BDO study: 20 biggest risk factors for retailers

New York -- General economic conditions, U.S. and foreign supplier vendor concerns, and competition/consolidation are the top three risk factors cited by retailers, according to a new study by BDO USA, LLP, a leading accounting and consulting firm. Rounding out the top five: federal, state and local regulations, and terrorism, natural disasters and geo-political events.

The BDO RiskFactor Report for Retail Businesses, which examines the risk factors listed in the most recent SEC 10-K filings of the largest 100 public U.S. retailers, also found that IT infrastructure and security risks have increased, partially due to growth of the mobile platform. This year, concerns over the maintenance of IT systems and operations leapt from the twelfth most cited risk factor to the sixth. Security risks jumped 31% from the nineteenth most cited risk factor to the twelfth.

Of the 99% of retailers citing general economic conditions as a risk, 71% point to fuel prices as a primary reason, up from 58% last year. With tepid progress in job reports, 68% of retailers note lingering concerns over unemployment, but the risk is down from its peak in 2010 (70%).

“Despite a dip in April, consumer spending has been improving, and retail executives feel that their strategy adjustments are on point,” said Doug Hart, partner in the Retail and Consumer Products Practice at BDO USA, LLP.

“This year, there is an increasing concern over unknown external factors, such as IT security, supply chain disruptions and geo-political events that could derail the execution of their strategies. While retailers are also concerned about gas prices this summer, they are otherwise encouraged by consumer spending.”

These are the top 20 risk factors cited by the 100 largest U.S. retail companies according to the BDO report:

1. General Economic Conditions
2. U.S. and Foreign Supplier/Vendor Concerns
3. Competition & Consolidation in Retail Sector
4. Federal, State and/or Local Regulations
5. Terrorism, Natural Disasters & Geo-Political Events
6. Implementation & Maintenance of IT Systems
6. (Tie) Dependency on Consumer Trends
8. Credit Markets/Availability of Financing & Company Indebtedness
9. Consumer Confidence and Spending
10. Labor (health coverage, union concerns, staffing)
11. Legal Proceedings
12. Privacy Concerns Related to Security Breach
13. Failure to Properly Execute Business Strategy
13. (Tie) International Operations
15. Loss of Key Management/New Management
16. Consumer Credit and/or Debt Levels
17. Changes to Accounting Standards and Regulations
18. Mergers & Acquisitions, Joint Ventures
19. Seasonality and Cyclicality of Results; Holiday Sales
20. Insurance Costs & Uninsured Liabilities
20. (Tie) Impediments to Further U.S. Expansion

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