The Retailer Spring Edition 2021

THE RE TA I L ER

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TIME TO RESET RETAILER RESILIENCE

Patrick Maher Principle Consultant | Risk & Resilience Lead Aon

R etailers must invest in a wider business continuity management approach to deliver long term success in the post-pandemic era A year into the pandemic, every retailer will have changed their strategy and no one will be expecting a return to the conditions seen before COVID-19. Business models have moved forward 10 years in little more than ten months to deal with issues ranging from the shift to newonline channels creating challenges around ecommerce traffic, fulfilment and last mile delivery; head office support functions like IT and finance moving to remote working; and, changing consumer buying habits and product availability putting new pressures on the supply chain. Retailers are now – and must be – fundamen - tally different businesses than theywere back in early 2020. But many will not have shifted their approach to business continuity to take into account their changed environment. Simply having a business continuity plan in place that responds to set scenarios like fire or flood is no longer acceptable. Retailers need to adopt a wider business continuity management phi - losophy – not just a plan – that recognises the key steps required all the way from goods in to goods out, and identifies the dependencies demanded to deliver each of these operational steps; providing enhanced resilience and reas - suring key stakeholders that the business is fit for purpose.

Click to queue According to research by NatWest and Retail Economics, online retail sales notched up five years of growth in the last year, increasing to 28% of retail spending in 2020 (up from 19% in 2019). A lot of brands would have been investing in their ecommerce structure pre- COVID but not at the rate that consumers are now demanding. At a point last year, even Ocado – one of the UK’s most sophisticated ecommerce retailers – had a million potential customers waiting to sign up to their platform and had to implement a queuing system for existing customers, providing some insight to the challenges all retailers have been facing. Then there’s fulfilment in terms of the additional pressure on the supply chain – particularly as the demand for different products like home office furniture spiked –warehousing and deliv - ery. It’s no surprise that the big ecommerce players have been signing up huge numbers of delivery drivers to meet that demand for last mile delivery. Of course, while managing all this complexity, retailers have also had to maintain their duty of care for their frontline staff while the big retailers had to move quickly to remote work - ing for office-based staff, in a sector where a remote working corporate structure has never been part of the corporate culture.

Business continuity drags All these factors add up to long-term change. But many big retailers have not yet adapted their business continuity approach to reflect this change and their realigned business models. Not only can this jeopardise a retailer’s ability to get back up and running quickly following an inci - dent, whileminimising financial and reputational problems, it can also have repercussions for their business insurance. In a tougher insurance market, insurers are now demanding not just sight of a retailer’s business continuity plans but also hard evidence that the plan has been validated, tested and is fit for purpose. Part of the problem is that businesses often regard business continuity as simply a list of who to contact in an emergency and what to do in a range of given scenarios like a flood or a fire. The weakness with this ‘checklist’ approach is that it can be irrelevant if the thing that no one expects happens – like COVID-19 for instance. Amuch better place for retailers to start is to understand their entire value chain from supplier to consumer, and the critical dependencies required to be able to deliver each operational step along that chain.

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Retailers are now – and must be – fun - damentally different businesses than they were back in early 2020”.