Assessing the pillars of resilience
A high 70% of respondents ranked cyber threats among their top three concerns over the coming 12 months, with one in three (34%) suggesting it was their top concern. Although the effectiveness of cyber-attacks has risen in recent years, the majority of retailers surveyed felt they were prepared in this area.
Regulatory issues and compliance was reported as the next most important pillar of resilience by 52% of respondents. This reflects more complex policy, including areas such as data protection, financial reporting obligations, and environmental requirements. Here, retailers feel sufficiently prepared to meet compliance demands but note issues with resource and expertise.
Environment and social risks indicate a growing recognition of sustainability and social responsibility as stated by 24%. However, as seen in our research, lower levels of preparations highlight more effort is required to integrate environmental and social principles into operations. This aligns with global trends where stakeholders want greater transparency and commitment to sustainability.
Reputational risks are the least focused on, with only 5% citing them as the highest focus area. Companies feel they are relatively aligned with their peers in managing these risks, suggesting a balanced approach to reputation management.
Figure 2 shows each of the seven pillars of resilience with: (1) the proportion of survey respondents who rated them within their top three concerns; (2) the degree of confidence in which retailers feel they can manage with a particular risk; and (3) the respondents’ perceived preparedness related to that risk in relation to their competitors.
Example insight from Fig. 2 regarding cyber/data risk
• 70% of respondents ranked cyber threats among their top three concerns
• 34% cited it as their highest risk
• There is a high degree of confidence in managing to the risk
• Respondents perceived themselves as being ahead of their competition in preparedness on average.
Fig. 2 – Perceived level of risk, confidence, and preparedness across resilience pillars
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Source: Retail Economics, Barclays
Section 2: understanding resilience
Importance and confidence in managing risk
Figure 3 shows the seven pillars of resilience and where they ‘sit’ with respect to their perceived importance and level of confidence in managing the risk.
It confirms three key insights:
1. Cyber and data security risks, along with operational risks, are viewed as the most immediate and well-understood, given their placement in the short-term, high-importance, high confidence area.
2. Environmental, social and strategic resilience areas, occupy the long-term, low confidence area, indicating their emerging significance and the challenges in predicting their impact.
3. Financial risks, regulatory compliance, and reputational risks lie in the medium-term, confident range, reflecting their persistent and manageable nature. The research highlights the different areas of retail resilience, and where immediate threats are balanced against evolving long-term challenges.
Fig. 3 – Mapping the seven pillars of resilience by importance and confidence
Source: Retail Economics, Barclays
Here, three key themes emerge:
Theme 1: balancing immediate priorities with long-term vigilance
Theme 2: investing in resilience
Theme 3: Generative AI and digital transformation
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Section 3: Strategies for success
This final section focuses on strategies to help retail brands build resilience by focussing on four key areas (Fig. 8). As an overarching point, it’s critical to recognise the value of a positive organisational culture for building resilience. When the attributes of trust, transparency, adaptability and proactivity are present in an organisation, developing resilience can be easier, quicker and potentially more cost efficient.
Fig. 8 – Key strategic areas and organisational culture for successful resilience building
Source: Retail Economics, Barclays
Leadership and governance
Strong leadership and governance is of utmost importance to help build resilience. Ensuring that management boards are fit for purpose and have the depth and breadth of experience to address all seven pillars of resilience is critical (outlined in our Retail Resilience Framework, Fig. 1).
Having a clear vision, good strategic oversight with accountability practices, and incorporating room for flexibility are also essential. When combined with intelligent implementation, which includes operational agility and regular risk assessment with continuous feedback loops, retailers can better manage risk and even thrive in challenging times.
Focusing on board-level governance ensures that long-term risks, particularly in areas like ESG, receive adequate attention. Strong governance can also foster a positive organisational culture which is also helpful to drive change and help businesses maintain trust with stakeholders.
It is also worth noting that the non-executives and external advisors or consultants can play a pivotal role where in-house skills are less experienced.
Attention to sustainability
Long-term risks are increasingly critical to address for sustained success, especially those related to sustainability. Our research shows that retailers are less confident in addressing environmental regulations than other risks, and is an area requiring more focus. By proactively managing sustainability factors, retailers can mitigate risks and strengthen their reputations, leading to increased customer loyalty and investment appeal.
Improving sustainability practices could also drive operational efficiencies. For instance, reducing emissions could lead to lower energy costs and waste, thereby boosting profitability. By integrating sustainability considerations into strategic planning, retailers not only comply with regulatory requirements (e.g. streamlined energy and carbon reporting regulations 20193) but could also position themselves as leaders in responsible business practices.
Interestingly, our analysis of some of the largest 100 UK retailers shows that profitable retailers often have lower emission intensities than their loss-making counterparts (Fig. 9). This suggests a link between operational efficiency and fewer emissions, where larger retailers actively seeking to reduce emissions could discover opportunities for cost savings. This highlights the potential for sustainability to drive profitability in specific instances.
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A final snapshot
The UK retail sector exemplifies resilience, continually adapting and innovating despite frequent forecasts of decline. This work highlights the sector's enduring strength, assesses sentiments from retail leaders using survey data, and presents a robust framework to benchmark retail resilience. Insights are also included from analysis of the largest 100 UK retailers.
Retailers face a diverse and complex array of risks - now and in the future. Immediate threats like cyber and data security are well-recognised, while long-term challenges such as sustainability are being taken more seriously but still require more strategic focus.
Strong organisational culture is also crucial for building resilience. It encourages proactive identification of risk, fosters transparency, enhances adaptability, builds trust, and promotes continuous improvement.
Retailers must prioritise maintaining brand relevance by centring their operations around the needs of their customers and shareholders, while simultaneously building resilience through adherence to the seven pillars outlined in our Retail Resilience Framework.
The UK retail industry's strength lies in its capacity for adaptation and innovation. By prioritising strong governance, focusing on sustainability, investment in technology and diversification, retailers can intelligently navigate the risk landscape to aid long-term success. Despite ongoing disruption, the future looks promising for organisations who embrace change and collaborate to foster greater resilience.
About this report
This report was produced by Retail Economics in partnership with Barclays. It included a survey of senior retail executives conducted in May 2024. This survey was used to quantify and explore their views on a range of risk and resilience-related issues within their business and the wider retail industry. Respondents typically included senior-level roles involved in managing risk or audit committees at organisations with a turnover in excess of £6.5 million, often at the C-suite level. In addition, research findings were also included from data contained in the most recent annual reports of 100 of the UK’s largest retailers (note: the sample includes retail and automotive organisations, both public limited companies (PLCs), and privately owned entities, including UK and UK subsidiaries of foreign-owned retailers; and excludes various international retailers who do not disclose UK-specific data). Analysis was conducted by Retail Economics.
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