Managing Wholesale and Retail Business Risks

Economic Concerns Come In On Top as #1 Risk

Wholesale and Retail Business Risks
In the span of two years, risks faced by wholesale and retail businesses have increased dramatically.

Retail businesses have grappled with economic fluctuations, federal regulatory changes, coupled with the general risks that accompany the buying and selling of goods domestically and offshore.

Supply chain breakdowns and the pressures of keeping up with the technological demands of consumers (such as offering Apple Pay as an option to pay for purchases) are weighing heavily on business owners as they work to stay compliant. But above all of this, financial instability emerged as the #1 retailer concern, according to risk factors listed in the most recent 10-K filings of the 100 largest public U.S. retailers, compiled by BDO USA, a professional services firm.

BDO found that interest rates (80 percent) overtook fuel prices (74 percent) and unemployment (70 percent) as the most frequently cited general economic concern, for the first time in the study’s eight annual analyses.

Cyber exposures have also emerged as one of the top risks facing the wholesale and retail sectors, as high-profile data breaches shed light on the growing hacker threat to both public and private companies. Given the importance of the subject—readers in a 2014 year-end compliance poll said cybersecurity would be the top compliance issue in 2015.The ambiguity of the circumstances surrounding Sony Pictures’ cyber hack prove that cyber threats are broad, and require a more proactive approach to risk management.

Sensitive data, including company emails, account numbers, credit cards, health data, and intellectual property are more vulnerable now than they have been before, as hackers seek newer and more advanced ways to infiltrate firewalls. Business owners of larger companies have been buying commercial cyber insurance, given these new facts.

Many of these coverages are expensive and may not be designed for mid-market companies. Through the formation of a captive insurance company, mid-market entrepreneurs can write broader, more inclusive coverages for critical exposures. Other forms of business disruption have the potential to financially harm mid-market businesses that do not have an adequate means to prevent or mitigate potential losses.

Regulatory Changes

Data privacy, minimum wage legislation, and healthcare insurance requirements for businesses all fall under the regulatory umbrella. Federal regulations remain a major concern of businesses as they can experience increased cost of compliance as new laws are put into place.

Supply Chain Failure

Supply chain risks take a significant toll on businesses, as margins decrease due to delays and lost revenue. Inefficiencies and changes in demand also present significant risks to retailers and wholesalers.


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