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Bangladesh Factory Collapse: Lessons in Risk for the Retail Industry

The recent Rena Plaza factory collapse in Bangladesh that killed more than 1,100 people highlights the serious risks that labour conditions can pose not only to workers, but also to organizations’ reputations, supply chains, and bottom lines.

In its latest Marsh Risk Management Research report, ‘Bangladesh Factory Collapse: Lessons in Risk for the Retail Industry’, Marsh provides an overview of the wide range of risks retailers face and risk mitigation advice when sourcing textile goods from Bangladesh and other low-cost markets.

“Even though major retailers and suppliers have sourced from Bangladesh for decades and have worked to improve labour conditions in the past, the Rena Plaza incident clearly reinforces to organizations that labour-related globalization risks require robust oversight efforts, greater visibility, increased vigilance, and continuous improvement,” said Tracy Knippenburg Gillis, Global Reputational Risk and Crisis Management Practice Leader for Marsh Risk Consulting. “Retailers and suppliers should use this tragedy as a catalyst to more fully identify and understand their operational and supply chain risk exposures, reform and strengthen workforce safety practices, and improve supply chain and reputational risk resiliency.”

In addition to carefully considering their approach to reputational risk, crisis management, and supply chain resiliency, Marsh recommends that retailers focus on improving compliance efforts and transparency by further standardising factory audit processes for and contract language with suppliers. This could include: more frequent and unannounced inspections, greater worker engagement in factory audits, and stricter penalty clauses for failure to meet workplace safety requirements.

Read the report.

•Date: 4th July 2013 • World •Type: Article • Topic: Operational risk

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