What does being part of the global economyreally mean?

Consider how even a midsize food retailer sources the items thatstock its shelves today: procuring produce from South and CentralAmerica; getting gourmet products from Europe; and flying infarm-raised seafood from China.

It's no wonder, then, that managing supply chains is atop-of-mind concern for retail risk managers, according toconsultancy-group Accenture's 2011 Global Risk Management Study:Retail Industry Report.

Another big concern for "Big Box" retailers is the rising costof property insurance across the board—and even steeper spikes incatastrophe-exposed areas.

To help retailers cope with increasing costs, brokers aredeveloping innovating approaches, such as Marsh's Marine CargoRetail Stock-Throughput program.

Usually, inventory in overseas transit is covered by Marineplacement and then transferred to Property coverage lines uponreaching a warehouse or a store, says Mac Nadel, U.S.retail/wholesale practice leader at Marsh.

But the stock-throughput coverage allows a Marine policy tocontinue covering the goods, helping to lower a buyer's insurancecosts.

GO PHISH: PAYMENT METHODS TAKE CENTER STAGE

Technology-related issues also remain leading concerns, withprevention of security breaches moving up seven notches on the listof top concerns of retailers, as ranked in the 2012 Retail RiskFactor Report from financial-advisory organization BDO (seechart).

While smartphones and e-commerce have allowed retailers toexpand their business across the globe by letting consumersanywhere buy with the click of a button, electronic-distributionchannels must be monitored to make sure they are not exposing their customers' data to hacking attacks.

As many businesses switch fromcatalogue sales to e-commerce as part of their multichanneldistribution efforts, information privacy and network security isat the forefront of the risk battle, says Nadel at Marsh,as  non-cash electronic payments expose companies andcustomers to data-poaching, identity theft and fraud.

And cyber crime, specifically hacking, viruses and malware, madethe biggest leap in Aon Analytics' most-recent Retail Risk Report,coming in as the fifth-highest retail risk last year.

And this concern is amply justified byreal-world incidents.

TJX Cos., which operates retail stores in the United States,Canada, Ireland and the UK, reported in 2007 that over the twoprevious years data-security breaches compromised more than 45million of its customer records.

The information was stolen by hackers who had tapped datatransmissions from handheld equipment that accounted storeinventory, and the thieves used it to break encryption codes andsteal the usernames and passwords of employees at companyheadquarters.

And the risks associated with doing business online aren'tlimited only to criminal activity.

In a February 2011 case against Williams-Sonoma, the cookwareretailer, the California Supreme Court ruled that the practice ofasking credit-card customers for their ZIP codes for the purposesof selling their credit-card information to third-party marketingcompanies violated state consumer-privacy statutes. The SongBeverly Credit Card Act now triggers penalties of up to $1,000 perrequest.

GENERAL LIABILITY, WORKERS' COMP STILL TOP CLAIMSOURCES

For all the emerging concerns over cyber exposures and supplychains, the "bread-and-butter" exposures, such as General Liabilityand Workers' Compensation, still count toward as much as 80 percentof claims hitting the retail industry, says Ace Hardware Corp.Director of Risk Management William Montanez, a member ofNU's Risk Managers Advisory Board.

Basically, "the role of a risk manager within a retail operationis to manage the cost of risk by creating a safe environment withinthe retail space, to educate all employees in workplace safetyculture, and to develop a strategy to ensure proper contractualtransfer of risk with manufacturers with Product Liability anddefense costs," he says.

Expanding on Product liability risks, Montanez adds: "At the end of the day, we are retailers, not manufacturers. Wehave to be very adept at insurance-transfer mechanisms with oursuppliers. Essentially, if there is a Product liability issue, wewant to be able to shift it back to the manufacturers instead ofabsorbing the cost of picking up the case."