Footlocker
Rakann Ammari
Fin 431, Exam #1
February 17, 2010
Foot Locker Incorporated: Risk Prevention Methods
Foot Locker Incorporated (ticker symbol: FL) is a U.S. based company that operates worldwide. Their services include the sale of various athletic equipment, sports apparel and products. According to their company background, as of the beginning of 2009 Foot Locker operates roughly 3,600 retail stores in 21 countries worldwide (“About Us"). Although Foot Locker provides their goods through both local retail stores and an online based “direct-to- customers” program, my risk management tactics will primarily focus on local retailers and warehouses and their risks. The five risks I have chosen are employee theft within the local branches and through bank accounts, customer theft within the store, physical injuries to customers and employees on Foot Locker property, property damage to Foot Locker property due to obscene weather conditions and the risk of fluctuating prices of necessary inputs that are used in the production of various Foot Locker goods including footwear. One of the most essential inputs in the production of footwear is rubber. As a risk manager, I must take into account the possibility of the cost of rubber increasing. According to the commodities index ran by indexmundi.com, the price of rubber has increased every month for the past 6 months. In January 2010, the price of rubber increased to $139.73 from $92.86 merely 6 months ago in August of 2009 (“Rubber Monthly Prices”). This nearly 34% increase in the commodity price of rubber could have devastating effects on Foot Lockers cost of production. This increase will potentially increase the cost of producing foot and athletic wear, which in turn will increase retail prices. The need for consumers to purchase high end Foot Locker products will then decrease as retail prices increase. Rubber remains the main input in producing footwear; however the leather used in everyday footwear is prevalent
Fin 431, Exam #1
February 17, 2010
Foot Locker Incorporated: Risk Prevention Methods
Foot Locker Incorporated (ticker symbol: FL) is a U.S. based company that operates worldwide. Their services include the sale of various athletic equipment, sports apparel and products. According to their company background, as of the beginning of 2009 Foot Locker operates roughly 3,600 retail stores in 21 countries worldwide (“About Us"). Although Foot Locker provides their goods through both local retail stores and an online based “direct-to- customers” program, my risk management tactics will primarily focus on local retailers and warehouses and their risks. The five risks I have chosen are employee theft within the local branches and through bank accounts, customer theft within the store, physical injuries to customers and employees on Foot Locker property, property damage to Foot Locker property due to obscene weather conditions and the risk of fluctuating prices of necessary inputs that are used in the production of various Foot Locker goods including footwear. One of the most essential inputs in the production of footwear is rubber. As a risk manager, I must take into account the possibility of the cost of rubber increasing. According to the commodities index ran by indexmundi.com, the price of rubber has increased every month for the past 6 months. In January 2010, the price of rubber increased to $139.73 from $92.86 merely 6 months ago in August of 2009 (“Rubber Monthly Prices”). This nearly 34% increase in the commodity price of rubber could have devastating effects on Foot Lockers cost of production. This increase will potentially increase the cost of producing foot and athletic wear, which in turn will increase retail prices. The need for consumers to purchase high end Foot Locker products will then decrease as retail prices increase. Rubber remains the main input in producing footwear; however the leather used in everyday footwear is prevalent