RISK MANAGEMENT PLAN

Running Head: RISK MANAGEMENT PLAN 1

 

RISK MANAGEMENT PLAN 5

 

Costco’s Risk Management Plan

Costco has a distinct risk management plan that is developed internally and includes five steps. Below are the five steps (Courtemanche & Carden, 2014).

1. Risk Identification

2. Risk Mitigation

3. Action Planning

4. Performance Metric

5. Shareholder Value

The initial step in a risk management plan is to identify the risk. One of Costco’s biggest risks is that the store is highly dependent on California operations. While Over 70% of Costco’s sales come from the United States, about 35% of the revenue is produced in California (Courtemanche & Carden, 2014). The next step that Costco takes is to try to identify probable courses that would enable them to develop a proper risk mitigation procedure. Costco acknowledges that some risks such as those related to the business operation are not easy to mitigate nearly for any organization (Pappas, 2016). Once the company has compiled the strategies to mitigate the possible risks, it then creates an action plan which involves incorporating the different mitigation strategies. For Costco, any significant decrease in its business operations would have a notable effect on the overall results. The company is vulnerable to the weaknesses or strengths of the California market environment. This risk arises from the size of California’s economy.

California’s economy would be ranked as the seventh largest worldwide if California were a country on its own. Rivals such as Wal-Mart do not consider California a major concentration risk although they are faced with almost similar operational risks (Sadgrove, 2016). When developing an action plan, Costco understands that its California business will usually change with the rest of the country. However, Costco’s risk management insists that shareholders should worry less about this concentration risk. The company is thriving in a region that has grown rapidly. However, the company’s dependence on the California economy is something to be kept in mind when considering its overall business outcomes. It is important to determine the effectiveness of the action plan by constructing the performance metrics. Costco then uses its financial tools to determine how the performance metrics will affect the shareholders. This can be achieved by analyzing critically the California business environment as this is the market in which an action plan is to be implemented. Costco values its employees and these strategies are communicated to employees using video clips and during regular meetings.

For an online store such as Costco, its operations, and the external environment are the major components of the value of the business. The effect of each component must be considered in the value. The overall value of the business to the company can be determined by looking into the effect of these components (Sadgrove, 2016). Then, the effect of strengths, weaknesses, and vulnerabilities can be assessed. Employees are encouraged to report promptly to the risk management department in the event they notice something which is likely to affect the organization. The company has an effective risk management team. The employees thus feel prepared to respond in an emergency. Customers are increasingly using mobile phones and computers to shop online. As such, Costco will need to keep up with shoppers. This can be achieved by developing and maintaining a functional multichannel experience for their target market.

Every employee knows what to do in an emergency. Costco provides workplace emergency response information to its employees. Spills resulting from delivery truck fuel leakage and a torn bag of merchandise all require well-organized emergency response plan to stabilize the situation. Occasionally, Costco employees practice an emergency plan at the workplace. Although such spills can be handled by employees, this does not happen frequently for the company to have regular contact with the cleanup companies or keep up with the federal spill requirements of various states. Costco’s employees are trained to initiate a response by making a simple phone call to 3E which handles the entire situation and provides a constant update to the company (3E Company, 2012). This way, a Costco employee will feel prepared to respond in an emergency because the entire emergency response plan is well executed by the company.

 

References

Courtemanche, C., & Carden, A. (2014). Competing with Costco and Sam’s Club: Warehouse Club Entry and Grocery Prices. Southern Economic Journal 80(3), 565-585.

Pappas, N. (2016). Marketing strategies, perceived risks, and consumer trust in online buying behavior. Journal of Retailing and Consumer Services, 29, 92-103.

3E Company (2012). MSDS/SDS Authoring, Management, and Distribution Chemical Regulatory Compliance Suite. MSD Gen. Retrieve from https://www.environmental-expert.com/files/3774/download/473848/83E_MSDgen_Brochure_Final_0.pdf

Sadgrove, K. (2016). The Complete Guide to Business Risk Management. Abingdon, UK: Routledge.

 

Running Head: RISK MANAGEMENT PLAN

 

 

1

 

 

Costco’s Risk Management Plan

 

Costco has a distinct risk management plan that is developed internally and includes five

steps. Below are the five steps

 

(Courtemanche & Carden, 2014)

.

 

1.

 

Risk Identification

 

2.

 

Risk Mitigation

 

3.

 

Action Planning

 

4.

 

Performance Metric

 

5.

 

Shareholder Value

 

The initial step in a risk management plan is to identify the risk.

 

One of Costco’s biggest

risks is that

the store is highly dependent on California operations.

While Over 70% of Costco’s

sales come from the United States, about 35% of the revenue

is

 

produced

 

in California

 

(Courtemanche & Carden, 2014)

.

 

The next step that Costco t

akes is to try to identify probable

courses that would enable them to develop a proper risk mitigation procedure.

 

Costco

acknowledges that some risks such as those related to the business operation are not easy to

mitigate

 

nearly for any organization

 

(Pappas, 2016)

.

Once the company has compiled the

strategies to mitigate the possible risks, it then creates an action plan which involves

incorporating the different mitigation st

ra

tegies.

 

For

Costco, any significant

decrease in its

business operations would have a notable effect on the overall results.

 

The company is

vulnerable to the weaknesses or strengths of the California market environment.

 

This risk arises

from the size of California’s economy

.

 

California’s

econ

omy would be ranked as the seventh largest worldwide if California

were a country

 

on its own

.

 

Rivals such as Wal

Mart do not consider California

 

a major

concentration risk although

they are faced with almost similar operational risks

 

(Sadgrove,

Running Head: RISK MANAGEMENT PLAN 1

 

Costco’s Risk Management Plan

Costco has a distinct risk management plan that is developed internally and includes five

steps. Below are the five steps (Courtemanche & Carden, 2014).

1. Risk Identification

2. Risk Mitigation

3. Action Planning

4. Performance Metric

5. Shareholder Value

The initial step in a risk management plan is to identify the risk. One of Costco’s biggest

risks is that the store is highly dependent on California operations. While Over 70% of Costco’s

sales come from the United States, about 35% of the revenue is produced in California

(Courtemanche & Carden, 2014). The next step that Costco takes is to try to identify probable

courses that would enable them to develop a proper risk mitigation procedure. Costco

acknowledges that some risks such as those related to the business operation are not easy to

mitigate nearly for any organization (Pappas, 2016). Once the company has compiled the

strategies to mitigate the possible risks, it then creates an action plan which involves

incorporating the different mitigation strategies. For Costco, any significant decrease in its

business operations would have a notable effect on the overall results. The company is

vulnerable to the weaknesses or strengths of the California market environment. This risk arises

from the size of California’s economy.

California’s economy would be ranked as the seventh largest worldwide if California

were a country on its own. Rivals such as Wal-Mart do not consider California a major

concentration risk although they are faced with almost similar operational risks (Sadgrove,

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