Professional Documents
Culture Documents
Prepared for
by
RICARDO BOURNE
CRISITINA DE AVILA
ZUILMA FARRARO
PHUONG NGUYEN
JENNIE RAN
MISBAH SAJID
MAY 1, 2017
CONTENTS
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EXECUTIVE SUMMARY
Tailored Brands is a holding company for retailers specializing in mens clothing. Though it
is a new company, it has existed for decades as the well-known Mens Wearhouse. In 2016,
Tailored Brands came into existence, and Mens Wearhouse completed its shift from being a
retailer of menswear to owning companies related to the menswear retail business. Its holdings
include several mens clothing retailers, tuxedo rental businesses, and dry-cleaning businesses.
A review was conducted of Tailored Brands history, financial statements, and current
economic and political conditions. With this information, a risk assessment was performed by a
risk assessment team for Tailored Brands. Risk exposure was calculated for forty different risks.
The risks with the ten highest risk exposures were selected as the priority risks for fiscal year
2017. Together these risks represent over $130 M of risk exposure. The top ten risks are as
follows:
Current economic conditions and shopping trends require management to address risks that
face Tailored Brands in 2017. Internal Audit is poised to use its skill and expertise in assessing
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the risks and advising management of all the possible courses of action and the implications of
each. The same skills that are used to evaluate and assess risk within the company can be
applied to risks externally. Internal audit provides additional benefit beyond their traditional
function by applying knowledge and skills to areas that are presently challenging Tailored
Brands.
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TAILORED BRANDS
Company Background
Tailored Brands came into existence in early 2016. It is a holding company which owns a
family of retail companies in North America that specialize in menswear. Although the name is
new, and the scope of business has changed, this company has been in business for decades. In
1973, George Zimmer started this company in Houston, Texas, and called it Mens Wearhouse.
It was successful in the Houston market and eventually established a presence throughout Texas
Mens Wearhouse went public in 1992. As a public company, it expanded across the US and
into Canada. In 2000, Mens Wearhouse entered the tuxedo rental business and dry cleaning
The process of expansion and development led Mens Wearhouse to acquire several
businesses related to mens clothing. This narrowed the gap between retailer and holding
company. When Mens Wearhouse changed its name to Tailored Brands in 2016, the company
officially changed the focus of its business from retailing to ownership in retailers. Its current
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Tailored Brands has maintained continuity by provided the same products and services
through its different menswear retailers. It offers a wide selection of formal wear, sportswear,
casual clothing, work wear, and uniforms. Tailored Brands owns and operates over 1,650 stores
in the US, Canada, and Puerto Rico. In addition, it owns and operated 39 dry cleaning, laundry,
and heir looming facilities in Texas. The resulting revenue streams listed below (Gledhill
2017a):
Tailored clothing 40 %
Non-tailored clothing 30 %
Rental services 13 %
Corporate apparel 7 %
Alterations 5 %
Womens clothing 2 %
Retail dry cleaning 1 %
Industry Trends
One of the major trends in the retail industry is mergers and acquisition. By acquiring smaller
companies in the same industry that fit with its vision and strategic objectives, a larger company
can increase market share by eliminating competition. Tailored Brands began acquiring its
competition in 1999 when it purchased Moores Clothing for Men. In 2000, it acquired two more
companies, K&G Fashion Superstore and TwinHill. The Moores acquisition enabled Tailored
Brands to enter the Canadian market. K&G Fashion Superstore opened the door to discount
retailing. TwinHill provided Tailored Brands an inroad to the market for corporate wear and
company uniforms. In 2005, Tailored Brands entered the dry-cleaning business in Houston. In
2006, Tailored brands, who entered the tuxedo rental business in 2000, purchased 509
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AfterHours Formalwear and Mr. Tux (History Timeline 2017). With these acquisitions, Tailored
The result of the merger and acquisition is a concentration of market share in the hands of
only a few major retailers. Tailored Brands acquired Joseph Abboud in 2013 and Jos A. Bank in
2014, which made Tailored Brands largest menswear retailer and tuxedo rental business in North
America in 2016 (Tailored Brands 2016a). The top competitors for Tailored Brands are
Another trend that is shaping the retail industry is online shopping. Increasing numbers of
customers are placing orders with online retailers. Gains in online sales negatively impacts
brick-and-mortar stores by reducing revenue. This trend will continue in 2017 (IBISWorld
2017a). Tailored Brands has adjusted their marketing and sales strategy to recapture the loss of
sales to their physical stores by developing an omnichannel approach to meeting customer needs.
This approach integrates the in-store and online shopping experience. If a customer wishes to
purchase an item the store doesnt carry, the consultant can order the item via the website and
have the order delivered directly to the customer. Another option, for the customer who prefers
to manage their own shopping, is for the customer to access the website themselves either online
or by mobile phone. International shipping is available and offered in over100 countries to make
The ideal Tailored Brands customer is male and between 25 and 55 years old. For this market
segment, the current fashion trend centers on a trim, lean cut. This silhouette, while flattering,
requires more attention to fit and alterations for suits, slacks, and shirts. To meet the current
trend, a new clothing line was launched in 2016, the 1905 collection, which has been successful
with the Tailored Brands customer. In addition, alterations are offered at all retail stores (TLRD
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2017a). For customers who want a custom-made suit, measurements are taken and an order is
placed at any Mens Wearhouse or Jos A. Bank store. The suit is hand-made in the US and
The retail industry, in general, was greatly affected by the last recession and the
income and reacted by reducing expenses. Clothing retail was negatively impacted, especially
those specializing in suits and work clothes. However, analysts believe the economy is
recovering and the evidence is the decrease in unemployment (IBISWorld 2017 b). This
suggests an increase in disposable income and, potentially, an increase in sales for suits and work
To distinguish itself from the competition, Tailored Brands offers its customers more than just
an online presence. Tailored Brands treats the shopping experience as an event rather than a
transaction. Though online purchases are convenient, there is no way to know how the garment
will look or fit without trying it on. The salespeople at Tailored Brands are known as sales
consultants. They provide customers with guidance and advice in finding the right look and the
perfect fit for any occasion. This provides customers with additional value if they shop in-store
Board of Directors
Board of Directors
The board of directors is responsible for setting strategic objectives for the company and
overseeing managements execution of that strategy. To do so, the board of directors for Tailored
Brands uses the one-tier board model. Directors are responsible for decision control and
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oversight of management, but daily operations and achieving performance objectives are the
responsibility of management. The board is responsible for guiding the company in a positive
Composition
The Tailored Brands Board of Directors has ten directors. For a list of the Board members,
see Appendix A, Figure 5. The majority of directors, 80%, are independent. These outside
directors bring skills and expertise to their position from their experiences with other companies.
The skills set and experience includes customer service, business development, protecting
business, audit, internal control, legal, new technology, business methodology, branding,
mergers and acquisitions, marketing, global strategic development consumer insights, operations,
retailing, and digital retailing. Two directors are intimately associated with Tailored Brands,
Doug Ewert and David Edwab. Doug Ewert has worked in various roles from mid-management
to the executive level since 1995. Currently he is the CEO of Tailored Brands. David Edwab
also worked in the company for many years, since 1991, primarily in executive management and
on the Board. Together they bring to the Board an extensive understanding of the company and
Succession planning
The Tailored Brands Board actively ensures succession by bringing in new directors that
have skills and expertise to complement those of the existing board members. New directors
also benefit from mentorship with seasoned directors. Dinesh Lathi has recently been named
Chairman of the Board and will be taking over for William Sechrest. Sechrest will have the
opportunity to pass his knowledge on to Lathi and Tailored Brands will not lose all of Sechrests
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knowledge when he eventually retires (Proxy Statement 2016b, 5-8). For a summary of the
Governance Guidelines
The Board of Directors does place a few requirements on its members. Directors may serve
on no more than four public company boards. Directors must also have a financial stake in the
company. Each director must own 12,000 shares, or $625,000 of stock, whichever is less. The
director must have been in possession of the required amount by September 12, 2016 or within
five years after becoming a director. Performance evaluations are conducted annually. Directors
are expected to complete self-evaluations to improve the effectiveness of the Board of Directors
Committees
There are three board committees: Audit Committee, Compensation Committee, and
Nominating & Governance Committee. Each committee must have at least three members, meet
twice a year, and adhere to its committee charter. Specific committee requirements depend on
the nature of the committee. The Audit Committee is responsible for hiring and oversight of the
external auditors. It also oversees the financial statements and disclosures, internal control
structure, internal audit, risk management, and compliance. The Audit Committee is also
granted investigative authority when necessary (TB Audit Com. Charter, n.d.).
strategy, its objectives, and programs. The committee reviews and approves CEO and executive
pay. It also makes recommendations for the Boards compensation which is then reviewed by
outside, independent consultants. The Compensation Committee also performs annual reviews
of company compensation program risks and the compensation philosophy (TB Compensation
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Com. Charter, n.d.). The Nominating & Governance Committee is responsible for enhancing the
Boards effectiveness through managing governance policies and procedures, Board size and
composition, and the frequency and structure of meetings (TB Nom. & Gov. Com. Charter, n.d.).
Board Compensation
General compensation for board members consists of a $125,000 annual cash retainer and an
annual grant of $125,000 of common stock. The stock grant vests in one year. In addition,
directors can receive additional compensation commensurate with their duties and
responsibilities (TB 2016b, 9-11). The only exception is Doug Ewert who is the CEO of
Tailored Brands and receives no compensation for serving on the Board. For an overview of
Summary of Financials
In the analysis of Tailored Brands January 30, 2016 year-end financial statements (TLRD
2016a), it is important to note that Tailored Brands (formerly known as Mens Wearhouse) had
acquired Jos. A. Bank, a major competitor, in 2014. This acquisition heavily impacted its year-
end results. Although, net sales increased by 7%, Tailored Brands incurred a net loss of
approximately $1.03 billion. This was due to a large impairment charge against the Jos. A. Bank
trade name and other intangible assets associated with the brand. A few months after
acquisition, Tailored Brands eliminated the famous buy 1, get 3 sales promotion that Jos A.
Bank was known for. The result was devastating. Comparable sales at Jos. A. Bank decreased,
relatively overnight, by more than 30% which exceeded what Tailored Brands expected. The
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goal of turning Jos. A. Bank around became one of the top priorities for the remainder of the year
During 2015, Tailored Brands also initiated the store rationalization program to reduce costs.
Approximately 235 stores, primarily Jos. A. Bank and Mens Wearhouse stores that were
performing poorly were slated to be closed. At the end of fiscal year 2015, Tailored Brands had
a significant amount of debt on its balance sheet due to the acquisition of Jos. A. Bank. With the
impairment charge negatively affecting its earnings, Tailored Brands financial ratios exceeded
the numbers specified in contracts with creditors which limited its ability to secure more debt
financing. Tailored Brands also partnered with Macys, in 2015, to open tuxedo rental shops
Although earnings fluctuated in fiscal year 2015, Tailored Brands continuously exceeded
analysts earnings estimates in the first three quarters of 2016, which showed a promising sign of
recovery. However, quarter 4 results failed to meet analysts expectations and resulted in a sharp
decline of the companys stock price. Tailored Brands cited soft store traffic as the main reason
for a net decrease in sales of 3.4%. In addition, Tailored Brands and other major retailers have
faced increasing competition from online retailers which threatened sales growth in existing
stores. Retailers are shifting their focus from brick-and-mortar stores to brick-and-click. Or, in
some cases, completely changing over to online sales such as the Limited. This trend will
continue in 2017.
Despite decreasing sales, Tailored Brands net income was $24.9 million compared to a net
loss of $1.02 billion in 2015. However, the contract with Macys to set up tuxedo rental shops
failed to generate the expected revenue and resulted in a $14 M impairment charge. As of
January 28, 2017, Tailored Brands had 170 shops within Macys but halted the opening of the
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remaining 130 stores until renegotiation of the contract is complete. The earnings per share at
the end of fiscal year 2016 was $0.51 compared to the negative earnings per share of $21.26 in
fiscal year 2015 (TLRD 2016a). Detailed analysis of the financial statements can be found in
ratios between Tailored Brands and competitors, as well as industry averages, is necessary to
determine the companys condition. The ratios analysis (see Table 1, Appendix B) assesses
liquidity ratios to measure the companys short-term ability to pay its maturing obligations,
activity ratios to measure how effectively the company uses its assets, profitability ratios, and
coverage ratios.
For liquidity measurement, the analysis covers current ratio, quick ratio and current cash debt
coverage ratio. Tailored Brands current ratios are 2.53 and 2.49 for 2016 and 2015. These
ratios exceed those of Burlington, 0.93 and 1.05 for 2016 and 2015, respectively; as well as, the
industry average of 1.98 for 2016 and 2015. According to the current ratios analysis, Tailored
Brands would be able to meet its short-term obligations. However, because inventory makes up
82% of current assets, the ability for Tailored Brands to pay short-term obligations is dependent
on how quickly it sells its inventory. The quick ratio, which limits the ability to pay short-term
obligations with only the most liquid assets, excludes inventory from the equation. Tailored
Brands quick ratios are 0.30 for 2016 and 0.18 for 2015. Although the ratio improved in 2016,
it is significantly lower than the industry average of 1.09. The low quick ratio corroborates the
fact that inventory is the larger portion of current assets. In the worst-case scenario, Tailored
Brands debts are called in unexpectedly and it is unable to sell its inventory quickly enough, so
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Tailored Brands defaults on its debt. Current cash debt coverage ratios are 0.49 and 0.25 for
2016 and 2015, respectively. These ratios show a positive trend over the last two years. This
shows Tailored Brands is increasing its ability to pay its current debt, but at this point it cannot
pay all its current debt out of operating cash. (see Table 1, Appendix B).
An analysis of Tailored Brands activity ratios suggests it is not operating as efficiently as its
competitors are. Tailored Brands inventory turnover ratios are 3.42 and 2.05 for 2016 and 2015,
respectively. These are lower than the ratios for Burlington, 4.44 and 3.89 for 2016 and 2015,
respectively; or the for that matter the industry average, 3.01 in 2016 and 2015. On average,
merchandise of Tailored Brands remains in inventory for 175 days, or close to 6 months. With
inventories remaining on the shelf longer, Tailored Brands might encounter issues with
merchandises quality due to wear and tear. Long shelf life might also compel stores to sell
outdated styles instead of matching the current fashion trend (see Table 1, Appendix B).
Tailored Brands profitability ratios have varied greatly from 2015 to 2016. Its net profit
margin ratios are -29% and 0.74%, respectively. These ratios are significantly lower than the
3.4% average of Burlington and the industrys average. Even though unit costs have not
increased, lower sales and non-recurring charges affected Tailored Brands performance. This
trend is expected to continue for the next few years as analysts anticipate retail sales will
Tailored Brands net loss in 2015 and small net income in 2016 resulted in a total
shareholders deficit on the balance sheet. This led to return on equity being negative for both
years (TLRD 2017a). Burlington also experienced a negative return on equity for the past two
years, and is operating with a deficit on its balance sheet (Burlington 2016).
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Regarding coverage ratios, the analysis suggests Tailored Brands leverage ratios, 1.05 and
1.04, are too high compared to the industry average. High leverage ratios and low acid ratios can
put the company in jeopardy if the debt is recalled (see Table 1, Appendix B).
Risk Assessment
The Process
Forty risks were assessed for Tailored Brands for the fiscal year 2017 and grouped into eight
major risk categories (see Table 3, Appendix C). The major risk categories are business
environment risks, operation risks, empowerment risks, integrity/reputation risks, market risks,
information technology risks, information for decision-making risk, and counterparty risks.
Each risk was assessed based on its potential impact and the likelihood of occurrence. Risk
was evaluated on a scale from 1 to 7 points, with one representing 0.1%, or $84,811, of the 5-
year average net income. On the high end of the scale, seven represented risk impact 25% or
greater of the 5-year average net income, or $21.1 million and above (see Table 1, Appendix C).
Likelihood was scored on a scale from 1 to 4 points. One represented the an extremely unlikely
event occurring one every ten years or longer. Four represented the possibility of a risk
occurring within this financial period (see Table 2, Appendix C). The score for impact and
likelihood for each risk were multiplied to calculate the exposure level. The higher the impact
and likelihood is, the higher the risk exposure will be.
To minimize the errant scores, a team of six risk and control professionals individually and
independently scored the impact and likelihood of each risk and calculated the corresponding
risk exposure. The six sets of scores were tabulated and run through a statistical model to
low range for either impact or likelihood. Team members with the two highest and two lowest
scores for risk were given the opportunity to present arguments for their scoring to the group,
followed by discussion. The final composite score was established through team consensus
which required compromise from each party at different points. From the composite score for
risk exposure, the risks with the ten highest exposure levels were recognized at the top risk
Examples
To illustrate the process by which team consensus was reached, four examples are given.
Each of the risks in the example had a high degree of variation in impact or likelihood.
1. Reputation Risk: Risk exposure from individual scoring ranged from 9 to 35 which
resulted in a difference of 29 points. During the team discussion, it became apparent that each
team member had a different viewpoint of reputation risk and how it applied to Tailored Brands.
Compounding this was the experience and judgement each team member used to assess the
impact and likelihood of the risk. Members that gave higher scores for likelihood and impact of
the risk based their decisions on the recent events that Tailored Brands encountered such as the
negative results associated with the Jos. A. Bank acquisition and lower than expected earnings
from the last quarter. In addition, customers have voiced complaints of poor customer service
online and on social media. Other team members felt that the negatives were offset by the fact
that Tailored Brands is a major player in this industry. It has been in business long enough to
know how to weather any negative publicity. Through discussion and compromise, the group
decided that the likelihood of Tailored Brands facing reputational risk within the next year is
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high and the impact could be substantial. This might already be reflected, to some degree, in
2. Investor Confidence Risk: Individual scoring ranged from 10 to 35, giving a difference of
25. The main reason for this large variation was a difference in opinion on how the risk applied
to Tailored Brands. Team members who rated the risk to investor confidence as having a high
likelihood cited the companys underperformance in delivering expected results as the basis for
their view. Team members who ranked the risk at the lower end of the range felt that there will
always be fluctuations in stock prices, especially when earnings are announced. They viewed
these fluctuations as temporary and noted that Tailored Brands is developing new strategies to
improve earnings results. Stock prices over the last year were reviewed and declining stock
prices were observed. This would imply the market and investors are less confident about
Tailored Brands and are cautiously watching its performance. The team agreed that given the
current stagnation in the economy and evidence of reduced mall foot traffic, the investor
3. Information for Decision Making Risk: The range of individual scores fell between 2 and
35 which represented a 33 point difference. The definition for this risk is broad since it includes
any information that could potentially be used for managements decision-making. Due to
several aspects of this risk, there were different understandings and applications of this risk. The
team members that scored impact and likelihood higher, associated the this risk with the recent
acquisition of Jos. A. Bank and the subsequent decision to eliminate the buy 1 get 3
of a strategic decision and its execution threatening company assets and future growth. Other
team members acknowledged these events but argued that because of them Tailored Brands was
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aware of the breakdown in information and has likely implemented systems and controls to
prevent this from happening again. After a discussion and review of the latest Tailored Brands
financial statements, the group decided to rate the likelihood of this risk as high with a
4. Data Security Risk: The risk was rated between 1 and 20 which gave a 19 point spread.
Unlike other risks where team members might have understood the risk definition differently,
everyone agreed on what this risk meant. However, views still differed regarding the impact of
this risk on the company and how likely it was to happen. The entire team agreed that Tailored
Brands was aware of the potential risks due to its online retail business. Some team members
felt that while Tailored Brands had probably taken step to mitigate the risk, the threat is always
present and evolving. Should this risk materialize into a real threat the impact could be
significant to the companys bottom line. As a result, these team members scored this risk as
high in both impact and likelihood. Team members that gave lower scores believed that with the
current trend of data breaches, Tailored Brands most likely implemented preventive and
detective controls to reduce the likelihood and impact of such breaches. After a discussing other
recent data breaches at major retailers and the impact, the team agreed that this risk should be a
priority in 2017.
After the group reconciled the individuals scores for each of the risk, the ten risks with the
highest exposure level were identified. The dividing line between the top ten risks and the
remaining thirty occurred was visually apparent (see Figure 1, Appendix C). All ten risks had
exposure scores of eighteen or above. This score was translated into a monetary figure by using
the dollar amount for the corresponding impact score (see Table 1, Appendix C) and assigning a
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probability to each level of the likelihood scale (see Figure 1, Appendix C). To calculate the
dollar amount of exposure, the composite scores for impact and likelihood were multiplied and
The top ten risks are listed below, from greatest to least exposure, and represent over $130 M
Risk Priority
Our job, as internal auditors, is helping to create value for the organization. In our role, we
specialize in identifying a risk and developing a control to mitigate the risk. In this project, our
role is to identify the top ten risks that pose the greatest threat to Tailored Brands in 2017 and
External influences
The increasing popularity of e-commerce and online shopping: Online shopping has
become an essential part of the shopping experience. This change brings with it a
dramatic decrease in store traffic, which has caused serious damages to retailers such as
the Limited, Bebe, American Apparel, and other well-known brands with brick-and-
mortar stores.
The retirement of baby boomers: The retirement of baby boomers (age 50 70) also
affects the retail industry especially for companies that specialize in formal wear for older
men such as Tailored Brands. With more millennials entering the workforce and work
dress codes becoming more casual, retailers need to monitor the changing fashion trends
to make appropriate changes or additions to their merchandise in an effort to appeal to a
younger generation whose taste differs greatly from the previous generation.
General macroeconomic conditions: Retailers need to also be mindful of the general
macroeconomic conditions as they can affect households disposable income. The
economy can influence whether customers shop or save.
Internal influences
Merchandise on hand: As a retail company, it is essential to know the changing fashion
trends and what customers want in order to offer customers what they are looking for.
Level of customer service offered at local stores: In the era of online shopping, a
positive face-to-face interaction can be the determining factor in brand loyalty.
Countermeasures
According to an article published by HBR, the two most powerful countermeasures to the
shifting of customer preference are the continuous creation and analysis of proprietary
creation and analysis of proprietary information refers to the production of new and up-to-date
design as well as the collection of information that gives insight to what customers want. Fast
and cheap experimentation refers to the application of the aforementioned information to test if
handbags. Coach experienced a period of stagnant growth in 2000 after it spun off from Sara
Lee. At the time, Coach was known for its conservative styling but wanted to expand its
customer base by offering more trendy styles. To test whether existing customers would stay
and if it could attract new customers, Coach launched an aggressive marketing campaign
featuring new products, conducted extensive interviews (more than 10,000 a year), and
conducted in-store product trials. Using information collected from this research, Coach altered
its designs and dropped items that did poorly. It also tailored existing merchandise to customers
preferences (Slywotzky, Dzrik 2005). This method for research has been proven successful for
Coach.
Coach is similar to Tailored Brands in many respects such as conservative styles, an older
customer base, high-end products, and international presence. If Tailored Brands decides to take
similar approach to what Coach did, internal audit can assist with the following:
Audit of the existing manual and automated controls surrounding the process of
collecting proprietary information, and if needed, provide guidance and suggestions on
how to make the process more reliable.
Audit the existing manual and automated controls surrounding the channels through
which customers voice their comments and/or complaints about the company. The audit
might expose weaknesses in terms of monitoring and help identify areas and controls that
need adjustments.
Conduct interviews and walk-throughs with appropriate personnel that handle the
collection of customer comments and complaints to ensure he/she understands the
procedures of what need to be done when the information comes in.
Conduct quality assurance audits at local stores to evaluate the current level of customer
service.
Assist with in-store trials by testing them prior to their launch at local stores.
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2. Reputation risk ($16.9M)
Definition
The risk that Tailored Brands fails to meet the expectations of its customers, investors,
employees, and/or the public, which would damage its reputation. In light of recent company
growth through mergers and acquisitions, the possibility exists for Tailored Brands to fail the
expectations of customers and employees. Employees are a direct point of contact with the
customer and are critical to satisfying customers expectations, reaffirming the companys brand
to the customer, and providing management with observations of changes in customer buying
habits.
External influences
Countermeasures
A global survey conducted by Forbes Insights suggested that only 19% of global companies
would grade themselves as earning an A in the measures they have taken to address reputation
risk, even though 88% of executives explicitly cited reputation risk as a top strategic issue
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(Ristuccia 2014). The survey revealed the following strategies that companies are doing to
The above measures can be implemented by a wide-range of companies as they are generic
Audit existing manual and automated controls surrounding the process of collecting and
distributing customer feedback within the organization.
Audit existing manual and automated controls, as well as, the effectiveness of the
supplier selection process.
Conduct interviews of a random sample of employees to survey their opinions regarding
their work environment and the climate of the company in general.
Audit separation of duties in key areas and based on the findings develop and implement
an educational program to improve employee awareness of company policies and their
role in safeguarding assets.
Communicate with the board periodically of any challenges regarding upper
management.
Audit the current plan for handling legal/regulatory changes and perform a walk-through
with appropriate personnel to ensure they understand how to perform the process.
Definition
Investor confidence risk refers to the exposure of a companys stock prices in relation to
unexpected changes in investor confidence. The market usually sees companys stock prices
decline when investors feel less confident. For Tailored Brands, 2015 and 2016 have witnessed
several hikes and drop of stock prices as investor confidence has changed. In 2015, the decline in
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sales after the Jos A. Bank acquisition prompted investors to sell their stock and the Tailored
Brands stock price dropped. In 2016, stock prices increased after earnings improved for the first
three quarters. However, stock prices decreased nearly 30% after fourth quarter earnings call
due to worse-than-expected results.
External influences
Industry outlook: The overall outlook of an industry might cause investors to buy or sell
their stocks, which results in fluctuation in stock prices.
Internal influences
Financial performance: Companys financial performance is among the most common
reasons that causes changes in investor confidence.
Ethical practices: A companys integrity and ethical practices affects investor
confidence. An example includes the incident between United Airline and a passenger
that was forcibly removed from the plane. Following the incident, United Airlines stock
price dropped considerably and more customer complaints are surfacing daily.
Compliance to rules and regulations: A companys adherence to rules and regulations
is a sign of effective governance and management and sends the message to investors that
the company is reliable and predictable. Lack of compliance could result in unexpected
substantial penalties and fines, as well as, prompt investors to question what else is going
on that isnt known yet.
Countermeasures
Investor confidence risk is closely related to reputation risk. The most effective
countermeasures to investor confidence risk include continuous reflection about the companys
practices to ensure they comply with rules and regulations as well as ethical standards.
Monitoring strategic decisions protects financial growth by ensuring that all functions are
working together to meet performance metrics and overarching goals. Since this risk is related to
reputation risk, internal audit can assist management by employing the same processes that
would be used to for reputational risk. To safeguard the companys financial health, internal
audit can take advantage of the normal audit course, which includes auditing financial reporting
controls.
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4. Information for decision-making risk ($16.9 M)
Definition
The risk that information used for operational, strategic, and financial decisions is unreliable,
incomplete, untimely or inaccurate. The information is created by inputs, processes, or
application systems. Failure can occur when these systems dont work properly or subordinates
fail to understand the nature of the information and company needs. Tailored Brands recent
strategic decisions raised doubts about whether, or not, the information used during the decision-
making process is reliable and accurate. Some decisions, such as the decision to eliminate the
promotions at Jos. A. Bank and the partnership with Macys, did not provide the expected result
and introduced questions about the reliability of the information used to make those decisions.
External influence
Third-party vendor: Many companies use third-party vendors for their information
technology needs which might include tools to gather and analyze information. If the
vendor does not have the resources to invest in advanced technology and experienced
personnel, the company might get information that is substandard in quality.
Internal influence
Misunderstanding of company objectives: Information gathering is usually conducted
at lower levels of the company. If the companys communication line is not effective,
subordinates might gather information that is incomplete, inaccurate, untimely, or
unreliable.
The integrity of data: Data might be corrupted through alterations, intentional or not,
once it is stored in the system. If the corrupted data is used to generate reports that are
used in decision-making, the results could be misalignment between the actual conditions
and the desired outcome.
Availability of data: The availability of data at a critical moment is as important as
having the correct data. Many strategic decisions are time-sensitive, which requires
information to be present at the appropriate time. Without timely data, decisions made
might be rendered ineffective.
Countermeasures
To gather and ensure the appropriate information is being used for decision making, many
Identify the problem that needs to be solved or the type of decision that needs to be made.
24
Determine the sources of information that are needed and decide what needs to be
collected, who should collect the information, and how it addresses the problem at hand.
Encourage collaboration between business and IT personnel to correctly collect and
process the information once it is stored in the system.
Identify and strengthen controls surrounding the integrity of data.
Communication should be clear and easy to understand between all parties involved to
avoid misalignment of objectives.
Internal audit can assist management with the following process if Tailored Brands implements a
similar approach:
Audit existing manual and automated controls surrounding the collection, storage, and
processing of information.
Interview people involved in the decision-making process to ensure they understand the
objectives and know proper procedures for data collection, processing, and reporting.
Audit the controls surrounding the integrity and availability of data to ensure
effectiveness and identify any areas of weakness.
Definition
Resource available risk refers to the risk that the availability of funds for increasing business
capacity, acquisitions, and other growth opportunity will become scarce. The risk also pertains to
a lack of managerial and technical expertise necessary for growth. For Tailored Brands, lack of
availability of funds might happen due to restrictions on borrowing resulting from debt
covenants. In addition, Tailored Brands will start paying off its debt in upcoming years which
might prevent the company from using the money in operations and strategic activities.
External influence
Creditors: If the debtor companys leverage ratios are higher than the maximum
specified in the agreement, creditors can impose a restriction to prohibit more funds from
being borrowed.
General macroeconomic conditions: General economic conditions might influence
whether a company can borrow money, or not. In difficult times, it might be harder for
companies to borrow debt to fund operations.
Shortage of expertise: With the rise of globalization, companies might find it difficult to
hire experts as they might have gone overseas to work. This includes experts in IT, math,
and engineering.
25
Internal influence
Credit worthiness: A companys financial condition greatly influences its credit score
and how much credit it is extended.
Allocation of resources: The way in which company allocates its resources determines if
resources are available in a time of need. Planning is essential to ensure the company
does not encounter a shortage in resources, especially cash which is needed for the
operations.
Countermeasures
Companies often counter the risk of resources shortage by implementing the following:
Conduct budget meetings every year and document spending decisions in a clear and
concise manner.
Operations and strategic spending should be approved by upper management.
Strengthen internal controls to avoid asset misappropriation.
Develop a contingency plan in the event the company faces a shortage of resource.
Develop policies for hiring, which should be approved by upper management to ensure
the hiring policies align with the companys objectives.
This risk is primarily countered by management and how the company is run. Internal audit
can assist with auditing existing manual and automated controls that safeguard the companys
assets. Internal audit can also perform walk-through with appropriate personnel to ensure
Definition
The potential for loss arising from the uncertainty of legal proceedings. It also includes the risk
associated with potential changes of laws and regulations related to a given industry, and/or
country. For Tailored Brands 2016 10-K, the company does not currently have any pending
legal outcomes that would negatively impact the company. However, with the ever-changing
26
legal and regulatory landscape, especially with the newest executive orders (RILA 2017), put the
company at risk.
External influence
Legal/regulatory changes: The changes in laws and regulations related to the industry
can positively or negatively impact the company. For Tailored Brands and the retail
industry, the executive order of buy American, hire American might cause increasing
costs as companies might no longer be able to source from outside the country.
Internal influence
Lack of corporate governance process: The lack, of a defined process to ensure the
company can keep up with the changes in the legal and regulatory environment, might
cause great losses to the company in terms of fines, penalties, and reputation.
Countermeasures
The Center for Retail Compliance (CRC 2015) developed a model, which can be used by
retailers to ensure they comply with rules and regulations. The model pertains to environmental
compliance requirements. However, it can be adopted to fit the companys needs in other areas.
Since these processes fall within the expertise of internal audit function, any findings
discovered during the normal course of an audit could be used to augment model above,
27
7. Inventory risk ($10.1 M)
Definition
The risk associated with the production process such as the availability of materials, financial
position of key vendors, pricing of required materials, shrinkage, shelf life, and obsolescence.
This risk can also be tied to the cycle time risk, which is the amount of time from when an order
is accepted until the time of delivery, and capacity risk, which associates with the entitys
capacity needs compared to actual needs.
As a retailer, Tailored Brands faces a significant inventory risk. Due to the nature of the
business, Tailored Brands holds on hand a large inventory of merchandise from various suppliers
around the world such as Asia (primarily China), Mexico, and other regions. The major hub,
where inventory is stored, is in Houston. Houston is prone to flooding and is vulnerable to
hurricanes and tropical storms. In the last two years, Houston has experienced unexpected
flooding in areas that never flooded before. This means Tailored Brands inventory, which
represents a substantial amount of assets, is exposed to significant risk due to natural disasters
and severe weather.
External influence
Suppliers: Suppliers are a key factor in inventory risk. Suppliers can have a positive or
negative impact depending on the suppliers stability and business practices. If a major
supplier goes out of business, a company without an alternative supplier will have
difficulty in sourcing new materials and scheduling production, especially in the garment
industry. This in turn could lead to quality issues with the product itself. If supplier
schedules and ship dates are unreliable, the merchandise isnt delivered on time which
might impact sales and the companys reputation.
Legal and regulatory changes: Legal changes associated with the retail industry might
cause an increase in prices of materials or cause hiccups in the supply chain of foreign-
sourced products.
Changing fashion trends: Changing fashion trends might cause longer shelf life for
inventory and exposed them to wear and tear, as well as, take up valuable space in
inventory that could be used for products that sell better.
Internal influence
The selection of vendors: The vendor selection process is critical to a retailers success.
Vendors should be carefully vetted. This ensure they are financially sound and do not
have going concerns issues and prevents engaging in business with suppliers that would
likely have a negative impact on business.
Contingent plan: All retailers need a contingent plan in the event major suppliers go out
of business or encounter an unexpected delay in manufacturing time. Disaster recovery
28
plans need to be kept up-to-date to ensure a quick recovery should the unthinkable
happen.
Inventory control system: This system allows companies to monitor in real-time the
level of their inventory and make appropriate decisions. It is a critical to doing business
in the retail industry and as such needs to be operating effectively.
Countermeasures
The CIO magazine (Schiff 2015) suggests the following practices to counter inventory risk:
Track and manage inventory in real-time to obtain more visibility of the supply chain to
align supply with demand.
Use source tagging and RFID to keep track of inventory and stock levels.
Utilize a B2B e-procurement network to predict supply chain disruptions and act quickly
to adapt business process.
Encourage collaboration between marketing and supply chain team.
Perform annual audit of current vendors to ensure they are financially healthy and
comply with contracts specified between both parties.
Join professional network to stay abreast of current and potential changes in the
regulatory environment.
Develop a written plan with scripts the company can follow in time of possible inventory
crisis.
The assumption is that Tailored Brands has implemented a lot of the common practices
considering its longevity in the business. Most of the activities associated with inventory
controls are part of internal audits normal audit course which would reveal weaknesses and lead
29
Retailers in this industry also faces external competition from department stores such as Macys
and discount retailers such as Walmart.
External influences
Customer preference: Changes in customer preference might drive certain customers to
the competition. Customers that are price sensitive might choose to buy substitutes from
discount retailers.
Internal influences
Innovative products: With the millennials entering the work force and the changes in
styles, companies need to stay abreast of the current market trends to not only meet the
demands of the existing customer base but also to attract new customers.
Continuous gathering of intellectual and proprietary information: Understanding the
competitions product lines, marketing strategy, and state of the other company is
important to Tailored Brands strategic decisions.
Countermeasures
According to EYs article, Turn Risk and Opportunities into Results, competition is
increasing as global players and local companies begin sharing the emerging markets playing
In addition, KPMG published an article for the top retail risks for 2017 (KPMG 2016), which
also suggests:
Consider new pricing and promotional strategy as many competitors compete on price.
Invest in advanced point of sale technologies that enhance the shopping experience.
This risk goes hand in hand with customer preference and reputation risks. The controls used
for those two risks can also be used for competition risk. Internal audit can assist Tailored
30
Brands in fine-tuning the controls to help gain a competitive advantage. In addition, internal
audit can conduct research to benchmark product quality, standard operations and in-store
customer service to allow for better comparisons between Tailored Brands and competitors.
Definition
Information systems may have exploitable vulnerabilities which could result in loss of data, loss
of transaction capability, loss of property, or loss of privacy. All systems have vulnerabilities,
and with the advancement of technology in this age, systems are extremely vulnerable to outsider
attacks. This risk increases for Tailored Brands as it gathers customers private information such
as credit card numbers.
External influences
The Internet of Things (IOT): IoT is a system of interrelated computing devices,
mechanical and digital machines, objects, animals or people that can send and receive
data. The growing of the internet and the incredible amount of connection that we have
nowadays renders many controls useless. As more computers are being connected, the
chances of exploitation increase.
Internal influences
Vulnerability detection: A companys ability to detect its system vulnerabilities can
reduce the exposure of potential loss if the risk does occur.
Monitoring and managing IT controls: IT controls such as authorization and
authentication, access controls help to safeguard the companys assets. IF these controls
are not effective, the likelihood of the risk occurring increases significantly.
Internal emphasis on data security: If companies dont emphasize the importance of
safeguarding its data, data security breaches will happen.
Communications and training: Lack of communications and training might cause
employees to fall prey to social engineering attacks.
Mobile computing and cloud usage: The usage of mobile access and cloud increase
exposes companies to significant data security risk.
Countermeasures
31
According to the ISACA, the first step companies need to take to combat security risk is to
perform a risk assessment pertaining to data security. In addition, the following steps are
Understand the firms data security risk profile, which includes a comprehensive review
of how and where data is stored, the kind of data sent and received, and identify practices
that might put the company at risk. This activity also helps to identify vulnerabilities
within the company.
Consider data needs. Companies should ask if the data that they collect and store is
necessary to the operations of the companies.
Evaluate mobile programs to ensure they meet the firms needs and take mobile security
very serious.
Have a written policy regarding the use of information resources and ensure employees
read and understand it.
Promote the importance of data security and conduct regular training.
Develop written plan with procedures on what needs to be done if data might be at risk.
Back up data and maintain a disaster recovery plan.
Internal audit can assist with the following regarding data security:
Audit existing IT controls including but not limited to authorization and authentication,
access controls.
Review user privileges on the need to know basis.
Review authentication policies to ensure they meet the needs of the company.
Perform walk-throughs with appropriate personnel in charge of handling data security
breaches.
Interview employees to survey the knowledge of and attitude towards data security.
Countermeasures
According to KPMGs recent publication on the top risks in retail in 2017, companies can
consider the following points to counter the sales price aspect of this risk:
Employ analytics and IT platforms to tap into the trend of consumer activities which help
retailers to make informed and timely decision regarding pricing strategies.
Focus less on deep discounts and more on providing the customer with a positive
experience.
33
Since the countermeasures for this risk emphasize the collection of information, internal audit
can assist with auditing controls surrounding this information to ensure it is available, complete,
and accurate.
Conclusion
Retail businesses are facing many challenges to their bottom line. The economy is growing
very slowly but decreased foot traffic in malls threatens to erode sales. The unemployment rate
is low but spending habits havent recovered to their pre-2008 levels. The list of retailers
succumbing to current market conditions is growing longer every day. Many major retailers are
finding it difficult to stay in business in todays economy and some have decided to close their
doors. Those that are able to survive, or even thrive, in the retail industry have had to rewrite
their strategy and plug the holes of seemingly innocuous non-issues. Companies have learned
that they cannot use the same tools and strategies they used in the past and must look to
resources from within the company and use them in innovative ways.
Internal audit is poised to use its expertise and skills in providing value to the company and
protecting its assets. The strengths that set internal audit apart from other areas of the company
are its independence, ability to view an issue from several different angles and identify crucial
processes, and evaluate and assess the effectiveness of a given course of action by measuring key
assessment by its very nature requires a judgement on an event that has yet to take place. This
involves subjective opinions based on experience and a knowledge of potential areas that require
34
additional scrutiny. Internal audit has been fully vetted and is required to maintain high
standards of independence from influences within and without the company that may attempt to
affect the results of an audit. Management can depend on information reported by internal audit
Internal audit is expert at looking at a multi-faceted issue from many perspectives. To get a
complete and accurate view of an issue it must be analyzed but only in vital areas. Internal audit
can distinguish between the important areas that are not key and those areas that are relevant,
critical, and sometimes hidden from open view. It is this ability to see into the heart of a matter
that saves time, effort, and money when answers are needed.
Internal audit has extensive experience and understanding of how to assess the effectiveness
of a course of action. When evaluating risk mitigation, the event hasnt occurred, so results are
hard to measure in concrete terms. Internal audit specializes in measuring the hard-to-measure
elements of any process and converting it into meaningful information that management can use
to make decisions.
The top ten risks that Tailored Brands faces in 2017 have been identified and they total $130
M. Deciding on how best to manage the risk relies heavily on the information surrounding the
risk. Internal audit can provide a comprehensive analysis of each risk for each company owned
by Tailored Brands. Internal audit would recommend primary and alternative courses of action
for mitigating risk which would fall under one of the following treatments: treat the risk, tolerate
the risk, transfer the risk, terminate the risk, or a combination of treatments. Management would
then be able to choose the best path forward to address the risk.
35
To provide management with an accurate picture of each risk for each company, research
needs to be done, followed by an analysis, and combined into a cohesive, comprehensive report.
The internal audit team will need to conduct walk-throughs, interviews, surveys, field
observations, benchmarks, reviews of policies and procedures, and access documents and
records. The resources internal audit requires to complete this task are as follows:
An increase in the internal audit budget of 3%. This would allow internal audit to hire an
additional auditor.
At least 2,000 hours to conduct the activities specified above for each of the risks.
Communication from management to the company about the audit and a request for
By using internal audit to evaluate the impact of the top ten risks on Tailored Brands,
management can be confident of receiving independent, unbiased information that provides the
best information possible with which to make decisions. Internal audit has access to key
personnel, records, processes and understands how the company works. The value internal audit
can give, especially since it knows and understands Tailored Brands intimately, is immeasurable.
It could be the deciding factor of whether Tailored Brands merely survives this business climate,
or whether it thrives.
36
APPENDIX A
Figure 1: Summary of financials for Tailored Brands and top competitors (Gledhill 2017b)
37
Figure 2: Disposable Income contrasted with purchase of online services (IBISWorld 2017a)
38
Figure 5: Summary of the directors professional background (TB 2017c; TB 2016b, 5-8)
39
APPENDIX B
40
Figure 2: Horizontal Analysis of Balance Sheet
41
Figure 3: Vertical Analysis of Income Statement
42
Figure 4: Horizontal Analysis of Income Statement
43
Table 1: Ratio Analysis (Burlington Stores 2015; Burlington Stores 2016)
44
APPENDIX C
45
Table 3: Composite risk assessment with individual score components
46
Ricardo 5 1 5 Median 6 3 14
Misbah 6 3 18 Range 3 3 19
Jennie 5 4 20
47
ZF 7 4 28 Mean 5 4 21
Phuong 4 5 20 Mode 4 4 20
Ricardo 5 3 15 Median 5 4 20
Misbah 6 4 24 Range 3 2 13
Jennie 4 5 20
14 Performance Risk 4 4 16
Cristina 3 3 9
ZF 3 2 6 Mean 4 3 12
Phuong 3 4 12 Mode 3 4 9
Ricardo 3 3 9 Median 3 4 11
Misbah 6 4 24 Range 3 2 18
Jennie 3 4 12
15 Capacity Risk 3 3 9
Cristina 3 2 6
ZF 3 3 9 Mean 2 3 6
Phuong 4 3 12 Mode 3 3 6
Ricardo 2 3 6 Median 3 3 7
Misbah 4 2 8 Range 2 1 6
Jennie 2 3 6
16 Inventory Risk 6 3 18
Cristina 5 2 10
ZF 6 3 18 Mean 5 3 15
Phuong 3 4 12 Mode 6 3 18
Ricardo 6 3 18 Median 6 3 17
Misbah 6 3 18 Range 3 2 8
Jennie 4 4 16
17 Quality Risk 3 2 6
Cristina 4 1 4
ZF 1 2 2 Mean 3 3 10
Phuong 3 3 9 Mode 4 2 0
Ricardo 4 2 8 Median 4 3 9
Misbah 6 4 24 Range 5 4 22
Jennie 2 5 10
Organizational Structure
18 3 3 9
Risk
Cristina 3 2 6
ZF 1 1 1 Mean 2 2 6
Phuong 2 1 2 Mode 3 2 2
Ricardo 1 2 2 Median 3 2 4
Misbah 4 4 16 Range 3 3 15
Jennie 3 3 9
Empowerment Risk
19 Authority/Limit Risk 2 1 2
Cristina 3 2 6
ZF 1 1 1 Mean 3 2 7
Phuong 2 1 2 Mode 3 2 6
Ricardo 3 2 6 Median 3 2 6
Misbah 4 4 16 Range 3 3 15
Jennie 3 3 9
Management/ Employee
20 5 2 10
Fraud Risk
48
Cristina 3 3 9
ZF 6 2 12 Mean 4 3 11
Phuong 4 2 8 Mode 4 3 0
Ricardo 5 3 15 Median 4 3 11
Misbah 4 4 16 Range 4 2 10
Jennie 2 3 6
21 Illegal Acts Risk 5 2 10
Cristina 4 3 12
ZF 1 2 2 Mean 4 3 9
Phuong 6 1 6 Mode 5 3 6
Ricardo 5 3 15 Median 5 3 9
Misbah 5 3 15 Range 5 2 13
Jennie 2 3 6
Integrity/Reputation Risk
22 Reputation Risk 6 5 30
Cristina 3 3 9
ZF 7 5 35 Mean 5 4 17
Phuong 5 4 20 Mode 5 3 0
Ricardo 6 3 18 Median 5 3 17
Misbah 5 3 15 Range 5 2 29
Jennie 2 3 6
23 Integrity Risk 5 2 10
Cristina 2 3 6
ZF 7 1 7 Mean 4 3 10
Phuong 4 3 12 Mode 4 3 6
Ricardo 3 2 6 Median 4 3 10
Misbah 6 3 18 Range 5 2 12
Jennie 4 3 12
Market Risk
24 Market Risk 3 3 9
Cristina 1 2 2
ZF 1 3 3 Mean 3 3 10
Phuong 3 3 9 Mode 1 3 0
Ricardo 4 4 16 Median 4 3 11
Misbah 6 2 12 Range 5 2 14
Jennie 5 3 15
25 Interest Rate Risk 3 4 12
Cristina 3 3 9
ZF 3 4 12 Mean 3 3 9
Phuong 3 4 12 Mode 3 3 12
Ricardo 1 2 2 Median 3 3 11
Misbah 3 1 3 Range 4 3 13
Jennie 5 3 15
26 Currency Risk 2 2 4
Cristina 3 3 9
ZF 2 3 6 Mean 3 3 8
Phuong 3 2 6 Mode 3 2 6
Ricardo 1 2 2 Median 3 3 7
Misbah 4 2 8 Range 3 3 13
Jennie 3 5 15
49
27 Liquidity Risk 5 3 15
Cristina 4 3 12
ZF 7 2 14 Mean 4 3 11
Phuong 3 3 9 Mode 4 3 12
Ricardo 4 3 12 Median 4 3 11
Misbah 3 3 9 Range 5 3 5
Jennie 2 5 10
28 Structure Risk 3 2 6
Cristina 2 1 2
ZF 5 1 5 Mean 3 2 4
Phuong 4 2 8 Mode 1 1 2
Ricardo 1 1 1 Median 3 2 4
Misbah 3 2 6 Range 4 1 7
Jennie 1 2 2
29 Hedging Risk 2 2 4
Cristina 2 1 2
ZF 1 1 1 Mean 2 2 5
Phuong 3 2 6 Mode 2 2 4
Ricardo 4 3 12 Median 2 2 4
Misbah 2 2 4 Range 3 2 11
Jennie 2 2 4
30 Velocity Risk 2 2 4
Cristina 2 2 4
ZF 2 1 2 Mean 2 2 5
Phuong 1 2 2 Mode 2 2 4
Ricardo 5 3 15 Median 2 2 4
Misbah 2 2 4 Range 4 2 13
Jennie 2 2 4
31 Collateral Risk 4 2 8
Cristina 2 1 2
ZF 7 1 7 Mean 4 2 6
Phuong 4 1 4 Mode 4 1 6
Ricardo 4 3 12 Median 4 2 6
Misbah 3 2 6 Range 5 2 10
Jennie 3 2 6
32 Investment Risk 4 3 12
Cristina 3 2 6
ZF 5 2 10 Mean 4 3 10
Phuong 5 3 15 Mode 3 2 6
Ricardo 5 3 15 Median 4 3 10
Misbah 3 3 9 Range 2 1 9
Jennie 3 2 6
Information Technology Risk
33 Information Systems Risk 5 3 15
Cristina 3 2 6
ZF 3 4 12 Mean 4 3 10
Phuong 3 3 9 Mode 3 3 12
Ricardo 4 3 12 Median 3 3 11
Misbah 6 3 18 Range 4 2 14
Jennie 2 2 4
50
34 Data Integrity Risk 5 2 10
Cristina 2 1 2
ZF 7 2 14 Mean 4 2 11
Phuong 4 2 8 Mode 0 1 0
Ricardo 5 4 20 Median 5 2 11
Misbah 6 3 18 Range 6 3 19
Jennie 1 1 1
35 Data Security Risk 5 4 20
Cristina 2 1 2
ZF 7 5 35 Mean 4 3 15
Phuong 5 4 20 Mode 0 1 0
Ricardo 4 4 16 Median 5 4 17
Misbah 6 3 18 Range 6 4 34
Jennie 1 1 1
Information for Decision Making Risk
Information for Decision
36 6 5 30
Making Risk
Cristina 6 2 12
ZF 7 5 35 Mean 5 3 16
Phuong 4 4 16 Mode 6 2 12
Ricardo 1 2 2 Median 5 3 14
Misbah 6 3 18 Range 6 3 33
Jennie 4 3 12
Counterparty Risk
37 Credit/Counter-party Risk 4 2 8
Cristina 4 2 8
ZF 4 1 4 Mean 3 2 7
Phuong 3 3 9 Mode 4 2 4
Ricardo 5 3 15 Median 4 2 6
Misbah 2 2 4 Range 3 2 11
Jennie 2 2 4
38 Intermediary Risk 2 2 4
Cristina 3 1 3
ZF 1 1 1 Mean 3 2 5
Phuong 3 3 9 Mode 3 1 9
Ricardo 3 3 9 Median 3 2 5
Misbah 2 1 2 Range 2 2 8
Jennie 3 2 6
39 Settlement Risk 3 3 9
Cristina 4 2 8
ZF 3 1 3 Mean 3 2 5
Phuong 2 4 8 Mode 4 1 8
Ricardo 4 2 8 Median 3 2 6
Misbah 1 1 1 Range 3 3 7
Jennie 2 1 2
40 Vendor Risk 3 2 6
51
Cristina 4 2 8
ZF 3 1 3 Mean 4 3 12
Phuong 3 3 9 Mode 4 3 0
Ricardo 6 3 18 Median 4 3 12
Misbah 5 3 15 Range 3 4 17
Jennie 4 5 20
52
Figure 2: Risk exposure
53
Figure 4: Top ten risks/opportunities for 2017
54
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