Risk Management Planning for Zara

Task 1 (Risk Management) (Written Report)

Executive Summary

A risk management plan is imposed on Zara. Identification of issues is needed. SWOT analysis and PESTEL analysis of Zara is done to identify problems. Current risk management process is also described. Then scope of RMP is given, and five risk factors of Zara are identified related to scope of RMP. The stakeholder analysis is provided. First stakeholders and communication process with specific stakeholders are identified. Then risk of RMP is also given. Tools and technique used for monitoring and review of RMP are also described.

1. Risk Context

1.1 Introduction

This report is based on risk management plan of Zara, Australia. There are several kinds of factors are associated within a business assessment. Every factor of business area has been risk scale for measurement. This concern retail business body is a trendy fashion brand in Spain. Zara was established in 1975. Nowadays, Zara operates in as many as 70 countries, and it also has almost 2360 stores in those countries. Zara got attraction of customers’ unique and effective business structure and their new fashion trends. They launch almost 1000 new designer clothes every year. In this project PESTLE, and SWOT kinds of analysis has been done, though which numerous factors and stakeholders association impact on Zara has been derived. These impacts have some affected on the aspect of risk management as well (Based on zara.com, 2019).

1.2 Current RMP

Current RMP of Zara is based on five conventional methods.

1. First part is identification of risks. In this part, every responsible manager has to uncover number and possibility of risks.
2. Next step is to analyze those risks by determining likelihood and outcome of those risks.
3. Next step is to evaluate the risk by determining magnitudes (Blackburn and Arlett 2013).
4. In this step, HR manager enlists all risks according to their magnitudes and comes up with some kinds of strategy to prevent those risks.
5. Last step is to monitor those risks.

1.3 SWOT Analysis

Zara is flagship brand of Index group. It eight more subsidiaries brands in its belt. Fresh designs and rotation of trends are primary reasons that customers keep coming back for Zara.

Strength	Weaknesses
One of main advantages of Zara is the design ability. It consists of number of designers who understand customer's interest and expectation (Keddie 2013). Their clothes have unique quality and elegant finishing. Zara kept its presence across by expanding their business every year. In 2018, they had 2360 stores across globe. Their business increased further in 2019. They have a remarkable record of average sale of products worth almost 16 billion per year. Another factor of their success is their band value. Forbes ranked band value of Zara at 53 worldwide (Roffey 2015). They also have design advantage as more than 1000 new designs are released every year across globe. Customers tend to try new, and they get attracted to new designer clothing of Zara. With exceptional designs, along with reliable brand value, Zara has achieved success in every country they are operating.	Zara has generalised collection of clothes. Designers of Zara focus on promoting every type of cloth, which is may sounds to be useful (Meltzer 2014). However, customers sometimes become more interested when they get a particular kind of clothes with various designs. Lack of advertising is a significant issue. Zara seeks for cost advantage because they have faith in brand value of company. However, Zara needs to advertise their design to show customers the ongoing trends. Another weakness of Zara is that they are always running low on safety stocks.
Opportunities	Threats
Online shopping has emerged in last five years. Zara can advantage of this platform by making available their clothes on online websites. Zara has to come up with a flagship design (Tan et al. 2018). Many fashion industries use this method. As Zara introduce so many designs every year, there will not face any problem in choosing their flagship design.	Competition level is increasing every day. Companies such as Vero Moda, Mango, and Raymond are also top-rated for their design. These companies also spend money on top models for increasing their brand value which Zara certainly does not. Zara does not smaller display because it only likes to operate through own stores (Zsidisin, Panelli and Upton 2014).

1.4 PESTEL Analysis

Political	●       Through several policies and regulations a political impact has been created on a business organization. In case oif Zara, Australia policies are seems to be favourable. The Australian government is now connected to several organizations, which includes the OECD, World Trade Organization, G20, and Commonwealth of Nations. Running on this trend of development Australia has a wide open retail business development, which is same for Zara as well (businessinsider.com.au, 2019).
Economic	●        Zara has high brand values of almost 16.48€ billion. Even though they are not advertising their business, clothes of Zara have sold at high prices (Simoneaux Stroud 2011).
Social	●       Zara gets access to new markets and cultures before delivering new products. ●       Zara also designs clothes according to culture of people in every country. Therefore, buying decisions of people are inclined towards products of Zara.
Technology	●       Zara entered in an agreement with TOYOTA 2014 to get assist for application of JIT and micro-learning for its manufacturing actions. ●       They also implemented RIFT system to keep a track on their supply chains
Environmental	●       Zara is improving towards sustainability. Authority is making changes to have energy and water efficient operations. They are also looking for better recycling methods that they can use.
Legal	●       The business of Zara has been developed through basing on ethics. Not only in store based marketing but also in online market Zara is spreading its arms. In this perspective this concern company is eligible to have legal protection from cyber crime in other countries. On the other hand, in Australia there are no cyber or encryption protection law. With some supportive laws this cyber protection has been run through. Thus in legal aspect Zara has some drawbacks in Australia (Based on iclg.com, 2019).

1.5 5 Success factors

1. Supply chain of Zara is central aspect of their success. They refresh their collection two times in a week. Time gap between their fresh produce is tiny. Those products are also having important quality.
2. Second factor is vertical integration (Nikitin et al. 2016). This model helps zara to refresh its collections according to customer's demands frequently.
3. Zara gives priority to ongoing trends and develops its new designer clothes.
4. Zara also produces limited number of clothes for ongoing trends as they do not get outdated by time of sale.
5. Store managers of Zara frequently check customer’s reactions and interests to bring new features in their designs (Taylan 2014).

1.6 Scope of RMP

1. To increase brand value
2. To analyze and evaluate organisational weaknesses (Zsidisin, Panelli and Upton 2014)
3. To prevent threats
4. To concentrate more on strengths

1.7 Risk categories

1. Strategic Risk- Strategic risks appear when organizational plans become less active (Balmer, 2017). Strategic risk is avoided to prevent threats.
2. Compliance Risk- Operations of Zara are always based on business ethics. They still work under rule and regulations of a country Because of this reason; Zara has always able to avoid Compliance Risk. Customers, suppliers and government have faith in their product and services. In this way they are looking to increase their brand value (Hutt 2013).
3. Operational Risk- Operational is sudden failures of product and services of a company. This is not a big issue for Zara as they continuously change their designs to get advantage over competitors (Morrow et al. 2015).
4. Financial Risk- Zara has average selling of 16€ billion per year. Therefore, business risk is not an option for Zara (Peyrefitte, 2014).
5. Reputational Risk- Zara is currently ranked at 53 by Forbes for their brand across globe. Therefore, reputation risk is also avoided by Zara to concentrate more on strength of company.

2. Risk Consideration

2.1 Internal Personnel

CEO and Implementer are most relevant internal personnel for RMP.

2.2 Two examples of communication

Meetings and email process are taken for communication system. Meeting is held between CEO and managers to discuss issues and suggest risk management plan. Agreement of CEO is needed to proceed according to plan. Then, HR manager would send email to implementer to enable this management plan in organisation.

2.3 Stakeholder analysis

CEO	CEO has an integral part to play in this business. They spread inspirations among designers. Óscar Pérez Marcote, CEO of Zara, has given full autonomy to designers to introduce new ideas in designing process.
Designers and Tailors	They have various designers that help the company to refresh their clothes in every two weeks. Tailors are also experienced enough to implement specific designs according to designers.

2.4 Three Tools

Brainstorming	Brainstorming techniques should be used against designers. At least five designers are allowed to participate in group discussion. They give instruction about their designing process and their thought about those designs. This technique is effective for taking various opinions from participants of a group. However, it is challenging to give importance to some specific ideas as they various opinions (Peyrefitte 2014).
Interview	Interview method should be used against to discuss issues of the organisation. This method helps the interviewer to get wide range of information. However, interviewees generally get frustrated as interview session is normally longer than 20 min.
Survey	This best possible method to get feedback from customers. They are given some specific questions and options are offered for answers. Customers have to choose their answers from given options. Surveyor can get information about points that he wants to know. But, there could be some other valuable information that surveyor cannot know with this method (Scotton, 2015).

2.5 Seven risks in RMP

Task and procedure	Procedure for every task and organisational management should be fluent. Otherwise, strategic risk could occur.
Roles	Everyone such as designer, tailor has their roles to play. If anyone fails to achieve given objectives, entire system will fall, giving rise to strategic risks.
Location	Location is essential for operation of a company. If company is located in an urban area then most people will not get access to products and services. This would result in operational risks.
Legislation	Legislation of operating country is also essential for operations. If the company is not working within limitations of laws, then compliance risk occurs.
Competition	Large competition gives rise to reputational risks.
Economics	Adverse economic conditions could result in financial risks.
Social trends	If a company is not following social directions of specific countries, it could cause operational risks.

3. Communication and consultation

3.1Method of communication with stakeholders

Interview	For implementation of RMP, a meeting of CEO will be taken for his consent.
Meetings	Meeting among all HR managers will be held to discuss implementation plan.
Survey	Customers are going to be surveyed and their decisions would be taken.

3.2 Action taken from Communication Plan

A 20 min interview is taken from CEO. Issues regarding every aspect and their solutions through risk management plan are discussed. After getting permission for implementation of this plan, all HR managers contacted to be present in a meeting. However, three sessions are needed to come up with a plan. Then customers are surveyed to give their feedback on this plan.

3.3 Example of a plan

Survey Questionnaires of Customers-

1. Do you prefer products of Zara?
2. Why or why not prefer Zara?
3. Which products of Zara toy like most?

4. Monitor and review

4.1 Monitoring techniques and tools for success of RMP

Risk assessment and evaluation	In this process, managers of Zara identify risks and calculate threat levels of those risks to come up with solutions.
Trend analysis	Zara analyses social trends of a specific country to produce products according to ongoing trends.
Technical Performance Measurement	Technical performance checking is needed to have effective productivity.

Zara mainly uses A1 tracker and RM studio tools for their risk management process.

4.2 Strengths and Weaknesses of RMP

Strengths	Weaknesses
Risk Identification Risk Evaluation Minimization of Threats Risk Awareness	Complex calculations Occurrence of Ambiguity Implementation difficulties Risk of failure

4.3 Description of one tool

A1 tracker is a risk management tool that provides web dependent UI. This tools record all process and offers possibility of risks. It is not very easy to use. However, UI is customer friendly. Still, people choose this tool because no help from any other devices is needed after learning functional process of this tool.

Task 2 (Risk Assessment) (Written task)

1. Assessment, Evaluation and treatment

1.1 Risk analysis

As already described, there are five categories of risks, such as strategic risk, compliance risk, operational risk, financial risk, reputational risk.

In strategic risk is not very likely to occur in Zara. This concern organization has veteran managers, designers, tailors who know their role, responsibility and procedures very well. Compliance risk is another aspect, which Zara has always taken care of because this company still operate within rules and regulations of countries. The Zara has some unconventional business growth in Australia. As per IBIS World estimation fashion industries has been grown up to 20% in this period of 2017-2018 in Australia. In this scenario every clothing industry has been growing almost 4% annul in Australia. In this environment of growth Zara has faced some obstacles of inventory management in their business scenario (businessinsider.com.au, 2019).

 1.2 Risk evaluation

Risk is going to be categorised from more exceptional to lesser threat levels.

1. Operational risk is most prominent issue in Australia. Impact of Brexit has affected severely all fashion companies, including Zara.
2. Because of Brexit, Zara had consumed a loss of 0.8€ billion in 2016 (Zara.com, 2019).
3. Reputational risk is third in this list in spite of enormous brand value of Zara because its authority members do not like spend money on advertisement, which is a Key feature of Fashion industry.
4. Forth in this list is strategic risk. Zara has been in the fashion industry for almost 44 years. They know all management plans and procedures. Therefore, strategic risk is very less likely to occur.
5. Compliance risk is fifth in this list because Zara always maintains all rules and regulation of a country to operate their business.

1.3 Treatment of Risks

Zara originated in Spain and Spain is in EU. For this reason, in Australia region this organization has to pay high taxes for running its business. Therefore, Zara has to develop a good relationship with government of Australia to lower this taxation rate. By doing so, Zara could avoid both operational and financial risks in Australia. Next is to spend some money on advertisement by hiring popular models, actors or actresses. Their brand value would increase even more.

2. Risk register

2.1 Summary of Risk analysis

Risk analysis includes identification and analysis. Five types of risk are identified in identification process. Most significant threat for Zara is inventory management operational risk in Australia after impact of UK’s Brexit issue (businessinsider.com.au, 2019). Severe, financial loss also occurred for this reason.

2.2 Summary of Risk evaluations

Risk evaluation process included categorizing of threats according to their threat levels. Most significant risk is operational risk and lowest risk is compliance risk as they always maintain laws and regulations.

2.3 Summary of Risk Treatment

As described already, Zara needs to develop their relationship with Australia government to lower tax rate, which is now 11% (businessinsider.com.au, 2019). They also need to spend sufficient money on popular models for advertising and promotion of the brand.

3. Stakeholder Communication

3.1 Identification of Recipients

CEO, employees, managers and customers are the participants here.

3.2 Explanation

Information of RMP	There are five categories of risk. Insufficient advertisement, lack of safety stock, increasing competition and lack of accessibility in Asia one of main concerns.
Monitoring and review	RM studio and A1 tracker is used to monitor RM process. Feedbacks from employees are taken to review the process.
Implementation of RMP	For application of RMP top-down method is used. An interview of CEO is taken to discuss issue and seek his consent. Then three managerial meetings were held to discuss implementation process. Then employees are informed to proceed according to this process.
Evaluation of RMP	Evaluation process is done after identification and analysis of risks. Managers are responsible for this process.

3.3 Documentation

All data and information are taken through A1 tracker and RM solutions. Then those data are stored within system. To have a backup plan, these data are also uploaded in cloud storage. To avoid data leakage, only a few higher authority members are allowed to see these data.

Reference List

Journals

• Balmer, J.M. (2017), "The corporate identity, total corporate communications, stakeholders’ attributed identities, identifications and behaviours continuum", European Journal of Marketing, 51(9), pp. 1472-1502.
• Blackburn, S.C.F. and Arlett, P.R. (2013), "Benefit Risk Management Plans?", Pharmaceutical Medicine, 27(1), pp. 5-8.
• Hutt, R.W. (2013), "The extent and patterns of multi-stakeholder communications in annual report letters", Corporate Communications, 17(3), pp. 323-335.
• Keddie, S. (2013), "A Descriptive Study of Additional Risk Minimization Measures Included in Risk Management Plans Reviewed by the United Kingdom Regulatory Authority", Pharmaceutical Medicine, 27(1), pp. 25-34.
• Meltzer, D. (2014), "Risks And Benefits Of Risk-Management Plans", Health affairs, 26(3), pp. 681-685.
• Morrow, B.H., Lazo, J.K., Rhome, J. and Feyen, J. (2015), "IMPROVING STORM SURGE RISK COMMUNICATION: Stakeholder Perspectives", Bulletin of the American Meteorological Society, 96(1), pp. 35-48.
• Nikitin, P.V., Zagaynova, E.N., Zagaynov, I.A., Blinova, M.L. and Safina, T.A. (2016), "The Mathematical Business - Risks Assessment Model in Organization Administration", International Journal of Economic Perspectives, 10(2), pp. 252-260.
• Peyrefitte, J. (2014), "The Relationship Between Stakeholder Communication in Mission Statements and Shareholder Value", Journal of Leadership, Accountability and Ethics, 9(3), pp. 28-40.
• Rauch, P. (2017), "SWOT analyses and SWOT strategy formulation for forest owner cooperations in Austria", European Journal of Forest Research, vol. 126(3), pp. 413-420.
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• Scotton, J. (2015), "Global Communication / Global Communication: Theories, Stakeholders and Trends", Journalism and Mass Communication Educator, 57(3), pp. 276-278.
• Simoneaux, S.L. and Stroud, C.L. (2011), "Business Best Practices: SWOT Analysis: The Annual Check-Up for a Business", Journal of Pension Benefits, 18(3), pp. 75-78.
• Tan, L.L., Ho, C.S., Han, P. and Chan, C. (2018), "Development of Post-Marketing Risk Management Plan Requirements: The Singapore Experience", Pharmaceutical Medicine, 32(1), pp. 13-20.
• Taylan, O. (2014), "IT project risk assessment of learning organizations by fuzzy set and systems", International Journal of Organizational Analysis, 22(2), pp. 161-180.
• Zsidisin, G.A., Panelli, A. and Upton, R. (2014), "Purchasing organization involvement in risk assessments, contingency plans, and risk management: an exploratory study", Supply Chain Management, 5(4), pp. 187.
• Zsidisin, G.A., Panelli, A. and Upton, R. (2014), "Purchasing organization involvement in risk assessments, contingency plans, and risk management: an exploratory study", Supply Chain Management, 5(4), pp. 187.

Websites

zara.com, 2019, Zara Collections, Viewed On: 09/02/2019, from: https://www.zara.com/au/

businessinsider.com.au, 2019, Fashion retail giant Zara's success is no secret, Viewed On: 09/02/2019, from

iclg.com, 2019 Australia: Cyber security 2019 Viewed on 09/02/2019, from