Retail surgery: how retailers can mitigate warehousing risks

Many retailers are reliant on big warehouses to store their stock.

But purpose-built industrial warehouses that keep all operations and products under one roof can come with considerable risks for retailers.

Dan Fox, retail practice leader at risk management specialist Aon, says: “The concentration of a lot of value into a single site can easily backfire. If a fire, flood or denial of access occurs this can lead to a significant impact on profits.”

Retailers should ensure they have comprehensive risk strategies when overseeing new warehouse construction to minimise this liability.

Once a warehouse is up and running, a continued monitoring of the operating model is required to ensure any change or development in risk profile is addressed accordingly.

Ensuring retailers have secondary operations or agreements with third parties to provide support in the event of an incident is important, as is having a comprehensive strategy to manage a loss during peak trading.

Insurance is the straightforward solution, but understanding and validating the likely cost of even a partial loss needs to be undertaken.

“It’s vital for retailers to invest the time and ensure that their own business continuity programme will respond to protect profits,” says Fox.

“If a retailer loses a major asset like a warehouse it might take up to two years for full reinstatement, so retailers must ensure that the period of indemnity is sufficient to allow the business to get back to a pre-loss trading position.”