Risk Management

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Business
• 3. Market Analysis
• 4. Location Strategy
• 5. Products and Merchandise Strategy
• 6. SWOT and Competitive Position
• 7. Marketing and Sales
• 8. Operations
• 9. People, Compliance and Controls
• 10. Implementation Plan
• 11. Financial Plan
• 12. Break-Even
• 13. Working Capital and Debt Service
• 14. Returns
• 15. Sensitivity and Scenarios
• 16. Risk Management
• 17. Trigger Points and Management Response
• 18. Key Performance Indicators
• 19. Key Assumptions
• 20. Conclusion
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Capital and Pre-Opening Schedules
• C. Appendix C: Funding and Debt Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

16.1 The risks that matter

Revenue shortfall is the dominant exposure. A 10 per cent miss costs R120 243 of Year 3 EBITDA — 73 per cent of it — because the cost base is largely fixed to the site and the trading hours. It is managed by the window as the primary acquisition asset, by the size register as the retention engine, by fitting appointments that convert the size-inclusive proposition directly, and by accessory attachment which lifts revenue at no additional cost.

Gross margin erosion is the risk that moves silently. Three points costs R76 056 and produces no single event that forces attention: it arrives as a slightly slower bank balance, absorbed by lengthening supplier terms. It is managed by the markdown cadence enforced from week six rather than judged case by case, by weekly best-seller and worst-seller reporting, by cycle counts on the twenty highest-value styles, and by monthly shrinkage reporting with a 1.5 per cent trigger for a full count.

Overbuying is the most common cause of failure in independent fashion retail. It converts cash into stock that can only be recovered at a markdown, and it does so at exactly the moment the store feels most confident. It is managed by a written open-to-buy budget per category per month, by a hard rule that no purchase order issues without available open-to-buy, and by forward cover held between four and five months of cost of sales.

Cross-border online erosion of the entry-price basics business is structural and will not reverse. SHEIN and Temu recorded roughly R7.3 billion of South African sales in 2024 and fashion e-commerce is growing 15 to 20 per cent a year. It is managed by not competing there: the merchandise mix under-weights low-price basics and over-weights dresses, occasion wear, the local capsule and the modest edit, where fit certainty, immediacy and frictionless exchange matter most.

A national chain taking space in the same centre would have no answer within one lease cycle. It is the risk the plan cannot mitigate, only prepare for — through the tenant-only break at month 36 negotiated into the lease, and through a customer relationship that a chain store cannot replicate at the individual level.

16.2 Risks sized against the plan

16.3 Controls

• A written open-to-buy budget per category per month; no purchase order without available budget in that category.
• Markdown at week six, week ten and week fourteen on a schedule, not on a judgement call. No style enters a third season.
• Weekly best-seller and worst-seller reporting; reorder the top decile within seven days, mark down the bottom decile at week six.
• Weekly cycle counts on the twenty highest-value styles; full counts twice a year; monthly shrinkage reporting by category.
• Every garment above R150 retail tagged; fitting rooms controlled by garment count with a staff member present.
• Daily banking with a dual count at close and segregation between the person selling and the person banking.
• Management accounts by the tenth working day of the following month, treated as a covenant-grade obligation.
• Supplier invoices paid to terms without exception, because credit lines are extended on behaviour rather than statements.
• POPIA consent captured explicitly at the point of sale for the size register and the WhatsApp list.
• No owner distribution beyond budgeted remuneration until the term loan is fully repaid.