Question

1. Pick one hypothetical company from the following choices: Auto repair shop, Retail clothing store, Furniture manufacturer, Restaurant, Landscape maintenance, Website design and maintenance. For whichever type of company, you choose, assume you own the building and have a related loan with the bank, and you sell your goods and services to customers on account (they have 60 days to pay).

State which hypothetical company you chose and provide several sentences to describe the company. You have lots of creative freedom here, so it's important to give all of us some information to help us understand what your company looks like. For example, if you choose the restaurant business, give us a description of your hypothetical restaurant (type of food, level of quality, pricing, location, etc.) so we better understand your business.

2. Pick three of the seven risk factors Credit Risk, Market Risk, Political Risk, IT Risk, Operational Risk, Legal Risk, Reputational Risk, and thoroughly describe each of the three possible risk factors for your company. Please provide at least three sentences for each risk factor for your company.

3. For each risk factor you identified, how would you go about limiting this risk?

Answer 1

1. RETAIL CLOTHING STORE

X FAM CLOTHING STORE

MG road, Kochi

Kerala

X FAM CLOTHING STORE will be a start-up retail men's, women's, and children's clothing store specializing in unique clothing from other parts of India. This business is a casual urban wear traditional clothing store. It is run by the owners ANWAR and SHAJI as a partnership. It is located at MG road near Metro station, Kochi, Kerala. This store has a local market and serve both youth and adults. Our intend is to provide community with unique clothing they would normally purchase outside the state.  

Objectives

• Establish a unique clothing retail business in the city of Kochi, Kerala
• Create jobs
• Provide quality clothing and customer service at a reasonable price
• Achieve the largest market share in the city for urban wear
• Be an active and vocal member of the community, and to provide continual reinvestment through participation in community activities and financial contributions.
• Achieve a profit within the first year.
• Continually and consistantly increase total number of customers per year.
• Increase average length of customer relationships and decrease customer turnover. Mission​​​​​​​   

X FAM Clothing Store is a retail clothing store specializing in unique clothing and accessories. We encourage customers to be experimental with new clothing styles. Our mission is to understand what our customers' needs and hopes are after buying urban wear clothing.

X FAM will maintain financial balance while delivering a quality product to our customers. We will make our clothing accessible throughout our community by way of establishing a retail location, fashion shows, and events. We will make a profit and generate cash. We will provide a rewarding work environment and fair compensation to our employees, ultimately provide excellent value to our customers, and a fair return to our owners.

  Company Location and Facilities

X FAM Clothing Store is  located at MG road Kochi, Kerala. The store is approximately 2500 square feet. It contains two dressing rooms and a unisex restroom. Parking space is available in front of the store with additional spaces in the rear for overflow. The are a variety of businesses in the area that include Burger King, Theaters, and a flower shop along with Metro station. This variety of businesses creates a constant flow of traffic during most business hours.

2. RISKS

Reputational Risk

The retail sector is characterized by direct contact with consumers and the worse problems for retail stores if when customers stop buying from these stores or view them negatively. Further, reputation risks have increased due to social media and the internet. Accordingly, any shortcomings in consumer satisfaction may quickly impact a store’s reputation and hence its revenue.

   Legal Risk

  Failure to maintain the validity of agreements and licenses (lease agreements, business license, advertising license, etc.) may cause the retail stores to face closure, incur financial losses or pay penalties. This would also impact the Company’s reputation.

  Market Risk

Retail Clothing business is known for intense competition due to limited barriers to entry. An increase in competition may hinder revenue growth. Competition through product price reduction is a major factor in consumer purchasing decisions.

3. Limiting the Risks

  Reputational Risk

• Conducts periodic consumers satisfaction surveys and formulates surveys to predict customer needs and expectations;
• Adopts a consumer relation management system to deal with any complaints and reply to any inquiries;
• Analyzes mystery shopper results to measure the quality of the rendered services as well as the quality of the employee-consumer relation;
• Provides proper training to employees; and
• Draws up a policy for dealing with social media with swift replies to any negative comments affecting the stores or products.   Legal Risk
• Adopts procedures for identifying and complying with any changes made to laws and legislations;
• Adopts procedures for following up on the terms of agreements and licenses; and
• Fixes a time period for initiating the action required for renewing agreements and licenses prior to expiry.   

  Market Risk

• Determines its competitors and periodically monitors product prices in the market;
• Uses the concept of loyalty cards which helps in consumer analysis as well as predicting the products that satisfy consumer expectations;
• Adopts a product pricing strategy by understanding consumer behavior and the manner by which they make purchasing decisions; and
• Works out a plan for sales increase by taking advantage of sporting events, beginning of the school year, and holidays.