A Stanford study notes despite companies disclosing risk factors in their SEC filings, there is often a disconnect between identifying and managing the risks
Lululemon Athletica inc. (LULU) (LLL) struggled to respond to anticipated product quality issues and contain the fallout on social media, notes a recent Stanford University Larcker, David F. and Larcker, Sarah M. and Tayan, Brian, Lululemon: A Sheer Debacle in Risk Management June 17, 2014.
In a research note dated June 17, 2014, authored by David Larcker, Sarah Larcker and Brian Tayan of Stanford, with the title: "Lululemon: A Sheer Debacle in Risk Management", they point out that despite anticipating the risks, companies such as Lululemon are ill-prepared to manage them when they materialize.
Lululemon’s anticipated risks in time
Ill-prepared to manage risksThe study highlights a number of miscues such as Lululemon Athletica inc. (LULU) (LLL)'s handling of the Luon recall, quality issues and related reputational damage. Providing specific instances, the study highlights that in recalling the pants, the retailer blamed its supplier for not meeting 'technical specifications', while the CEO Christine Day subsequently clarified that the problem was not due to production, but to inadequate testing.
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