Enterprise Risk Management in Walmart and Target

Abstract

The purpose of this paper is to analyse and discuss the main differences between the Enterprise Risk Management systems of two of the most important retailers in the United States, namely Target Corporation and Walmart Inc.

Firstly, the authors will briefly introduce the two companies, focusing on the different types of business strategies implemented and their history, considering then the main risk factors that characterize each company such as competitive and reputational, operational and investment, security and data privacy, supply chain and finally a short introduction about financial risks that will be the subject of deeper analysis afterwards.

Likewise, the authors will evaluate the distinctive features of the financial structures and the strategic and tactical risk management processes of both companies, starting from the top level of the strategic planning to get to selected tools by the firms in order to face both financial and business risks that affect their activities.

After that, it will be provided a deep analysis about the risk factors faced by Target and Walmart during their activities, with a main focus on financial risks that emerge from their financial structures, also considering derivative contracts to address the interest rate risk and the performance and cost of hedging interest rate risk.

Moreover, the authors will underline differences and similarities among the two retailers in order to facilitate the comparison and the evaluation of the two ERM systems, but even further considerations highlighted in the paper.

Keywords: Risk, Risk Management, Liability Management, Interest Rate Derivatives, Retail Industry, Walmart, Target

JEL Classification: G32, L81