A Report on “Lulu Lemon’s” Strategic Financial Management
Task 3: a)
Identification of sustainability and risk management: Sustainable business or green business is an enterprise that has trifling negative impact on the global or local environment, community, society or economy- a business that struggles to meet the triple bottom line. Often, sustainable businesses have enlightened environmental and human rights policies.
Risk is the first and foremost element of a business. Risk management develops the right tools, methods and processes to manage risk. Risk is defined as the probability of an unexpected incident and its penalty. For a business, exposure to risk could lead to adversity.
Identification of Sustainability for business: The business world is facing challenges in every sector of economy, society and environment. The challenges are much higher than the past few decades. Now days business feels the pressure of government as well the consumers as they want to have goods and services by protecting environment. People want businesses that can be trustworthy and also upstanding. Sustainability helps a business to adopt the environment as soon as possible and makes maximum profit at the same time.
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Sustainability of a business can be identified by points given below:
- Mission statements
- Goals and disclosure
- Communication style
- Management style
- Commitment beyond the value chain
- External certification
Analyzation of Risks Faced by Lulu Lemon:
Lulu lemon Athletica Inc. is a yoga-inspired athletic apparel and accessories manufacturer and retailer. It was founded in 1998 in Vancouver, Canada. By the year of 2007, the company owned or franchised 81 stores internationally.
On March 18, 2013, Lulu lemon Athletica pulled from its stores its inventory of women’s black yoga pants made from the company’s proprietary luon fabric because recent shipments did not meet the company’s specifications, According to press release:
“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black luon bottoms that falls short of our very high standards.”
Approximately 17 percent of its inventory of women’s pant bottoms was affected. Lulu lemon stock fell 3.8 percent on the news.
Lulu lemon is suddenly facing competition from similar businesses all over the world. May be lulu lemon has loyal following but the vulnerable price decreases the followers. Trendy outfits are making by other companies include Lole, Lorna Jane. Mainly lulu lemon was closely watched by investors because of its meteoric rise and faced a cluster of competitors whose stores and products bear a striking resemblance to its own.
Steps on identifying risk assessment: As part of managing health and safety of business risk must be controlled in a work place. To do this one needs to think about what might cause harm to people and decide if he is taking reasonable steps to prevent the harms. This defines as risk assessment and it is something that the law required to carry out the business.
A risk management is not about creating a huge amount of paperwork but rather about identifying sensible measures to control the risks in work place.
Risk assessments are allocated in 4 important steps:
- Step 1: Hazard Identification: Problem causes by the contamination.
- Step 2: Dose response Assessment: Problems at different exposures.
- Step 3: Exposure Assessment: The hazard, exposed to during a specific time period and the number of exposed people.
- Step 4: Risk Characterization: Extra risk of problems in the exposed population.
Classify various sources of risks: The purpose of classifying the risks is to show the risks identified in a structured manner, for example in a relation to their origin, they are given below:
- Sector: A risk that the external factors liberated from the entrepreneur’s management could directly or indirectly influence the achievement of his or her goals and strategies to significant extent.
- Operational: The operational risks are associated with the entrepreneur’s ability to alter the strategy chosen into specific plans by means of an effective allocation of resources.
- Competitors: The size, the financial and functioning capacity of the agents in sector determine the degree of conflict in that sector and set the rules of the game that any new agent has to operate in the marketplace, this can involve risks for the entrepreneur.
- Suppliers: The role played by the suppliers in the sector could generate risks for an entrepreneur due to variations in the price of raw materials, to the availability of a diversity in the supply and for a continuous period of time, as well as the degree of awareness of the suppliers, which will determine the method of payment traditionally accepted in the sector.
- Customers: the customer can be a crucial central point of risk for an entrepreneur, since they are the generators of revenues; the risk can steam from changes in their tasted and needs, from creating pressures forcing prices down or from lengthening the payment period, among other factors, in such a way that the entrepreneur’s value proposal must always be customer-oriented.
- Financial: The financial risks refer to the uncertainty associated with effective management and the control of finances carried out by the entrepreneur, as well as to the effects of external aspects such as the availability of credit, exchange rates, fluctuation in interest rates etc.
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Impact of risks in many terms of an identified business:
- Physical Risks: Building risk is mainly considered as physical risk. Fire or explosion in electric line is most common physical risks. Hazardous material spills or accidents also occur with some regularity. People who handle these materials should be properly trained and skilled to be safe.
- Location Risks: The businesses should take places regarding fire, storm damages, flood, hurricane, tornedo and other natural disasters. The employees should keep aware about those places.
- Human Risks: Among the employees many of them can be alcoholic or drug addicted. Immediate counseling and treatment facility should be given to them and make sure that they would be well treated. Most of the organizations have the facility of health insuring to cover some of the treatment cost.
- Technology Risks: Electricity failure is the main problem now days. So, electricity depended businesses face emerge problems during the electricity failure. Having back up electricity by generators or alternative electric line can be help to reduce these problems. Computer may be kept up and running by the high performance back up batteries.
- Prioritizing Risks: After identify the risks they must find the priority in according to assessment of their probability.
Future challenges of Lulu lemon affecting strategic business management and planning of the organization:
Lulu lemon is concentrated on producing sustainable future growth and expanding globally as a multi-channel and multi-brand organization. This will be accomplished through the company’s heavy investment in product exploration and progress. Lulu lemon’s vision is to “elevate the world from mediocrity to greatness by focusing on quality over quantity”.
Apply strategies and techniques to mitigate such risks in the future.
Risk Mitigation: Transferring risk to others, as a method of risk mitigation, is a very topical issue. The core element of the risk management process is risk mitigation. Of the four fundamental risk mitigation methods-
- Avoiding the risk altogether
- Reducing or eliminating elements of risk
- Accepting (sometimes pooling or sharing)
- And transferring risk (to another party)
- It is the last one-transfer- that is quite often misused and misunderstood.
Transfer of risk: Often this method is equated to insuring risk. CAR policies; third party liability; professional indemnity; employers liability; directors and officers liability; motor and so on are all common examples and indeed some are required by law.
Misused: Misused because the risk owner often assumes that the underlying obligation of the risk is also transferred when it rarely fully is, regardless of the contractual instrument used.
Misunderstood: Misunderstood because the transfer of risk should be to a party who is competent to manage the risk as mentioned above, perhaps preferably more competent and suitable that the original risk owner.
Lulu lemon created a Social Responsibility Compliance ranking to assess suppliers and manufacturing partners, and evaluated each partner out of a possible score of 100. The score was broken down into four sections: labor practices, environmental responsibility, health and safety.
As lulu lemon’s commitment to the environment, efficiency and waste reduction was also at the core of lulu lemon’s community legacy initiative and overall strategy. The five year vision for this plan comprised a high level of product and process revolution to reduce environmental pollutants in garment manufacturing and retailing.
Lulu lemon’s final module of community legacy initiative is green buildings and spaces. The company had five year for LEED (leadership in energy and environmental design) designed buildings and spaces for new construction and motivated existing departments and retail locations to aim for nil waste and releases through the implementation of an internal building guide and the Building code of conduct; which encouraged paperless communication along with recycling and paper reduction programs.