Shopping around for risk

The retail sector is a very important part of the UK economy accounting for around 6% of national GDP with sales in 2005 of £249bn.

By 2010 it is estimated that e-commerce will account for between 20% and 25% of all retail spending and it is estimated that the sector as a whole derives 60% of its income from Christmas shopping.

While the increase in sales over Christmas is good news for retailers, thought must also be given to the increase in risks resulting from more shoppers, longer opening hours and increased stock and deliveries.

Considering that 11% of all enterprises in the UK are retailers, employing around three million people ranging from corner shops to huge out-of-town shopping centres, for a risk manager a shopping centre, such as Bluewater, amasses all the dangers of everyday city living into one central hub.

Reputational aspects
Effectively managed the risks involved can be mitigated and accidents prevented. When looking at retail risks, insurers will want to consider those related to the property, customers, staff and the reputational aspects.

Consideration must be given to flood and storm hazards, and the possibility of fire spreading to other premises. There are often valuables at risk, therefore theft and arson are also important considerations. Location is another significant factor as, from a business interruption point of view, there could be a knock on effect on trade if a nearby attraction, such as a museum, were to close.

The nature of stock may present an increased hazard, as would the type of business. For example, some retailers may hold large sums of cash on the premises or may have no more than two or three members of staff working at any one time (as in petrol stations), therefore increasing the risk of robbery.

Property damage
Customers are the lifeblood of the retail sector, so the number of people present increases the risk of third party injury and property damage.

There are obvious hazards such as slips and trips on wet floors, curling carpet edges, and protruding shelf edges. Additionally, there are many less obvious risks that brokers should ensure their clients are aware of too. For example bacteria in water tanks from faulty air conditioning systems could cause illness.

Londoners drink over 380 million cups of coffee a year and at least one coffee shop can always be found in any major shopping centre. These premises will make use of a machine with a steam boiler ranging from around one litre in size (a carton of orange juice) to more than 20 litres (an average sized petrol tank). By law, these boilers need to be regularly inspected.

The consequences of a failure could range from scalding customers and staff, to an explosion that could have the force to cause death and destroy premises.

Also, many stores now contain customer-operated equipment such as ATMs, auto checkouts and self-service counters. By law, electrical and mechanical equipment requires testing, maintenance and, where appropriate, inspection.

In addition, the working at height regulations must be complied with. Shelving and storage should be accessible, at an appropriate height and clearly labelled. Well-maintained trolleys should be available and, in our shopping centre example, there should always be clearly marked escape routes and incident management procedures in force to cope with the large numbers of people.

Personal injury compensation is high on the political agenda and with claims management companies setting up stalls in shopping centres, the emphasis on health and safety is now more important than ever. Stemming the tide of claims will impact positively on premiums, and a broker willing to advise on health and safety issues is likely to be welcomed by insurer and insured.

For the retail sector most risks can be significantly reduced if time is taken to train staff in how to work safely in their own environment especially as certain characteristics of the retail trade make it more susceptible to accidents. High staff turnover means that the industry is reliant on part timers and temporary seasonal staff and in fact, Health & Safety Executive statistics show that the accident rate doubles for part timers, as they are less risk aware.

A key feature of good management is proper training and supervision as well as access to safety equipment and clothing where required. The most common risks are those activities, which are not properly assessed. Retailers need to get on top of health and safety as the sector is becoming increasingly vulnerable to emerging risks.

For example, a 22-year-old working in a nightclub five evenings a week could, in 30 years' time, be a claimant as passive smoking has been acknowledged in law as being linked to cancer. Food poisoning and legionnaires disease are also potential threats.

Linked directly to poor water supplies legionnaires could be the asbestosis of the future. Yet adequate hygiene standards implemented by trained staff are the only simple steps needed to diminish the jeopardy. Retailers who fail to put the adequate procedures in place will invite claims.

Poor risk management will also incite risks to reputation and there is nothing like a spurious claim to get national headlines screaming. For a small business, any claim splashed all over the front pages could force the retailer to close up shop.

With litigation being so prevalent, it is vital that brokers add value and inform their clients where their duties lie. Customers rely on brokers and service providers to provide timely and accurate advice.

In the interest of all parties involved it is vital that all aspects of the relevant legislation areunderstood and observed. Inspections make sound business sense, support risk management and save lives.

There has never been a better time for them to offer their clients support and guidance in this essential area.

Looking back at our shopping centre example, Bluewater is officially listed as a potential terror target, however the likelihood of an attack is slim compared to trips and slips, burns from hot coffee machines, or a visit from the environmental health.

The employers' liability rate hikes of 2000/2001 acted as a sharp reminder to employers that claims will happen, there will be rate rises, and that compulsory employers' liability insurance is here to stay.

Health and safety advice is a value added tool, which brokers need to offer clients in order for risks to be better managed. With just a few simple procedures in place retailers can mitigate risks significantly. IT

Phil Wright is chief engineer at Allianz Cornhill Engineering