise risk. If the stores wifi was to

be hacked the person or people who have done the hacking could steal people identity, there

personal information, banking information, and much more. This makes it of the most

importunacy for Walmart to have top of the line cyber security for its wireless internet and its

barcode system.

Injury is also a risk in any company. This Walmart has 300 employees and thousands of

customers every week. Safety is one of this stores top concerns for both employees and

customers. This risk is classified as an enterprise risk. This Walmart dose have workers

compensation insurance coverage and also general liability insurance. This insurance covers

the company as a whole if employees are customers are injured while on the job or while on the

property of this Walmart. It protects the company from lawsuits and it also protect the employees

incase they are injured on the job. This is what is used after the fact if an induvial is injured.

However, this is why employees have annual training to provide safety expectations and training

on how to stay safe while on the job. Natural disasters are also an issue of risk for a company

like this Walmart. It can cause risk to the customers and employees and it can damage the

building and property. This is considered a project risk. This Walmart has contingence plan in

case a natural disaster hits. This is another reason employees must attend their annual training to

ensure they know these plans and can accurately put them into place if it is pessary.

Relationships in a retail business are essential to be profitable. This covers relationships

with customers, suppliers, co-workers, managers, and everyone and every other company

needed to make the store profitable. Relationships are also a risk in retail because a failed

relationship could mean a major loss or a complete loss this is why it is considered a pure risk.

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7 WALMART RISK MANAGEMENT

Customer relationship are a necessity, having a good and well-rounded customer foundation is

one way to ensure a retail store has customers who continually shop at this store and they repeat

shopping here. Having a good relationship with a supplier is also needed for continual profit

margins. Have a good relationship with the stores supplier helps ensure we get our inventory on

time and the supplier will be helpful to the store if the company has a good working relationship

with them. These are evolving relationships they will continue to evolve through the business

and they will grow and if they grow into excellent relationships that mean profit will continue

and inventory will not be an issue to sale or receive.

Risk will always be present in a retail store like this Walmart as it will be in any other

business. Risk management and risk control must be handled in the most effective and affective

way possible. Avoidance is staying away from the issues that are causing a risk, loss prevention

is accepting that there is a risk but minimizing the effect the risk has on the company, loss

reduction is accepting the risk but attempting to reduce the effect of the risk of completely

terminate the risk. Risk management and risk control has a massive effective on the company

and on this Walmart, it is the responsibility of all 300 employees to handle and mitigate these

risk as best as possible.

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8 WALMART RISK MANAGEMENT

Sources

Atkinson, W. (n.d.). Enterprise Risk Management at Wal-Mart. Retrieved from https://fliphtml5.com/exnv/kbxc/basic

Dionne, G. (2013). Risk management: History, definition, and critique. Risk Management and Insurance Review, 16(2), 147-166. Retrieved from https://search-proquest- com.ezproxy1.apus.edu/docview/1449840499?accountid=8289

Matthews, C. (2015, June 10). Here's How Much Walmart Loses Every Year to Theft. Retrieved from https://fortune.com/2015/06/05/walmart-theft/

Matthews, C. (2015, June 10). Here's How Much Walmart Loses Every Year to Theft. Retrieved from https://fortune.com/2015/06/05/walmart-theft/

Kenton, W. (2020, January 29). Understanding Risk Control. Retrieved from https://www.investopedia.com/terms/r/risk-control.asp

What Is General Liability Insurance? (n.d.). Retrieved from https://www.nationwide.com/lc/resources/small-business/articles/what-is-general- liability-insurance

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