Retailers are feeling pressure from a heightened regulatory climate. A new BDO USA, LLP analysis of the risk factors listed in the most recent 10-K filings of the largest 100 public U.S. retailers found that federal, state and local regulations have increased as a risk among the nations largest retailers.


 

Nearly all retailers (97 percent) cite regulatory risks as they navigate the effects of government deficits, payroll tax increases and internet sales tax legislation on their businesses and on consumer spending. The risk was cited by the most retailers in the studys seven-year history and was second only to general economic conditions (100 percent). Retailers also note increased concern over environmental (57 percent) and accounting (69 percent) regulations.

 


The BDO RiskFactor Report for Retail Businesses also found that retailers are increasingly concerned over the protection of their crucial IT systems and customer and company data. Verizons 2013 Data Breach Investigations Report recently found that the retail industry accounted for 24 percent of data breaches in 2012, second only to financial services. And in the wake of several high-profile industry security breaches, IT and data security risks were cited by the most companies in the studys history at 89 percent and 85 percent, respectively.

 

 

Data protection is critical given that retailers process and retain a tremendous amount of sensitive data through credit card transactions, loyalty programs, online shopping and social media, said Doug Hart, partner in the Retail and Consumer Products practice at BDO USA, LLP. Further, the increasing reliance on cloud computing solutions to process and store this data adds another dimension to this security and privacy risk.

 

The following chart highlights the top 20 risk factors cited by the 100 largest U.S. retail companies:


























































































































































































































































































































































































2013 Rank 2013 2012 2011 2010 2009
1. General Economic Conditions 100 % 99 % 97 % 96 % 96 %
2. Federal, State and/or Local Regulations 97 % 85 % 92 % 72 % 66 %
3. U.S. and Foreign Supplier/Vendor Concerns 95 % 97 % 95 % 86 % 86 %
4. Competition & Consolidation in Retail Sector 94 % 94 % 95 % 85 % 87 %
5. Implementation & Maintenance of IT Systems 89 % 83 % 73 % 64 % 61 %
6. Labor (health coverage, union concerns, staffing) 86 % 78 % 84 % 70 % 74 %
6t. Credit Markets/Availability of Financing and Company Indebtedness 86 % 82 % 86 % 84 % 93 %
8 Privacy Concerns Related to Security Breach 85 % 72 % 55 % 51 % 46 %
8t. Dependency on Consumer Trends 85 % 83 % 87 % 63 % 63 %
10. Consumer Confidence and Spending 84 % 81 % 77 % 83 % 74 %
11. Natural Disasters, Terrorism and Geo-Political Events 83 % 84 % 83 % 70 % 64 %
12. Failure to Properly Execute Business Strategy 79 % 68 % 80 % 43 % 32 %
13. Legal Proceedings 78 % 73 % 84 % 62 % 47 %
14. International Operations 76 % 68 % 70 % 55 % 47 %
15. Changes to Accounting Standards and Regulations 69 % 58 % 72 % 58 % 44 %
16. Loss of Key Management/New Management 68 % 63 % 73 % 49 % 48 %
17. Insurance Costs & Uninsured Liabilities 63 % 46 % 53 % 40 % 36 %
18. Consumer Credit and/or Debt Levels 61 % 59 % 65 % 69 % 49 %

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