An exclusive preview of one of the articles in this month’s magazine.

Coming soon: “Trouble in store”

In the past four years the roll-call of retail casualties has included a bewildering number of familiar names, from Allied Carpets, Barratts, Borders, Clinton Cards and Focus DIY to Habitat, Oddbins, Principles, Sofa Workshop and Woolworths.
The outlook still isn’t encouraging. According to the Centre for Retail Research, 35 mid-sized to large retailers went into administration in the first half of 2012. Only 2009 was worse: 37 similarly sized retailers went to the wall – although that was during the course of the whole year. It seems that 2012 could mark a new nadir.

Consequently, internal auditors need to be aware of the risks. Les Krepa, head of internal audit and risk at jewellery store chain Signet UK and chairman of the Retail Audit Group, a forum for internal auditors to discuss industry issues, says that “where auditors can help in this environment is in not going against that grain”. Internal auditors need to help their organisations “declutter”, he says, but should not streamline at the expense of failing to manage big risks properly.

Krepa says that there is a danger that retailers are trying to change things rapidly but may be reluctant to put in the appropriate controls and infrastructure behind the change, because they are also trying to contain the costs.

“Internal auditors need to ensure that companies don’t run ahead of themselves,” he says. “We’re not trying to slow people down. We’re just saying: ‘Be sure you don’t create a massive risk that you’ll pay for later.’”

Asif Bhatti, head of internal audit and risk management at John Lewis, believes that the internal auditor’s role is to catch things before they fall: to stop wasted money or badly run programmes; to be on top of the disaster-recovery process; and to provide a neutral opinion on whether things are going to plan or not.

“We’ll give an objective view on a programme, a project or a process,” he says. “And I think that’s particularly important in tough times like now.”

Want to find out more?
Look out for the full feature, “Trouble in store”, in the next issue of Audit & Risk.