Welcome to this Autumn 2015 edition of Inperspective, Aon UK’s review of the risk and insurance issues facing the retail and wholesale industries. In this edition we focus on the steps risk managers are taking to plan for one of the busiest consumer spending periods in history.

1. Risk. Reinsurance. Human Resources.
Retail and Wholesale
Inperspective
In this issue
p2 Housekeeping a must as peak
season approaches
p4 When is your business at its most
vulnerable?
p5 Fleets under pressure over
agency driver use
p6 Meet the experts
Aon Risk Solutions
National | Retail & Wholesale Practice
Issue 5 November 2015
Welcome to this Autumn 2015 edition of Inperspective, Aon UK’s
review of the risk and insurance issues facing the retail and
wholesale industries. In this edition we focus on the steps risk
managers are taking to plan for one of the busiest consumer
spending periods in history.
Black Friday and its counterpart Cyber Monday, gave retailers a £1.5bn bump in
sales last year according to Retail Week and the industry is expecting even more
this time round.
Sudden peaks in demand like this mean a whole new collection of stresses being
placed upon retailers’ in store operations, warehousing and logistics. As such Black
Friday and Cyber Monday have been labelled a ‘margin call’, by some detractors
who argue that volume discounting is a high risk strategy, particularly given reports
of up to 30% returns by one delivery company in 20141
.
Nevertheless, major retailers will have prepared their supply chains, warehousing,
distribution, logistics, IT and fulfilment like knights heading for battle, so we’ve
taken this opportunity to analyse if there are any chinks in their armour.
As ever, we look forward to hearing your thoughts in advance of this fascinating
consumer spending spree.
Daniel Fox
Aon Retail Practice Leader
Black Friday and the peak
period challenge...
1
Source: International Business Times

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Housekeeping a must as peak season
approaches
Operational risks are amplified during Black Friday and Cyber
Monday, and it helps to remember the basics. Grant Foster,
Managing Director of Aon Global Risk Consulting lists a few
do’s and don’ts.
In 2014 electrical goods sales rose by 32%, driven in many cases by the impact
of Black Friday and Cyber Monday’s heavy discounting. November 2014 saw a
6.4% rise on the previous year and images of rampaging consumers grabbing
merchandise dominated the headlines.
While the media tended to focus on the more hyperbolic elements of Black Friday
last year (stampedes etc.), it is a safe bet that when sales volumes rise by almost a
third, as in the case of electrical goods sales, supporting infrastructure and
operations will be stretched.
With every aspect of the business under strain; from the workforce and infrastructure
right through to the shop floor, the risk of something going wrong increases, both
in terms of the likelihood of incidents and also the associated impact in terms of
costs to the business.
For example, if you have an overstretched workforce (working extended hours,
working late at night) there is a much higher likelihood that they will make mistakes,
accidents will happen more frequently and will affect the business at a critical time.
Additionally the fact that this is a known busy period will increase the possibility of
a cyber-attack, a denial of service attack being more effective when servers are
already under high loading.
Housekeeping
At a very basic level, retailers’ housekeeping and risk controls need to be sustained
during this busy period. With larger than normal stock levels, are fire risk control
protocols being observed? Is stock spilling out onto the aisles where staff and
customers can trip over them?
Secondary packaging has to go somewhere and in these peak turnover periods
more than the usual amounts of cardboard pile up is produced, usual storage space
fills up; staff have less time to keep things tidy, and a situation develops where there
is an increased risk of accidents and plenty of combustible material around should a
fire break out.
Malls and high streets
Retailers operating within large malls and out of town centres have finite storage
capacity, but peak period often increases the pressures on how space is used.
From a risk point of view, there could be an increase in manual handling injuries
when activity beyond normal scope is encouraged.
Meanwhile, overflow storage on a shopping complex is often sited away from the
shop floor which introduces inevitable security questions about vulnerable stock as
well as an expanded area for employers to monitor and control. Workers will
potentially be moving around in a much less controlled working environment than
usual, increasing the potential for accident or injury.
Grant Foster
Managing Director
Aon Global Risk Consulting

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Prepare your pop-ups
Temporary facilities, pop-up premises and additional space requirements for shop
floors were another feature of Black Friday 2014. These were particularly notable
amongst electrical retailers who needed large amounts of additional space to
market their discount goods. However this can increase fire risk as greater loads are
placed on the available power supply, while safety features such as sprinkler systems
are unlikely to be available.
Stampedes
Certainly the most striking images of Black Friday 2014 involved the stampedes of
customers hunting for discounts. In truth this is far from a new phenomenon and
many retailers have experience of managing crowds. However, busy periods still
require careful monitoring of customer numbers within stores to avoid overcrowding,
maintain compliance with fire and safety regulations and to keep a lid on a likely
increase in shoplifting.
For further information contact Grant Foster.
Grant Foster
+44 (0)20 7086 0300
grant.foster@aon.co.uk

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When is your business at its
most vulnerable
Black Friday is a unique opportunity for retailers, but could this
seasonal uplift in sales be storing up problems of underinsurance?
Aon Retail Practice Leader Dan Fox, explains.
The key to any risk transfer programme delivering good value to a customer is
transparency. The theory goes that the more forthcoming you can be about the
exposures underwriters will be assuming, the better value you can receive in return.
So what does this mean for a retailer approaching the 2015 Black Friday sales?
Firstly don’t panic. Making a request to insurers to extend cover or provide an
automatic provision for a pre-defined peak period is not uncommon and this
could be applied to both increased property and business interruption exposures.
However, it is also a time to consider whether this goes far enough, particularly if
you are a retailer that looks to peak periods for the majority of its annual profit.
The more reliant on peak period sales a retailer becomes, the more its potential
maximum loss will be during those key points in the calendar. Risk managers
should therefore carefully consider if existing policy limits and contingency plans
remain adequate. The range of areas to review is vast from key suppliers, group
interdependency provisions to failure of utilities providers.
Declare your profits when they’re earned
Like most businesses, retailers will be asked to declare their estimated gross profit
by insurers in order for underwriters to provide terms. With ever increasing
requirements to declare accurate data, do your insurers fully appreciate the impact
and estimated cost of a major loss during peak period?
It’s arguable that Black Friday may have moved the goalposts beyond those
normal peak period trading conditions, so a detailed discussion with your broker
or insurer can only be a positive step to ensure the position is accurately insured
and declared.
Black Friday remains a relatively new concept and insurers need time to build a
claims history so they can more accurately respond to the demands of the retail
sector. For the risk manager this is an opportunity to get out in front of the issue
and discuss the realities of trading now that peak periods are growing in number
across the year.
For further information contact Dan Fox
Dan Fox
dan.fox@aon.co.uk
Dan Fox
Aon Retail Practice Leader

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Fleets under pressure over agency
driver use
Black Friday and Cyber Monday will increase competition across
the board and for retailers with their own logistics operations
this means demand for agency drivers will be fierce. David Price,
Director – Risk Control at Aon, explains.
Reports that independent logistics firms like Yodel are hiring up to 7000 agency
drivers for the Black Friday and Christmas periods2
serve as a clear reminder of how
resources will be just as much in demand as revenue this Autumn and Winter.
The availability of quality agency drivers could be a key to success for the logistics
operations of retailers but it is essential that they work hard to pre-empt any issues.
Larger providers can influence the activities of agencies and demand pre-emptive
risk assessment, but for many operators the challenges are considerable.
Nowhere is this more apparent than in the appointment of foreign nationals and EU
driving licence holders amongst the agency workforce. Whether these drivers will
be carrying out last mile deliveries or trunking between supply and distribution
centres, there remains no means of adequately checking licences for any
prosecutions or endorsements because data protection laws prohibit disclosure
across borders.
Fleet operators can require foreign agency drivers to register their licence
credentials with the DVLA who will give them a 16 digit driver number before they
are appointed and this will help you to build a driving history for those agency
workers, but it remains a risk shared by the whole sector.
2014’s Black Friday and Cyber Monday experience gave retailers a very clear idea of
what peak demand could be. As a result those bringing in extra capacity on the roads
should work closely with their agents to pre-screen and approve drivers; there needs
to be an acceptance of liability on the agency’s part to do this up front assessment.
It’s a rather sad indictment of our institutions that while the retail industry can use
big data to implement game changing methods like ‘anticipatory shipping’3
we
cannot accurately assess the potential risk posed by using Foreign and EU licenced
agency drivers in times of peak demand.
However, as long as retailers and their agents build an auditable system of checks
and pre-screening, and demand other pre-emptive actions such as DVLA
registration; logistics can run smoothly and brands can be protected
For further information contact:
David Price
+44 (0)12 1253 3230
david.price@aon.co.uk
David Price
Director – Risk Control
2
Source: The Drum
3
Source: IMD

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Meet the experts
Dan Fox
Aon Retail Practice Leader
Grant Foster
Managing Director
Aon Global Risk Consultancy
Dan Fox has over 20 years’ experience working for leading national and global
brokers in client management roles. In this time, he has lead client service teams,
delivered strategy and developed international and captive programmes. In his last
position, Dan was a specialist in the retail sector and was accountable for a number
of existing flagship accounts together with success in new business development.
Grant Foster is the Managing Director of Aon Global Risk Consulting, a team
of 80 risk practitioners based in the UK covering a range of risk management
disciplines including Actuarial, Engineering, Claims, Risk Financing and Enterprise
Risk Management.
Combining direct experience of Corporate Assurance Systems, Organisational
Change Management, Enterprise Risk Management and Project Risk Management
(including risk assessments, process development and due diligence work), Grant
is able to bring innovative approaches to the challenges of business management.
Grant has wide experience of working with many different industries, including
Energy, Petro-chemical, Pharmaceutical, Manufacturing, Power, Transportation,
Retail and Renewables. Grant also has a track record of successful bespoke tool
development to aid companies in assessments, assurance and continual
improvement. A former lecturer, Grant is a natural communicator and has
designed, developed and delivered innovative training and awareness material.
Grant is a chartered engineer, holds PhD in the field of distributed systems
modelling and a BSc (First Class) in Cybernetics and Mathematics from the
University of Reading.
David Price
Risk Control
Aon Global Risk Consultancy
David Price heads the UK’s Risk Control Team. He assists industrial and commercial
clients with risk control and provides client focused support in risk identification,
analysis and development of management controls. David has
20 years’ experience in risk control across a wide range of industrial and commercial
industries, including retail, hotel, warehousing, clothing, printing, plastics and
engineering industries.
David is an Associate of the Chartered Insurance Institute (ACII), a Member of the
Institute of Risk Management (MIRM) and a Chartered Member of the Institute
Occupational Safety and Health (CMIOSH).

7. Risk. Reinsurance. Human Resources.
About Aon
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