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Large and small operational risk management cycles
05.12.2018

Regular monitoring of the branch offices helps to maintain corporate service standards in each of them. It is easy to evaluate the work of sellers, the state of the sales area and even to look under the hood using checklists listing the main "control points" — to analyze the efficiency of internal business processes of the company to identify errors that increase its costs. However, the approach to system checks will be slightly different.

Both are about identifying operational risks — situations that cause a retail network to lose profits. They can be in-store or general, typical of several or even all branches. In the first case, local staff errors result in lost profits:

  • expired products in the sales area, which is why the company loses customers;

  • lack of offers from the cashier to buy promotional goods, which could increase the purchase receipt, etc.

The second is the strategic miscalculation of the head office:

  • inconsistency of actions of the company's departments/divisions;

  • errors in the scheme of cooperation with the contractors;

  • failure of senior management to understand the specifics of personnel work in the field, etc.

Smaller operational risk management cycles can help to minimize or even eliminate negative in-store scenarios. This is the monitoring of branch office operations using typical checklists for auditing sales networks. The essence is that the object is checked for compliance with one or another of the criteria with a certain frequency. In case of detection of violations in its work the corrective action is taken, i.e. the deficiencies are eliminated.

 For example:

  • stale and expired goods are removed from the shop window in time,

  • sellers become more attentive to visitors, better observe service quality standards, etc.

This effect can be easily achieved by changing the staff motivation system.

P.S. checks within the framework of a small cycle of operational risk management can be carried out both by auditors and local management — for timely detection of errors in the work of the outlet.

 

Advantages of this type of audit: 

  • it's simple.

Disadvantages: 

  • such audits do not allow to see potentially weak items in functioning of the branch and to focus on them. 

  • it is impossible to optimize the cost of the audit.

A large cycle of operational risk management is an in-depth approach to analyzing the causes of unsatisfactory performance of retail outlets. It allows not only to see the root of the problem, but also to correct the situation at the system, not at the local level. The main thing is that it is possible not only to identify errors, but also to foresee a potential threat and thus prevent it.

This approach analyzes in detail each business process, among dozens in the store, and draws up a rating of operational risks, indicating the company losses in cash equivalent. The higher the risk and the higher the costs, the more carefully and strictly you need to control this or that action in the store. 

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Once the risk rating has been compiled, control points are determined — what and how often should be checked to ensure that the network operates as efficiently as possible. Based on these data, checklists are generated. That's why they are "turnkey" — templates cannot cope with the task.

Advantages of using a large risk management cycle:

  • systematic approach to evaluating the performance of the network's branches;

  • possibility of collecting information not only on actual, but also on possible deviations in the work of the branches:

  • ability to assess and evaluate operational risks.

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Disadvantages:

  • difficult preparatory stage for non-professionals. Therefore, the preparation of the operational risk table and control points should be entrusted to specialists.

How to distinguish between a system error and a non-system error?

The difference is that a system error is not a human one, but a business process error. This is what you should be guided by when selecting a corrective action. 

Even if a system error has been detected in just one outlet, it is necessary to take proactive measures in all of them — so that the situation does not become critical.

Mobile Dimension specialists will tell you how to implement this scenario in practice. Request a consultation here. The service is free and does not require additional efforts.

The material was prepared together with Alexander Shubin, the managing director of myRetailStrategy (PBK Management), the author of the methodology for improving the business model of the retail company "Business onTrack for Retail" and the book "Business models of retail companies: how to compete with the giants".

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Tеги process management , results analytics
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